Things are spicing up in Tesla's (TSLA) latest EV pricing bout with Chinese competitors in China's auto market, this time with Li Auto (LI) as both companies slash prices on electric vehicle models.

Yahoo Finance's Akiko Fujita explains the multi-year timeline of EV price cuts from Chinese auto manufacturers — some noted to be more affordable on average than US counterparts — as China accelerates faster into electrification trends.

For more expert insight and the latest market action, click here to watch this full episode.

This post was written by Luke Carberry Mogan.

Video Transcript

SEANA SMITH: The EV pricing war is heating up in China. Shares of Tesla now sinking this morning. And China's Li Auto falling to an 11-month low after both companies cut prices. Joining us now with the latest on this is our very own Akiko Fujita. Akiko.

AKIKO FUJITA: Good morning to you, Seana. Yeah, it certainly felt like a race to the bottom, if you will, in the world's largest EV market. That latest price cut coming through from Li Auto applies to four out of the five models for the carmaker. We're talking about roughly 5% of the existing sale price. So about $4,100 off of what it's selling for right now. That comes one day after Tesla slashed prices for four of its models sold in China. Just for some context here, the Model Y is now selling for $34,502 roughly. Compare that to $42,990 in the US. That's the starting price for a Model Y here. So we're talking $8,500 roughly price difference between what's being sold in the US as well as China.

Now, this is just the latest in an ongoing price war that began all the way back in October of 2022. If you'll recall, that's when Tesla fired the first shot slashing its prices. Since then, nearly all of China's car makers have followed suit here. BYD has been among the most aggressive, slashing prices by more than 7% since the beginning of the year. Just last month, they slashed the price of its most affordable EV, that's the Seagull, now selling at $9,670. We're talking about less than $10,000 here. More than 30 of those brands have slashed prices in the first four months of this year alone.

Now, the question is, what does the demand look like in China moving forward? On that front, we've got a bit of a milestone over the weekend here. Data coming through from the Passenger Car Association showing that new energy cars surpassed ICE vehicles in China in terms of new car sales. So we're talking about the numbers here, that made up over 50% of car sales in the first two weeks of April. And yes, it's just the first two weeks of April but that points to an overall trend that we have been seeing in China here.