Chinese companies are freeing price wars. The consumer is not always winning

The fierce price wars in China are reaching car industries to food deliveries and solar panels, squeezing the profits and worsening the deflationary sliding of the country. Although consumers can be attracted to ultra-baratic agreements, compensation for them are more complicated than they seem.

From the pandemic and in the midst of the fall in the current housing, Chinese consumers have become more price sensitive, focusing on the value and non -essential cut. To stay competitive, car manufacturers have implemented strong discounts and reduced prices, helped by government subsidies, deepening a price war that is triggered for years.

In the so -called instant trade sector, Alibaba, JD.com and Meituan They are running to expand delivery networks and promise billions in subsidies, attracting clients with bubble tea for mere cents.

It is not difficult to see the appeal that the trend has for some consumers.

Li Kun, resident in Beijing looking at a model by the Chinese manufacturer of electric vehicles XpengHe said he hooked immediately after a seller called him about new subsidies.

“The more manufacturers compete, the better it will be for buyers,” Li said. “Compete how you want!”

But timing a purchase may seem like a bet if prices fall later, said Yu Peng, a Beijing resident who plans to update his car. “As a consumer, all you can do is accept it in silence,” he said. Even so, he shrugged with a Chinese who said: “Buy early, enjoy early.”

Cutthroat competition comes with hidden costs.

Some buyers in China recognized that safety and quality may suffer when car manufacturers cut the corners to stay cheap, citing problems with retreats and assisted driving characteristics that received low scores. And Beijing is now concerned that price wars not only harm companies and suppliers, but also wages, tax revenues and the entire economy.

In recent weeks, China’s state media have intensified criticism of price wars. This month, Qiushi, a publication of the Chinese Communist Party, warned that the race towards the fund could force companies to reduce the cost of essential production and quality commitment, “causing” bad money to go well “and, ultimately, damage the interests of consumers.” The comment also criticized some local governments for offering unfair incentives.

On Wednesday, the Chinese cabinet promised to regulate what it called “irrational” competition through the strictest controls of costs and prices, and preventing the contest from being cheaper for who has better technology and caliber.

For now, maintaining market share remains a priority for many car manufacturers, analysts say.

With the saturated market of many brands and similar models, car manufacturers who do not want to lose market share are the opinion that the only way to survive in the short term is to reduce prices, said Felipe Muñoz, Jato’s automotive analyst.

Jim Ma, Sales Manager of the Chinese-Sueco Lynk & Co car manufacturer, said the company does not focus on short-term profits, but on developing loyalty over time. Its new plug -in hybrid presents a mini refrigerator, rotating seats and a strip of LED messages. The competition has made buyers more sensitive to the price, but many value security, customer service or specific designs, such as entertainment in the child’s car, he added.

“Our price policy is intended to make customers like and choose our brand,” Ma said. “In the long run, when they need subsequent services or decide to replace or buy a new car, we hope they still choose us.”

The effects of the Wave of China’s price battles also feel abroad, in varied ways.

Some consumers outside China welcome the shake that forces car manufacturers worldwide to offer better products.

Julia Poliscanova, senior director of vehicles in the Transport and Environment Defense Group, said the Chinese EVs helped fill the gap left by European marks of slow movement. While they are not as cheap in Europe as they are in China, their prices often remain slightly lower, or offer a better range or software at the same price, he said.

But politics is also at stake while Europe negotiates tariffs and minimal prices in EVs with China. A key question, he said, is how to encourage Chinese car manufacturers and batteries to locate their supply chains in Europe to build national industries, as Japanese and Korean brands did decades ago. Efforts are already underway in some Chinese companies, particularly for the small car market.

While consumers in Europe generally care more about the quality than the origin of a car manufacturer, they also care about broader economic impacts, said Poliscanova.

“They just want to make sure that this is not, for example, in their neighbor or someone in a nearby village that loses their job,” he said.

Ford and Volvo cars are among car manufacturers that cut jobs in Europe in recent months, partly driven by the growing competition with their Chinese rivals.