How Has the Price War in China Been Impacting the Demand for Fluoroelastomer?

Shanghai, China: The Fluoroelastomer prices, which were surging a few weeks back, suddenly became stable during the week ending on 17th March and are now showcasing a downfall. Market researchers are indicating that this decline in Fluoroelastomer prices is somehow related to the automotive industry's price war initiated by Tesla. As the automotive industry is one of the major downstream industries of Fluoroelastomer, anything affecting the industry impacts the Fluoroelastomer market.

Analysts have cautioned that the new wave of price reductions in China's auto market might further compress the profitability of manufacturers already contending with sluggish demand, which would impact the Fluoroelastomer prices in the near term. In a recent report, an analyst at Fitch Ratings said that the growing pricing war in China's automotive market is projected to persist into the second quarter of 2023 and erode profitability along the whole automobile value Chain in 2023. As new national pollution rules are slated to go into effect in July 2023, carmakers are under pressure to get rid of their inventory, which has resulted in dramatic price cuts, according to analysts at Nomura Holdings in a study released on Tuesday. They also anticipate that the price battle will last for a few more months, and if that happens, fluctuations in automotive sales will surely impact the Fluoroelastomer market. Consequently, as long as the automotive industry is affected by the price war, it will impact the Fluoroelastomer market trend to some extent.

There are other strategies automakers have been employing besides price reductions. On new purchases made before the end of March or the end of April 2023, several businesses, including Li Auto, Lynk & Co., Hozon New Energy Vehicle, and Zhejiang Leapmotor Technology, have started to give a 90-day price match guarantee. Many automakers claimed that the incentives were only available for a short period of time, but Fitch analysts said they thought Chinese consumers would wait to buy in expectation of even bigger price reductions.

As per the above statements made by different market analysts, the demand for automobiles is less in the market as consumers are waiting for better discounts. The lack of demand and abundance of inventories in the automotive industry is, in turn, impacting the Fluoroelastomer offtake in the market and has been impacting its value.