Tesla and BYD are gearing up for another round in China's brutal EV battle

• China's brutal EV battle shows no signs of letting up.
• BYD is asking suppliers to cut prices and Tesla is rolling out more discounts.
• The price war is putting some smaller Chinese players under financial pressure.

BYD and Tesla have been playing a game of how-low-can-you-go on EV prices in China for the past year, and they don't seem to be slowing down anytime soon.

The rivals are asking suppliers to cut prices and rolling out discounts as they prepare for another round in an ongoing EV battle.

After Bloomberg reported on a leaked email that appeared to be asking an unnamed supplier to cut prices by 10% from January, a BYD executive said it was asking suppliers about price reductions.

"Annual price negotiations with suppliers are a common practice in the automotive industry," wrote BYD public relations and branding general manager Li Yunfei in a post on Chinese social media site Weibo.

"Based on large-scale purchases, we set price reduction targets for suppliers. This is not a mandatory requirement and we can negotiate and move forward."

The move is the latest sign that China's price war, which has seen the price of new vehicles plummet as local and foreign automakers vie for a bigger slice of the country's EV and hybrid markets, is set to enter a new phase.

Tesla, which is battling BYD for the crown of the world's largest EV producer, cut the price of its bestselling Model Y EV in China by 10,000 yuan ($1,400) on Monday.

Elon Musk's automaker kicked off China's EV price war last April, and is attempting to boost sales as it seeks to deliver a record number of cars this year.

Tesla's sales in China have suffered recently, with shipments from the company's Shanghai factory falling 23% in October from September.

Tesla is coming under pressure from smaller rivals such as Zeekr and Xpeng, which have both launched rivals for the Model 3 and Y this year, as well as its lack of hybrids that have proven increasingly popular in China.

BYD reported record monthly deliveries for October and recently announced quarterly earnings that outstripped Tesla for the first time.

Analysts previously told Business Insider BYD was cashing in on its strong hybrids lineup, with hybrid sales rising by 62% year-on-year.

The race to the bottom on price, which has seen some Chinese automakers offer EVs for as little as $10,000, has strained the finances of some smaller EV startups.

Xpeng, Nio, and Zeekr all reported sizeable net losses in their most recent quarterly earnings despite booming sales, with Nio attributing a decline in revenue from vehicle sales to lower sticker prices.

BYD and Tesla did not immediately respond to requests for comment from Business Insider.