BYD’s Hong Kong-listed shares fell nearly 10% cumulatively on Monday and Tuesday this week. Goldman Sachs cited investor concerns over profitability and gross margins, while Morgan Stanley stated that the price cuts sent a strong signal of intense pressure in the end market. CICC noted that the actual discount was lower than the surface figures suggested. Cui Dongshu, an industry analyst, predicted intensified competition in the auto market in the second half of the year, emphasizing diversified approaches to enhance product competitiveness rather than low-level internal competition.
Last Friday, BYD, a leading new energy vehicle (NEV) manufacturer, announced price cuts of up to 53,000 yuan ($7,300) across 22 models, triggering a sustained decline in its Hong Kong shares. The market interpreted this aggressive promotion as more than a sales tactic—it signaled a potential price war that could reshape the industry landscape. Goldman Sachs analysts expressed bearish views, and Citigroup anticipated other domestic automakers would follow suit. CICC, however, argued that the discounts were partly anticipated and less severe than officially announced. The promotion covers 22 intelligent-driving models from BYD’s Dynasty and Ocean series. The Sealion 07 DM-i intelligent-driving version saw the steepest cut, with its limited-time price slashed by 53,000 yuan (34%) to 102,800 yuan. Ocean series models start at 55,800 yuan, while Dynasty series models begin at 63,800 yuan after subsidies, breaching the 60,000-yuan threshold and challenging traditional fuel-powered vehicles’ pricing. This marks BYD’s third major promotion in less than two months and the most extensive one to date, far exceeding previous campaigns in scale and depth. From entry-level non-intelligent-driving models in late March to intelligent-driving version trade-in subsidies in early May, and now this sweeping limited-time offer, BYD’s discount strategy is escalating. Behind the frequent price cuts lies the broader challenges facing China’s NEV market. Data from the China Passenger Car Association shows auto inventory hit 3.5 million units in April, equivalent to 57 days of supply—the highest since December 2023. Morgan Stanley analyst Tim Hsiao noted, ‘While some discounts were implemented since April, the official announcement underscores severe pressure in the end market.’ This reflects how even market leaders are resorting to price cuts to boost sales amid economic headwinds and weak demand.According to sales data, BYD sold approximately 1.38 million vehicles from January to April this year, achieving only a quarter of its annual target of 5.5 million units. To meet the 30% year-on-year growth target, the sales pressure in the second half of the year is evident.
Investor confidence is being tested as Wall Street investment banks remain cautious about BYD’s significant price cuts. Goldman Sachs analyst Shubham Ghosh advised clients, “We are selling BYD here.” CICC analysts attempted to alleviate market concerns, stating, “This promotion was somewhat anticipated,” citing factors such as the ramp-up of the intelligent driving version in March-April, high terminal prices, and limited appeal in lower-tier cities. In reality, BYD has continued to increase promotions at the terminal in April-May, with actual price reductions being lower than the surface figures suggest. However, investors are clearly more focused on the long-term impact of the price war on the industry’s profitability. Goldman Sachs analyst Keita Umetani wrote in a report, “The EV sector remains under pressure, with BYD’s stock plunging 8.6% (on Monday) after announcing discounts on 22 models. Investors are concerned about its profitability and gross margins.” Industry peers are following suit, accelerating market reshuffling. Cui Dongshu, Secretary-General of the China Passenger Car Association, believes BYD’s price cuts “will have some impact on the current price war in the auto market.” Data shows that 65 models in China saw price reductions in the first four months of this year, 56 fewer than the same period last year, indicating a cooling price war. However, BYD’s move may reignite the competition. Under the pressure of annual sales targets, automakers are bound to engage in fiercer competition for market share. As Cui Dongshu noted, competition in the auto market will intensify further in the second half of the year. As the new energy vehicle industry shifts from high growth to stock competition, a price war may be inevitable. For investors, this price war ignited by BYD means the profit expectations and valuation logic of the entire industry will face re-evaluation. Cui Dongshu predicts that competition among automakers in the second half of the year will no longer be low-level “internal competition” but will instead focus on diversified approaches to enhance product competitiveness and capture more market share. Citigroup Research analysts wrote in a report, “We expect peers to follow BYD’s price cuts.” They noted that Chongqing Changan Automobile has already announced a price reduction of 25,000 yuan for its Deepal S07 model, while Zhejiang Leapmotor has also cut prices for its C16 full-size crossover SUV and C11 midsize SUV. CICC also pointed out that some traditional brands may face direct competitive pressure and will consider following up with promotions as appropriate. Risk Warning and Disclaimer: The market carries risks, and investment requires caution.This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situations, or needs of individual users.
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