Ford, GM Engage in China Price War as Car Sales Slump

Chinese government has ended tax cuts for car buyers and long-running EV subsidies

Auto makers and dealerships in China are slashing prices after the lifting of pandemic controls failed to reverse slumping demand in the world’s largest car market.

Companies including Ford Motor Co., BMW Group and Volkswagen AG are offering deep discounts and promotions on electric vehicles after China phased out its nationwide subsidies for EVs. Others including General Motors Co. and the maker of Citroën are slashing prices on their gas-powered cars.

China’s overall retail car sales fell by almost a fifth in January and February from a year earlier, with many consumers avoiding big-ticket purchases amid an uncertain outlook for the economy.

Foreign auto makers face increasing headwinds in China following years of stalled growth and declining sales of gas-powered cars and as homegrown EV makers dominate the growing demand for electric cars.

Ford has cut about $6,000 off its Mustang Mach-E until the end of April, according to online sales promotions. The standard version of the battery-powered SUV is going for as low as $31,000. Only 84 of the cars were sold in China last month, industry data show, down from around 1,500 in December. The car maker saw a December spike in sales after it shaved around 9% off the original price.

A Ford spokeswoman confirmed the promotion, saying it was a stock clearance.

The headwinds facing the industry are varied, and car makers and dealers have different motives for their varying discounts—ranging from half the usual price to a single percentage point off vehicles from market leader BYD Co.

In December, China’s leaders abandoned their Covid-19 controls to focus on a consumption-led revival of the stuttering economy. At the same time, the government ended tax cuts for car buyers and long-running EV subsidies that boosted car sales last year.

Dealers of gas-powered cars want to clear out roughly 500,000 vehicles in their inventory, which include older models that won’t meet tighter emissions standards due to take effect in July, said Kelvin Lau, an analyst at Daiwa Capital Markets.

Volkswagen’s joint venture with the Shanghai government said Thursday that it is slashing prices of 20 gas-powered and electric models until the end of April, with discounts ranging from around $2,200 to $7,300 a car.

The German auto maker earlier cut almost $6,000 off the price of its electric ID series, according to a March 11 social-media post by the company’s joint venture with state-owned FAW Group.

A Volkswagen spokesman said the company is offering temporary promotions due to general reluctance among car buyers, the new emissions rule and discounts offered by competitors.

Citroën-maker Dongfeng Motor Group and the government of Hubei province, where the state-owned car maker is based, are offering rebates of up to almost $13,000 a vehicle this month on cars made by its joint ventures, according to local dealerships. Most of the models are combustion-engine vehicles.

Buyers can pick up the keys to Dongfeng Peugeot-Citroën Automobile Co.’s C6 gas-powered sedan for as little as $18,000, a 40% discount to the sticker price. The aging model hasn’t been selling well, falling to around 100 units last month.

“Some car makers have been seeing very few sales,” said David Zhang, a Shanghai-based independent automobile analyst. “At this rate, the manufacturers’ production and dealership networks will collapse.”

Neither Dongfeng nor its joint venture responded to requests for comment.

Some Cadillac dealers are offering short-term discounts of about a quarter off the CT5 combustion-engine sedan. General Motors’ joint venture in China sold almost 2,200 of the model last month. GM’s brands have been losing market share in China in recent years. GM didn’t respond to a request for comment.

China’s overall retail sales rose 3.5% in the first two months of the year, Wednesday official data showed. Spending surged for clothing and catering services, but fell for larger purchases.

China’s policy makers should consider reinstating EV subsidies to spur the growth in consumer spending needed to sustain the economic revival, said Carlos Casanova, senior Asia economist at Union Bancaire Privée in Hong Kong.

Auto makers globally have said they need to lower prices as well as costs. Tesla Inc. recently lowered prices for a number of its models across the U.S., Europe and China, where it was among the first to cut prices.

Ford followed in Tesla’s footsteps, cutting the price of its electric Mustang Mach-E in both the U.S. and in China.

China has become the world’s largest market for electric vehicles and plug-in hybrids after introducing incentives for buyers in 2010. While sales of those vehicles grew 23% in the past two months from a year earlier, that wasn’t sufficient to offset the almost 30% plunge in purchases of vehicles with internal combustion engines.

Some EV makers are offering promotions ahead of next month’s Shanghai car show, when companies are expected to launch their latest models.

Buyers of BMW Group’s i3 EV can get almost $12,000 off the $51,000 sticker price, a sales representative at a dealership in the southern city of Guangzhou said, saying they sold out of already made cars and were now taking orders.

A BMW spokesman said it hasn’t changed its cars’ sticker price and discounts are offered by dealers.

The discounts are bringing forward orders and will likely drag down car makers’ sales later in the year, Mr. Lau, the Daiwa analyst, said.