BYD’s aggressive discount campaign is shaking up China’s EV market, pushing rivals to slash prices and raising concerns of an industry-wide “race to the bottom,” according to Nikkei Asia.

Since January, BYD has launched repeated limited-time offers. Its latest, running through June, cuts prices by up to 34% across 22 EV and hybrid models, with its Seagull now starting at just $7,700. Morningstar’s Vincent Sun said investors are worried this signals a prolonged price war. “I believe sales targets are the main driver behind this,” he said.

BYD aims to sell 5.5 million vehicles in 2025, including 800,000 overseas. But its stock fell over 8% Monday and continued sliding Tuesday after the discount news.

Great Wall Motor chairman Wei Jianjun hinted at growing debt in the industry, saying, “The Evergrande of the automotive industry already exists; it just hasn't collapsed yet.” Many believe he was referring to BYD, whose debt ratio stood at 70.7% in March. BYD’s Li Yunfei appeared to hit back with a cryptic social media post: “A dog can bite a person! But a person cannot bite a dog!”

Nikkei writes that other carmakers quickly followed BYD’s lead. Geely’s Galaxy brand launched deals with discounts up to 20,000 yuan, while Changan and Leapmotor also cut prices. Rising inventories are partly to blame—China had 3.5 million unsold vehicles in April, a 57-day supply, the highest since late 2023. BYD alone reported 154.4 billion yuan in inventory, up 33% from the previous quarter.

Despite its lead, BYD is feeling pressure. Haitong’s Oscar Wang said competitors are catching up in tech and pricing. “While long-term reliance on price wars may erode brand premium value, it can help capture market share in the short term,” he said.

Macquarie’s Eugene Hsiao noted, “We think BYD is looking to both sustain its position in the local EV market while also forcing competitors to match them on prices, which may accelerate future consolidation.”

The Chinese government has signaled support for mergers among state-owned auto firms, and Geely recently announced it will take Zeekr private to cut overlapping costs. S&P Global warned that "many entities [are] on an unsustainable path" and predicted "a sweeping consolidation" ahead. “For many firms, a merger or some form of partnership will be necessary for survival.”