Will Chinese EV market usher in a new price reduction storm soon?

In the mid of August, Dongfeng Electric Vehicle Company announced that the company has lowered price of the Dongfeng Fengshen E30 series pure electric vehicles from 199,800 yuan to 58,000 yuan after enjoying Green Commuting subsidy from the company itself and other official subsidy from central and local government.

Within a few days, the Lifan Group also announced that the company lowered price of the whole series 620EV. The new official selling price of two models dropped by 14,000 yuan and 30,000 yuan to about 219,800 yuan.

These two huge price reduction triggered people to wonder if EV market will usher in a price reduction war.

Like official price reduction in traditional automobile, price cutting in EV is to raise the vehicle competitiveness and market share. The specific reason for Dongfeng and Lifan cutting EV price is that they have suffer low sales for their EV models.

On the other hand, the gap between EV official prices is increasingly narrowing as competition getting fiercer. In a more stabilized market, product of a variety of levels settle down on their prices. Thus it is inevitable for those vehicles of relatively high price to be sold at lower prices. For pure electric vehicle market in the future, more people think the price reduction is unavoidable, because technological progress will result in lower prices.

Scale effect and technical progress will cut the cost of EV by a large margin, according to a statement of Wang Kefeng, deputy General Manager of alternative energy business units of BAIC. In addition, even if the official subsidy from government is being withdrew, which may lead to price rise, the advanced technology will make that up and keep the price low.

In specific, close to half the cost of the battery on the system of pure electric vehicles. As Chinese vehicle power battery capacity expanding, battery costs are also expected to be further reduced.

In terms of vehicle power battery, lithium iron phosphate battery in particular, the raw material cost will be cheaper, since manufacturing techniques will have been raised and capacity have been expanded. Vehicle power battery cost will probably be reduced by half around in a few years.