BYD Co. has asked suppliers to accept price cuts next year in a signal the Chinese electric vehicle maker is preparing for the brutal price war in the world’s biggest auto market to intensify.

This is sort of a good thing for the reputation of Chinese-made cars in Europe over the long term,” said Paul Gong, head of China auto research at UBS.

China's 4S dealership model, once a cash cow in the early 2000s, is unraveling under mounting pressure. The sector, which peaked around 2017, has been hit hard by fierce price wars and a market pivot toward domestic new energy vehicles (NEVs).