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Shares of Chinese electric vehicle giant BYD (HK:1211) fell 3.6% to HK$409.80 on Tuesday, extending losses from last week’s record highs. The decline reflects growing investor concerns over aggressive price cuts in China’s EV market, which could erode profit margins amid intensifying competition.
BYD's drop weighed heavily on the Hang Seng index, which slipped 0.2%. Other Chinese EV makers also saw declines, with Xpeng (HK:9868), NIO (HK:9866), Li Auto (HK:2015), and Leapmotor (HK:9863) losing between 1.7% and 3%. Geely (HK:0175) also slid 3.2%.
The pressure follows a new round of price reductions and promotional incentives announced by BYD and several of its rivals, fueling fears of a deepening price war. While BYD recently received praise for offering driver-assistance technology for free on select lower-cost models, investors worry about the potential impact on earnings, particularly if margins shrink further.
The selloff also comes amid profit-taking after BYD hit all-time highs last week, driven by optimism over its overseas growth. Notably, BYD surpassed Tesla (NASDAQ:TSLA) in EV sales across Europe for the first time in April, marking a significant milestone after having already overtaken Tesla in China last year.
European data released Tuesday showed Tesla’s sales in the region plummeted nearly 50% in April, underscoring BYD's growing market share abroad. However, with the domestic landscape turning increasingly price-sensitive, analysts remain cautious about near-term profitability for Chinese EV makers.
As the Chinese EV price war heats up, investors are closely monitoring how companies like BYD balance market share expansion with sustainable margins in an increasingly competitive environment.
