(Yicai) March 1 -- Price wars are intensifying as big marques BYD and Tesla revealed new sales incentives in China's crowded electric vehicle market today and the trend is expected to continue due to rising EV sales and falling prices of raw materials.

Price wars are predicted to deepen this year as sales of EVs should increase and fixed costs are diluted, per Gasgoo, an automotive media outlet and research institute. There is still room for discounts as lithium prices further decline, it added.

Discounting is accelerating as BYD announced on Weibo today that the Shenzhen-based EV giant will lower the price of the Song Pro DM-i Glory Edition compact sport utility vehicle by CNY20,000 (USD2,780) to a minimum of CNY109,800 (USD15,250).

Last month, BYD slashed its prices of the Song Plus DM-i, Song Plus EV, BYD Tang, BYD Dolphin, Qin Plus, as well as Chaser 05 by CNY20,000 to CNY30,000 to as low as CNY79,800 (USD11,090).

Moreover, Tesla today revealed its third sales promotion in China this year. Buyers of certain editions of Model 3 or Model Y can enjoy an insurance subsidy of CNY8,000 (USD1,110), car paint options worth CNY10,000, and car loans with an annualized rate of 2 percent.

SAIC Motor’s EV brand Rising Auto also said today that it will cut the prices of certain models by CNY25,000 to CNY30,000.

Several marques added fuel to the trend last month. SAIC-GM-Wuling Automobile, a joint venture that makes models under brands Wuling and Baojun, and Hozon Auto, which produces Neta-branded EVs, announced price cuts of certain models and a JV between SAIC and Volkswagen did the same for Lavida-branded cars while SAIC-GM made luxury sedan Cadillac CT-5 cheaper.

Some of the reasons behind automakers' price cuts are the intensified competition and the dropping prices of lithium carbonate, a major raw material used in batteries, according to Minmetals Securities.

Prices of lithium carbonate have slumped by over 70 percent to CNY99,500 per ton year-over-year, according to Wind data. Last year, the decline exceeded 80 percent. But after bottoming out soon, prices should stabilize and rebound this year due to rising demand, Guolian Securities predicted in a research report.

Sales of EVs should jump by a fifth in China this year to around 11.5 million units from the year before, according to the China Association of Automobile Manufacturers. Export should reach 5.5 million units.

Editor: Emmi Laine