BYD’s decision over the weekend to cut prices on 22 models to promote sales has cast a pall over the earnings outlooks of Chinese electric vehicle (EV) makers, as many competitors are expected to follow suit in an effort to retain market share.
BYD’s Hong Kong-listed shares lost 7.5 per cent to close at HK$425.20 on Monday. Xpeng saw its shares close 3.4 per cent lower at HK$75.35, while Li Auto closed 3.2 per cent lower at HK$109.90. And Geely shares fell 6.7 per cent to close at HK$18.38.
On Friday, BYD said that until the end of June it would offer discounts of 10 to more than 30 per cent on 22 of its battery-powered and plug-in hybrid models.
The latest discounts were mainly focused on models priced under 150,000 yuan (US$20,820). The highest-priced model included in the promotion was the Xia multipurpose vehicle, which remained above 200,000 yuan after a discount of about 13 per cent.
The price of BYD’s cheapest model, the all-electric Seagull hatchback, was reduced 20 per cent to 55,800 yuan from 69,800 yuan. The largest discount was for the Dynasty series Qin Plus DM-i, which saw its sticker price fall 34 per cent to 63,800 yuan from an official guide price of 79,800 yuan.
Analysts from Morgan Stanley said that “while some of these discounts have been in place since April, the official announcement sends a strong signal” about how tough the market was.
And Citi estimated that after the price reductions were announced, BYD’s weekend showroom footfall may have increased 30 to 40 per cent from the weekend before.
“We anticipate peers to follow BYD’s price cut,” its analysts said in a note on Monday.
Following BYD’s announcement, IM Motors and Leapmotor joined the discount war.
On Sunday, Stellantis-backed Leapmotor said it would offer discounts of up to 30 per cent on two of its extended-range SUVs until June 8. And on Monday, IM Motors, a subsidiary of state-backed SAIC Motor, said it would offer a discount of nearly 20 per cent on one of its SUVs.
Of the country’s 50-odd EV manufacturers, only three are known to be profitable: BYD, the world’s largest electric-car assembler; Li Auto, which like Tesla assembles smart EVs targeting middle-income consumers; and Seres, builder of the Aito-brand intelligent vehicles.
“Fierce as the competition turns out to be, we still see some bellwether companies wading through the turbulence to make profits,” said Nick Lai, head of Asia-Pacific auto research at JPMorgan. “Indeed, some carmakers rely on overseas sales to make money since they enjoy higher profit margins abroad.”
He said EV makers that had multiple brands and models across various price segments would survive the cutthroat competition because their diverse portfolios could ensure stable sales volume.
