China's largest new energy vehicle (NEV) manufacturer BYD Auto has demanded that its suppliers reduce prices by 10% in 2025 compared with 2024 levels, according to reports in China citing leaked letters sent out in late November by the automaker’s executive vice-president He Zhiqi.

While it is common practice within the global automotive industry for automakers to demand efficiency improvements and price cuts from their suppliers, these are normally in the range of 3% to 4%. BYD’s demands for a 10% reduction have fueled fears that the price war between vehicle manufacturers in China will continue to escalate and spill over into global markets. Many suppliers also expressed their “deep dissatisfaction” with BYD’s “continued pressure to cut prices”.

BYD is the fastest-growing among China’s major automakers, with its global sales surging by 40% to 3,757,300 units in the first eleven months of 2024 – including a 74% jump in overseas sales to 360,050 units.

In the leaked letter, which was meant to be confidential, He Zhiqi told suppliers: "To ensure BYD's competitive edge, we demand the whole supply chain join hands to cut costs continuously. So, we demand that you cut prices by 10%.”

Company spokesperson, Li Yunfei, later pointed out that it is "common practice" to negotiate new prices at the end of the year, and when making large-scale purchases, and claimed that the price cuts “are not mandatory, but negotiable.”

BYD continues to cut prices of its vehicles in the marketplace, as it looks to overtake Tesla as the world’s largest manufacturer of battery electric vehicles (BEVs) and is aggressively focused on expanding its market share globally.

One supplier is quoted as saying: “This relentless drive to reduce costs is undermining the livelihoods of domestic suppliers and workers. This approach harms the entire industry and will ultimately undermine BYD's own long-term success."