NEV Makers Raise Prices or Cut Discounts Amid Shift to Value Competition

Since Tesla triggered a price war by cutting prices at the beginning of 2023, China’s new energy vehicle (NEV) market has endured three years of intense competition. By the second quarter of 2026, at least 15 automakers—including Tesla, Xiaomi, NIO, XPeng, and Changan Qiyuan—had successively adjusted their strategies, either raising prices directly or indirectly through reduced terminal discounts. For instance, Changan Qiyuan increased the official price of its Q07 Tianshu Smart Laser Edition by RMB 3,000; Tesla, while not implementing a direct price hike, shortened loan terms to raise monthly payments; NIO and XPeng eliminated free charging benefits and scaled back trade-in subsidies. Behind this round of adjustments lies a sharp rise in upstream raw material costs. Battery-grade lithium carbonate prices surged from below RMB 60,000 per ton in the second half of 2025 to over RMB 200,000 per ton by mid-May 2026, adding RMB 3,000–5,000 to the battery cost per vehicle. Additionally, automotive memory chip prices jumped 180% within three months due to capacity constraints caused by surging AI computing demand, with high-end DDR5 chips rising more than 300%. Supply remains tight—Li Auto has warned that the fulfillment rate for automotive memory chips in 2026 could fall below 50%. Moreover, copper prices have exceeded RMB 100,000 per ton, and aluminum prices continue to climb. Given that NEVs use over four times as much copper as conventional internal combustion engine vehicles, wiring harness and other component costs have risen further. Against this backdrop, the entire auto industry faces mounting profit pressure. The sector’s average profit margin stood at just 3.2% in Q1 2026, dipping to only 2.9% in January–February—far below the 5.8% average for industrial enterprises overall. In contrast, upstream battery makers like CATL reported net profits of RMB 20.738 billion in Q1 2026, averaging over RMB 230 million per day—significantly higher than most automakers. Although current price increases remain modest—and are partially offset by the extended 2026 trade-in policy offering consumers an 8% subsidy (capped at RMB 15,000) on new NEV purchases—the immediate impact on essential car buyers is limited. However, industry consolidation is accelerating. Second- and third-tier brands lacking core technologies, brand premium, or economies of scale now face a dilemma: raising prices risks losing sales, while not raising prices threatens survival. In the long run, competition is shifting from price to value. Key capabilities will include in-house battery development or vertically integrated supply chains (e.g., BYD and NIO’s self-developed chips), intelligent user experiences (for which customers are willing to pay for software), and overseas market pricing power. After three years of price wars, the industry has transitioned from expansion into a phase of stock competition, where companies with pricing power and self-sustaining profitability will dominate the next stage.