China EVs: BYD-triggered price war raises fears of Evergrande-like liquidity crisis
China's electric vehicle (EV) makers have had a lot to contend with over the past week: slumping shares for market leader BYD, cooling sales and margins and a warning from authorities in Beijing amid a punishing price war.
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BYD's Hong Kong-listed shares lost as much as 17 per cent of their market value, or HK$122.3 billion (US$15.6 billion), on Monday after falling to HK$378.20 from an all-time high of HK$477.80 on May 23. The company's shares recovered 4 per cent on Tuesday. Analysts attributed part of the decline to a weak earnings report for the most recent quarter.
The Shenzhen-based firm, the world's largest maker of new energy vehicles (NEVs), delivered 382,476 units in May, a 0.6 per cent gain from April. On the mainland, which is plagued by unrelenting discounts, its May sales stalled from a year earlier and weakened 2.5 per cent from April, according to a report released on Sunday.
Around a week earlier, BYD
said it would reduce prices of 22 models to promote sales , which cast doubt over the earnings outlooks of China's EV makers.
'The price move reinforces BYD's strategy to favour scale over temporary per-car profitability in the domestic EV market,' HSBC analysts including Ding Yuqian said in a report last week. 'This round of seasonal promotion coincides with soft domestic demand, weak consumption sentiment and intense competition.'
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Left unchecked, China's EV price war and profitability problem could nudge the industry into
a China Evergrande-style liquidity crunch , said Wei Jianjun, the chairman of Great Wall Motor, last week. He was referring to the beleaguered property developer.
Li Yunfei, who oversees branding and public relations at BYD, took issue with the comparison.
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