BYD Faces Market Turmoil Following Aggressive Discounting Strategy
In a surprising turn of events, shares of BYD, recognized as the largest electric vehicle (EV) manufacturer in China, plummeted by 8.6% on Monday. This sharp decline followed the company's announcement of substantial discounts on certain vehicle models, raising alarm over a potential price war in the fiercely competitive Chinese EV market.
The downward trend persisted into Tuesday's trading session, with BYD shares experiencing an additional 4% drop in Hong Kong by 5 AM CEST. Despite this turmoil, the stock has shown remarkable resilience, maintaining a year-to-date increase of over 50% on the Hong Kong Stock Exchange. In contrast, rival Tesla's stock remained relatively stable on Monday, although it has seen a 13% decrease year-to-date in 2025.
The pungent pricing strategy deployed by BYD has illuminated concerns regarding the slowing demand for EVs amid the backdrop of China's economic struggles and increasing tensions in the US-China trade relationship. Other substantial Chinese EV manufacturers, including Geely, Great Wall Motor, and Xpeng, also experienced declines of between 4% and 9% in their share prices on Monday, as analysts speculate that deeper discounts may further compress profit margins across the sector.
Discounts and Sales Outlook
BYD's price cuts span a broad range of 22 electric and plug-in hybrid models, which are effective until June 30, as stated on the company’s Weibo account. The discounts, varying from 10% to a striking 30%, include significant price slashes on its Ocean and Dynasty series. Notably, the Seal 07 DM-i model has seen a remarkable discount of 53,000 yuan (approximately €6,460), equating to a 34% reduction.
Analysts anticipate that rival manufacturers in China may soon emulate BYD's pricing tactics as competition heightens domestically. This aggressive pricing appears strategic, aiming to alleviate an observed inventory surplus of older models. Recent reports indicate that BYD’s dealer inventory ballooned by around 150,000 units within the first four months of 2025, representing approximately half a month’s retail sales.
Citi analysts have posited that these price reductions could trigger a 30% to 40% boost in weekly sales, possibly enabling BYD to counterbalance rising margin pressures.
BYD's Resilience and Reported Growth
Amidst the persistent investor anxiety, BYD continues to chart a course of significant growth and remains a formidable competitor to Tesla in the global marketplace. April figures revealed that BYD achieved 380,089 sales of new energy vehicles (NEVs), marking a 21% increase compared to the previous year. International sales have also reached unprecedented levels, setting records for five consecutive months.
In a notable achievement, BYD outpaced Tesla in Europe last month for the first time, registering 7,231 new battery-electric vehicles, representing a staggering 169% year-on-year growth. Conversely, Tesla’s European sales have faced a slump in 2025, a shift that analysts attribute to growing discontent linked to CEO Elon Musk's political engagements.
During the first quarter, BYD reported sales nearing 1 million vehicles, solidifying its prospects to meet its ambitious target of 5.5 million annual vehicle sales by 2025. The financial rewards of this growth were evident, with BYD posting a net income of 9.15 billion yuan (€1.11 billion) and a gross profit margin of 20%—a performance that stands in contrast to Tesla's $409 million (€359 million) net income and a 16% margin during the same period.
Moreover, BYD is making significant investments in advanced driver-assistance systems and is incorporating DeepSeek’s R1 AI model, anticipated to compete with Tesla’s Full Self-Driving (FSD) technology at a potentially reduced cost. As the second-largest battery manufacturer in China, following CATL, BYD benefits from a competitive advantage in cost efficiency and vertical integration.
Importantly, BYD's exposure to US tariffs is considerably mitigated, as it does not market passenger vehicles within the United States. Instead, the company is focusing its expansion efforts on Southeast Asia and South America. Additionally, a new manufacturing facility in Hungary is expected to facilitate increased sales in the European market.
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