TLDR
- BYD shares dropped 8.6% after announcing price cuts on 22 electric and hybrid models with trade-in incentives lasting until end of June
- The Seagull hatchback price fell 20% to 55,800 yuan ($7,780) while the Seal sedan dropped 34% to 102,800 yuan
- Other Chinese automakers also declined with Geely down 9.5%, Nio and Leapmotor falling 3-8.5%
- Great Wall Motor CEO warned the Chinese auto industry has its own “Evergrande” crisis brewing
- China’s price war continues intensifying as automakers cut costs and offer premium features for free
BYD shares closed 8.6% lower in Hong Kong trading on Monday after the Chinese electric vehicle maker announced new price reductions across 22 models. The stock fell to 425.20 Hong Kong dollars, marking a sharp retreat from recent record highs.
The automaker revealed its latest pricing strategy over the weekend on Chinese social media platform Weibo. The company is offering subsidies and incentives that require customers to trade in their old vehicles.
The price cuts are substantial across BYD’s lineup. The pure battery-powered Seagull hatchback now starts at 55,800 yuan ($7,765), representing a 20% reduction from its previous price.
The Seal dual-motor hybrid sedan saw an even steeper cut of 34%. Its price dropped to 102,800 yuan under the new incentive program.
Stylish, reliable, and efficient – Introducing the BYD KING
With the DM-i plug-in hybrid system, this sedan achieves a combined range of 730 miles, offering low fuel consumption and a peace of mind for range anxiety. pic.twitter.com/0csKePOW66
— BYD (@BYDCompany) May 2, 2024
These reductions will remain in effect until the end of June. A customer service officer confirmed that buyers must trade in their existing vehicles to qualify for the subsidies.
The latest moves follow earlier price adjustments BYD made this year. The company previously launched its Han sedans at starting prices 10.35% lower than previous versions.
The Tang SUVs also received price cuts of 14.3% compared to earlier models. These repeated price reductions show BYD’s commitment to maintaining market share through aggressive pricing.
Citi analysts expect the price cuts drove significant customer interest. They project footfall at BYD dealerships spiked 30% to 40% between May 24 and 25 compared to the previous weekend.
Broader Market Impact
The BYD announcement sent ripples across the Chinese automotive sector. Geely Auto shares fell 9.5% in Hong Kong trading on Monday.
Other electric vehicle makers also declined. Nio and Leapmotor closed between 3% and 8.5% lower as investors grew cautious about intensifying competition.
Great Wall Motor and Li Auto saw their shares drop 2.94% and 4.93% respectively. Xpeng shares declined 4.19% as the selloff spread across the sector.
Geely quickly followed BYD’s lead by announcing similar incentives on Monday. The move suggests other automakers may need to match BYD’s aggressive pricing to remain competitive.
Industry Warning Signs
Great Wall Motor Chairman Wei Jianjun issued stark warnings about the industry’s health on Friday. He compared the Chinese auto sector to property developer Evergrande, which became the center of China’s real estate crisis.
“Now, Evergrande in the automobile industry already exists, but it has not collapsed,” Wei told Sina Finance. He did not name specific companies but referenced “main manufacturers” focused too heavily on market value and stock prices.
Wei criticized the industry’s approach to pricing and quality. He questioned how products could drop from 220,000 yuan to 120,000 yuan while maintaining quality assurance.
The chairman highlighted supplier struggles in the current environment. Companies face ongoing pressure to lower prices while dealing with delayed payments from automakers.
Wei accused some manufacturers of cutting corners on safety and reliability. He described the electric vehicle industry as being in an unhealthy state due to heavy losses and prolonged price competition.
China’s state planner issued warnings last week about excessive competition in some industries. Officials noted that some firms are selling below cost, disrupting fair competition.
The government indicated it may take corrective action to address these market distortions. This regulatory attention adds another layer of uncertainty to the sector’s pricing dynamics.
Citi analysts remain optimistic about companies with vehicles priced below 200,000 yuan. They expect “robust sales growth” for new energy vehicle makers in this segment, noting that competition remains relatively mild in the lower price ranges.
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