The Electric Vehicle (EV) price war started by Tesla in China has now affected the entire auto industry as investors and traders are abandoning Chinese automobile stocks. Investors fear that the Chinese automobile market will not revive quickly enough and the ongoing price war will further reduce profitability.
China which is the world’s largest automobile market is going through a sluggish economy. The zero covid policy which led to periodic lockdowns combined with Beijing’s crackdown on industries and the real estate crisis all led to the economic downturn in China. The ongoing US-China trade war, rising inflation, and impending global recession have also made consumers cautious and reluctant to invest.
To get back consumer interest, revive the demand, and capture the market, automobile companies in China are slashing their vehicle prices which has led to a fall in Chinese Automobile stocks. Last week BYD stocks fell 11 percent in Hong Kong and 7.8 percent in Shenzhen. Shares of famous Chinese EV makers like Li Auto, Nio, and Xpeng fell up to 15% and SAIC recorded a 6.7% fall in Shanghai.
Automobile Price War in China:
To revive the sluggish demand for EVs, Tesla first slashed its price in October 2022. The company reduced the prices of Model 3 and Model Y by as much as 9.4%. A second round of price cuts happened in January when the company cut prices for all versions of its China-made Model 3 and Model Y. The base variant of model 3 has been reduced by 13.5% while the starting price for Model Y has been slashed by 10%.
Following the price cut, Tesla saw an increase in sales which then led BYD the world’s biggest EV maker to slash its price. The price war which started with Tesla and BYD affected many domestic and international players who then joined the battle. Last week, premium automobile companies like BMW and Mercedes and domestic companies like SAIC and Guangzhou Automobile reduced their vehicle prices in order to revive consumer demand.
Tesla reduced its prices somewhere between 6 to 13.5% and BYD reduced its price on the famous Dynasty series by up to 7% this year. However, the biggest discount was offered by the French automaker Citreon who slashed the price of its C6 model by almost 40%.
Wang Zheng, chief investment officer at Jingxi Investment said that the ongoing price war is a sign of weak consumer confidence. He further added that customers are not ready to spend as they expect a slow economic recovery. This in turn has caused investors to lose trust in the Chinese automobile industry.
Related:
- After Tesla, BYD Slashes EV Prices to Combat the Competition
- Tesla’s Price Reduction Strategy Pays OFF in China: Sales increase by 26% in February
- China Sees Sharp Fall in Semiconductor Imports: US Sanctions Taking a Toll on the Industry
(via)
