Meaning of price war | Babel Free

Definitions

A situation where commercial competitors repeatedly undercut each other's prices in order to attract buyers.

Equivalents

Examples

“BYD, Xpeng, Changan and Dongfeng showed electric vehicles (EVs) with advanced technology and prices that undercut Western models, or announced expansions making it clear that Europe is the main target in their worldwide export blitz. Yet Chinese ebullience in Europe contrasts sharply with troubles at home, where a long-running price war, caused by chronic overcapacity, is raging. Its origins lie in the Chinese government’s success in first nurturing its carmakers and then propelling them to the fore of the global industry. […] Around 130 domestic firms now battle for sales, though few make cars in significant numbers. If their factories ran at full tilt for a year they could churn out twice as many cars as there are buyers. The consequence of overcapacity has been a savage price war. The average car price has fallen by 19% over the past two years, to around 165,000 yuan ($23,000), calculates Nomura, a Japanese bank. Some models have seen one-off cuts of around 35%. Although sales are still growing—at a forecast 7% this year, to around 24m vehicles—firms’ profits have dwindled or losses mounted (see chart 1).”

CEFR level