Shares of Chinese automakers continue to slide after fears of price war and scrutiny from regulators
It follows a plunge of more than 9% on Monday, which was a reversal from its record high last week.
JaneWalter
A large number of new energy vehicles are being prepared for export at the Lianyungang Port in Jiangsu province, China.
Nurphoto | Nurphoto | Getty Images
Shares of Chinese automakers marked a second day of decline as fears of a price war and increased scrutiny from regulators weighed on investors.
Hong Kong-listed shares of BYD fell as much as 4% Tuesday, continuing losses recorded in the prior session. The plunge of more than 9% on Monday was a reversal of its record high last week, as investors assessed the Chinese electric vehicle giant's price cuts announced on May 23.
Stocks of other Chinese automakers also fell Tuesday as investors turned cautious about stiffer competition in the sector.
Geely Automobile shares declined 3.16%, while Great Wall Motor Co and Li Auto had lost 1.1% and 2.37% respectively. Meanwhile, shares in Xpeng were down 1.73%.
Reuters reported Tuesday that China's commerce ministry was meeting industry bodies and automakers over a practice of marking cars as sold to meet sales targets. These zero-mileage cars were then sold by thousands of vendors on the secondhand market.
Separately, BYD announced on May 23 that it was reducing the prices on 22 electric and plug-in hybrid models until the end of June.
BYD slashed the price tag of its Seagull hatchback by 20% to 55,800 Chinese yuan ($7,780), while that of the Seal dual-motor hybrid sedan was cut by 34% to 102,800 yuan.
"We expect BYD's vehicle margin would be under pressure in the short term as I think this move by them is driven by the need to hit their sales targets," Victor Sun, senior equity analyst at Morningstar said, adding that BYD shares are now overvalued.
Looking ahead, Sun expects the company to "offset the impact via larger sales scale and battery cost staying low," regardless of whether its sales campaign is extended beyond its current deadline of June.
Shares of China’s BYD continue to tumble following price cuts
The latest developments follow other price revisions the automaker announced earlier in the year, such as the release of its Han sedans and Tang SUVs at a starting price that was 10.35% and 14.3% lower than that of previous versions.
Analysts from Citi expect BYD's price reduction to have caused a 30% to 40% spike in footfall at its dealership stores between May 24 and 25, compared to the previous weekend.
Morningstar's Sun, however, already sees margins of some EV makers being "capped by price competition despite decent sales volume in the fourth quarter last year."
"Retail discount levels stayed at high levels in the first quarter of 2025. With the expected prolonged price war, we believe the sector's profitability will remain under some strain in the near term," he told CNBC.
Citi's analysts, however, are not concerned that BYD's price cuts would erode its competitors' market share.
Instead, they expect "robust sales growth" for new energy vehicle companies with prices below 200,000 Chinese yuan as "competition remains relatively mild," the analysts wrote in a May 26 note.
