BYD and Tesla sign a pledge to stop 'abnormal' EV pricing together with NIO and XPeng

After the government extended its "new energy vehicle" subsidies, China's Association of Automobile Manufacturers now managed to get the largest automakers there to sign a co-opetition pledge. Tesla, together with BYD, NIO, XPeng, Geely, and 11 others vowed not to "disrupt the fair competition order of the market with abnormal prices," among other pledges.

Tesla cut the prices of its bestselling Model Y and Model 3 earlier this year by up to 30% as government subsidies, production cost efficiencies, and supply chain normalization allowed it to do so and still keep its enviable margins. Many others had to follow suit despite that they don't have some of those advantages, sending the local EV industry into a vicious cycle of price cuts.

Now that prices have stabilized at a lower level, however, good guy Tesla has signed the pledge as well, buoyed by a record number of vehicle deliveries in China this past quarter that represent half of its global sales.

The pledge of the 16 largest car makers there is not legally binding, but it includes other coordination activities besides the agreement to avoid future price wars:

• First, we will abide by the rules and regulations of the industry, regulate marketing activities, maintain a fair competition order, and not disrupt the fair competition order of the market with abnormal prices.
• Second, we will pay attention to marketing methods, will not exaggerate or conduct false marketing, not to mislead consumers to attract attention and increase customer acquisition.
• Third, we will put quality first, use quality-oriented, high-quality products and services to meet the people's needs for a better life.
• Fourth, we will actively fulfill our social responsibility, and take an active role in helping to stabilize economic growth, increase confidence and prevent risks, and work together to make a contribution to national economic growth.

Tesla's toughest competition hails from China, where the likes of BYD have vertically integrated EV business that also makes its own batteries, and has access to affordable and skilled labor. Tesla is trying to replicate this supply chain in time for the opening of its Gigafactory in Mexico that may be producing its first mass market Model 2 vehicle.

In China, however, it may prefer to put cooperation before competition, as the local Chinese brands may grab more than 50% market share there for the first time, while BYD is growing at a faster pace than Tesla.

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