BYD Shares Slide 8% as Aggressive EV Price Cuts Spark Investor Worries but Boost Buyer Interest

Shares in Chinese electric vehicle (EV) manufacturer BYD dropped as much as 8.25% on Monday, retreating from a record high reached the previous week. The decline came in response to the company’s decision to significantly reduce prices on several of its electric and plug-in hybrid models, announced on May 23. This move has raised concerns among investors about shrinking profit margins and heightened competition in China’s crowded EV market.

BYD Slashes Prices on 22 Models, Boosting Dealership Traffic and Consumer Interest

BYD revealed on Chinese social media platform Weibo that the price cuts would affect 22 of its models, with discounts valid until the end of June. Key models such as the Seagull hatchback saw a 20% price drop to 55,800 yuan (approximately $7,780), while the Seal dual-motor hybrid sedan’s price was slashed by 34% to 102,800 yuan. These discounts follow earlier reductions for the Han sedan and Tang SUV models earlier this year.

Despite investor jitters, the price reductions appear to have stimulated consumer interest. Analysts at Citi reported a 30% to 40% increase in foot traffic at BYD dealerships during the weekend following the price cuts, compared to the previous weekend. This suggests that the aggressive pricing strategy may be driving short-term demand for BYD’s offerings, particularly in the affordable EV segment.

Chinese EV Sector Sees Stock Declines Amid Price War Concerns and Investor Caution

The market’s negative reaction wasn’t limited to BYD. Other Chinese automakers also experienced notable declines in their share prices, reflecting concerns about intensifying competition and the potential for an industry-wide price war. Geely Automobile dropped 7.29%, Great Wall Motor Co fell 2.94%, Li Auto declined 4.93%, and Xpeng saw a 4.19% decrease in share value.

Despite the market volatility, Citi analysts remain optimistic about the long-term outlook for the sector, particularly for new energy vehicle (NEV) companies offering products priced below 200,000 yuan. They believe the competition in this price range remains relatively subdued and foresee strong sales growth ahead. The analysts do not anticipate BYD’s price cuts to significantly affect the market share of its rivals, underscoring confidence in robust demand for affordable EVs.