https://x.com/fbermingham/status/1927306576613756931
BYD’s recent price cuts on 22 electric and plug-in hybrid models have sent shockwaves through the Chinese auto industry, with shares of major automakers falling for a second day amid fears of a price war and increased regulatory scrutiny. Hong Kong-listed shares fell as much as 4% on Tuesday, following a plunge of more than 9% on Monday. Other Chinese automakers also saw their stocks decline, with some falling by over 3%.
https://x.com/BYDCompany/status/1926677142596685943
The market’s unease is partly due to China’s commerce ministry’s scrutiny over a practice where automakers mark cars as sold to meet sales targets, only to have these zero-mileage cars sold by thousands of vendors on the secondhand market. BYD slashed the price of its Seagull hatchback by 20% to 55,800 Chinese yuan ($7,780), while the Seal dual-motor hybrid sedan’s price was cut by 34% to 102,800 yuan. These discounts are part of a limited-time campaign that runs until the end of June.
https://x.com/JChengWSJ/status/1927228521530704277
Victor Sun, senior equity analyst at Morningstar, expects BYD’s vehicle margin to be under pressure in the short term due to the need to hit sales targets.
Price war pressures Chinese EV market
However, he believes the company can offset the impact through larger sales scale and maintaining low battery costs.
Analysts from Citi expect that BYD’s price reductions led to a 30% to 40% spike in foot traffic at its dealership stores between May 24 and 25, compared to the previous weekend. The latest developments follow other price revisions that BYD announced earlier in the year. Morningstar’s Sun pointed out that the margins of some EV makers are already strained by price competition, and the expected prolonged price war will keep the sector’s profitability under pressure in the near term.
However, Citi’s analysts are optimistic about robust sales growth for new energy vehicle companies with prices below 200,000 Chinese yuan, as competition remains relatively mild in that segment. BYD’s aggressive pricing strategy aims to capture a larger share of the rapidly growing electric vehicle market in China, but it also puts immense pressure on other automakers to reduce their prices or risk losing market share. Industry experts predict that smaller, financially weaker companies may not be able to sustain such discounts, potentially leading to further consolidation within the sector.
