Shares of Chinese electric vehicle (EV) makers slumped on Monday after US rival Tesla sparked off another price war in the world’s biggest car market.
Tesla cut the starting price of its revamped Model 3 in China by 14,000 yuan ($1,930) to 231,900 yuan ($32,000), its official website showed on Sunday.
That prompted Chinese automaker Li Auto to announce on Monday that it was cutting prices by around 5% on four of its five models. It added that it would refund owners who had bought those models earlier this year.
Also on AF: US ‘Pressured’ Mexico to Reel Back China EV-Maker Incentives
While Li Auto’s move was fuelled by a push to stay competitive in China’s increasingly tough EV market, the fresh round of price cuts spooked investors.
Hong Kong-listed shares of major Chinese EV firms were in the red on Monday, led by Li Auto, which slumped more than 8% by close of trade.
Meanwhile, shares of Great Wall Motor slumped more than 6% while Leapmotor fell over 5%.
Bigger EV-makers saw relatively smaller drops, with Nio and Xpeng falling close to 2%.
China’s biggest EV-maker BYD — which briefly overtook Tesla as the world’s biggest EV-seller last year — was flat, closing just 0.20% lower.
In US pre-market trade, Tesla shares were also trading more than 3% lower as of 1206 GMT.
Investors are growing increasingly wary of the EV price war in China, with concerns about automakers’ increasingly thinning margins.
The ongoing price war, that started early last year with cuts by Tesla, has drawn in dozens of automakers including BYD, Geely Auto, GAC Aion, Leapmotor and Xpeng.
Chinese automakers have rushed to take on Tesla despite increasing competition and slowing demand already weighing on their market share.
Eugene Hsiao, head of China equity strategy at Macquarie Group, noted over the weekend that all of China’s biggest EV makers have one goal in mind — “taking the crown from Tesla,” according to a CNBC report.
Looming oversupply
The less than ideal market conditions prompted China’s state planner on Monday to warn of oversupply in the country’s EV market, adding that the price war will only intensify.
The National Development and Reform Commission (NDRC) said it expected the release of more than 110 new energy vehicle (NEV) models among a total of 150 new cars launched this year. NEVs include electric cars and plug-in hybrids.
The NDRC also estimated the market demand for new energy vehicles to grow 2.1 million units this year, but BYD, Seres Group’s Aito and Li Auto — the three top NEV brands — had planned to increase deliveries by 2.3 million units for 2024.
Falling battery costs and economies of scale will be the other two main reasons for price cuts in NEVs, which will range from 5% to 10% this year in the southern city of Shenzhen, a metropolis with high EV adoption, NDRC said.
BYD and Denza cars have been leading the price cuts with reductions of 7.15% to 9.7% to the prices of five models in April compared with those at the beginning of the year, according to NDRC.
View this post on Instagram
- Vishakha Saxena, with Reuters
Also read:
Excess Capacity Claim is Wrong, We’re More Competitive: China
China Firms Order Dozens of Ships For EV, Exports Surge
Musk Cancels Low-Cost EV Plans Amid Tough China Competition
Tesla-BYD Lock Horns in China With Deep Discounts, Incentives
Xiaomi’s EV Launch Sees Its Market Value Overtake GM, Ford
In Battle for China EV Market, Xiaomi’s ‘Thor’ Takes on Elon Musk
BYD Leads China EV Charge Despite Sluggish Sector Growth
Volkswagen to Pump $2.7bn Into China Site, Boost EV Output
