The race to lead China’s artificial intelligence sector heats up as ByteDance, Alibaba and Baidu offer their models at rock-bottom prices

The largest Chinese companies have a proven tactic when it comes to fighting competition: they lower prices, drastically. Many sectors of China’s consumer economy – e-commerce, consumer devices and electric vehicles – are currently embroiled in a fierce price war.

The artificial intelligence sector is the latest industry to be hit by heavy discounting, with the country’s biggest tech companies all but sharing their models to woo customers.

According to state authorities, there are more than 200 major language models (LLMs) in China. Global times, quoting China Media Group. However, the most famous ones are those from China’s biggest tech players, such as Alibaba, Baidu and TikTok owner ByteDance. LLMs underpin many generative AI services, such as OpenAI’s ChatGPT chatbot.

Last week, ByteDance revealed pricing for its Doubao LLM. The TikTok owner will charge 0.0008 yuan ($0.0001) per 1,000 tokens for its top-end Doubao Pro, which ByteDance says is 99% lower than the industry average for enterprise users.

A token is a unit of data processed by LLM. In the case of OpenAI’s ChatGPT, 1,000 tokens equal approximately 750 English words.

ByteDance’s competitors responded quickly. On Tuesday, Alibaba slashed prices on some of its Qwen LLM models by up to 97%. A few hours later, Baidu said Ernie Speed and Ernie Light, two lighter versions of Ernie LLM, would be free for all business users.

On Wednesday, iFlytek – which has its own AI chatbot “Spark” – also lowered the prices of its services. It charges just 0.21 yuan ($0.03) for 10,000 input tokens, which is equivalent to generating approximately 15,000 Chinese characters on the platform.

Chinese AI services are already priced lower than their Western counterparts. OpenAI charges its users $20 per month for a ChatGPT Plus subscription, although the chatbot is not available in China. By comparison, Baidu charges 59.90 yuan ($8.32) a month for its top-of-the-line Ernie Bot 4.0, which CEO Robin Li says works as well as the OpenAI product.

China’s AI sector is still in its early stages of development, with popularity shifting rapidly between different vendors. ByteDance’s Doubao chatbot, released last August, has already overtaken market pioneer Baidu’s Ernie bot in terms of regular monthly users on iOS, according to Bloomberg, citing Sensor Tower data.

Price wars in China

Deep discounts are common in China, where companies often lower prices to take market share from competitors.

Alibaba and its affiliated tech companies Tencent and JD are engaged in a separate price war in the cloud computing space. To ward off competition, the three companies have significantly reduced the fees for their services.

Just earlier this week, Apple lowered the price of its iPhones in China for the second time this year as it tries to defend its position against Chinese manufacturers such as Huawei and Honor.

But perhaps the fiercest competition is in the electric vehicle sector. Chinese automakers, as well as U.S.-based Tesla, have been embroiled in a protracted price war since Tesla first began slashing prices in October 2022, lowering prices to gain market share as electric vehicle sales in China begin to decline .

This story was originally published on Fortune.com