On the evening of November 26, an email titled "BYD Passenger Car Cost Reduction Requirements in 2025" began circulating online. The email revealed that BYD is asking its suppliers, including global sensor giant Sensata, to reduce product prices by 10% starting January 1, 2025. The email was signed by He Zhiqi, BYD Group Executive Vice President and Passenger Car COO.

The email explains that while 2025 presents significant opportunities for new energy vehicles (NEVs), the market is expected to face intense competition, entering what BYD described as a "final battle and elimination round." To enhance competitiveness, BYD emphasized the need for collaboration across the supply chain to reduce costs.

The email urged suppliers to "take this requirement seriously, explore cost reduction opportunities, connect with BYD's resource development team, and submit revised prices through the SRM system by December 15."

Interestingly, Sensata has consistently maintained profit margins exceeding 30%, reaching 38% last year. In contrast, BYD's gross profit margin is around 20%, highlighting the disparity in profitability between the carmaker and its suppliers.

On November 27, Li Yunfei, BYD’s Brand and Public Relations General Manager, responded via Weibo, clarifying that "annual bargaining with suppliers is a common practice in the automotive industry." Li described the price reduction targets as non-mandatory and negotiable, emphasizing the collaborative nature of such discussions.

BYD insiders revealed on November 29 that fewer than 1% of its more than 8,000 suppliers received cost-reduction notices. The initiative primarily targets electronic control and sensor suppliers, totaling only a few dozen companies. However, insiders did not rule out the possibility of expanding the request to other supplier categories in the future.

Since 2023, BYD’s rapid growth in automobile sales has significantly increased its bargaining power with suppliers. Industry insiders note that annual price reduction requests of 10%-20% are common among automakers with large-scale production capacities. "For suppliers, unless they hold significant leverage, it's challenging to resist such demands," said a source familiar with the matter.

Like Tesla, BYD employs a vertically integrated supply chain model, independently developing and manufacturing critical components such as batteries, motors, and electronic controls. Only non-core components are outsourced to external suppliers like Sensata.

Sensata, headquartered in the U.S., operates four factories in China, with the Changzhou facility serving as its largest manufacturing and R&D hub in the Asia-Pacific region. In 2022, Sensata received BYD's "Special Contribution Award" at the BYD New Energy Vehicle Core Supplier Conference for its technological and supply chain support.

BYD's cost-cutting efforts reflect a broader trend within the automotive industry. At the start of 2023, during the price war initiated by Tesla, Chang Jing, President of Sensata Technologies Asia Pacific, acknowledged the mounting cost pressures due to global inflation, rising raw material prices, and market volatility. He remarked, "While we are not the main driver of cost reductions, we must optimize our cost-performance ratio to support OEMs and ensure long-term growth."

The pressure on suppliers extends beyond Sensata. In April 2024, Xu Daquan, President of Bosch China, echoed similar concerns, stating that demands for price cuts of up to 20% could force suppliers to shut down. "If we close, that might be better than operating under such unsustainable conditions," Xu lamented.

For BYD’s numerous suppliers, including Abrmicro, the future remains uncertain. Many worry whether they will receive similar cost-reduction notices from the automaker as it navigates the competitive NEV landscape.