China's electric vehicle (EV) market is grappling with a fierce price war, as BYD Co. and competitors like Geely Automobile Holdings Ltd. and Chery Automobile Co. ramp up discounts to avoid losing market share. In March, the average price reduction for BYD vehicles reached 10%, a record high, reflecting the intense competition and overcapacity in the industry. Despite efforts by Chinese regulators to stabilize prices, including warnings against unreasonable discounts, the trend of price cuts continues unabated. BYD, which has seen its sales decline for seven consecutive months, is under pressure to adapt its financial strategies, moving away from an IOU-based payment system to meet regulatory demands. This shift has resulted in increased liabilities, contributing to the company's first annual profit drop since the pandemic. The overproduction issue is stark, with Chinese factories capable of producing 55.5 million vehicles annually, while domestic sales were only about 23 million in 2025, leading to an average capacity utilization of just 50%. As a response to these challenges, some manufacturers are focusing on overseas markets, with Chinese EV exports more than doubling in March. However, this surge has prompted some countries, including members of the European Union, to impose tariffs to protect local production.