Chinese EV Makers Face New Price War

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Chinese electric-vehicle makers listed in Hong Kong experienced a broad decline in their stock prices on Monday as they engaged in a new price war that investors fear could negatively impact their profit margins.

Li Auto saw a 3.8% drop to HK$159.30 ($20.38), XPeng fell 6.1% to HK$62.1, and BYD Company saw a significant decline of 7.7% to HK$234.80.

In August, the new-energy vehicle players have once again started to cut prices, just months after their last price war aimed at attracting consumers. Tesla, for instance, has slashed the prices of its Model Y Long-range and Model Y Performance cars in China by CNY14,000 ($1,934), effective from Monday. SAIC-Volkswagen has also reduced prices for its models by up to CNY55,000, while Neta lowered its prices by up to CNY49,000. Market observers anticipate that BYD may soon follow suit and lower its prices too.

According to a research report by Citi analysts, the price war, together with concerns about its impact on margins and cash flow, is likely to be more influential for EV makers’ shares in early 2024.

Notably, the analysts believe that fourth-quarter demand will be weak, even if sales volumes unexpectedly perform well. Given the current weak macroeconomic environment, it is unlikely that these EV makers will achieve sequential on-quarter sales growth into the first quarter of 2024.

During the first week of August, most EV makers saw lower retail sales. Nio, Leapmotor, and XPeng all experienced double-digit on-week percentage declines, while Tesla’s sales increased by 21% compared to the previous week, albeit influenced by distortions caused by a low base effect. Analysts consider these results significantly below expectations due to the low-season effect and the fact that sales had been front-loaded in June following the previous round of price cuts.

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