The price war among electric vehicle makers in China is taking a toll on even the most resilient players, as evidenced by BYD Co.’s massive $18 billion plunge last month.
US-listed shares of the Warren Buffett-backed maker have declined 14% since February 1, underperforming rival Tesla Inc, which rose 9% during the period. In comparison, a gauge of global EV makers fell 9%.
Traders are growing concerned about BYD’s prospects after the electric vehicle maker’s dealers slashed prices of some models to boost sales. The change in sentiment underscores the wave of caution that Nio Inc. and XPeng Inc. The moves lead Tesla to lower prices as industry-wide reduced demand.
Robert Mumford, an investment manager at GAM Hong Kong Ltd, said, “The industry is slowly changing as extreme price cuts can cause buyers to back away, waiting for even lower prices, with all players Margins could have a huge negative impact.” “The lower input prices as of today are unlikely to have a negative impact on margins.”
Mumford said investors are now sifting through a pile of stocks to determine potential winners and losers from the price war.
In this regard, some say Shenzhen-based BYD could hold up relatively well because it has superior pricing power and controls most of its supply chain by producing its own chips and batteries.
Citigroup Inc analysts Jeff Chung and Beatrice Lam wrote in a note, “Some players may undergo cash burn to increase market share and better scale effects, which will lead to intensified competition and market consolidation.” “Over the long term, we believe market consolidation will further strengthen BYD’s market share.”
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