Chinese car makers' shares plummet as price war heats up
Chinese automakers' shares plummeted on Monday following new incentives from industry leader BYD and a stark warning from Great Wall Motors' CEO about the unhealthy state of the global auto industry.
BYD Co Ltd's Hong Kong -listed shares closed 8.6 per cent lower, while Geely Auto experienced a steeper decline of 9.5 per cent. Other prominent players like Nio and Leapmotor also saw their shares fall between 3 per cent and 8.5 per cent.
The price war raging within the world 's largest car market has intensified, with manufacturers continuing to slash prices and offer premium features, such as smart assisted driving, for free.
Over the weekend, Chinese electric vehicle giant BYD announced a new wave of subsidies and incentives across more than 20 models.
This brought the starting price of its most affordable offering, the all-electric Seagull hatchback, down to 55,800 yuan ($7,765) for customers trading in their old vehicles. Geely quickly followed suit with similar incentives on Monday, further fueling the ongoing price competition.
On Friday, Wei Jianjun, the chairman of Great Wall Motor warned that the Chinese auto industry had its own "Evergrande", referring to the debt-laden developer that became the centre of a liquidity crisis in China 's property sector."
Now, Evergrande in the automobile industry already exists, but it has not collapsed," he told Sina Finance in an interview.
He did not name any automakers but said some of the "main manufacturers" in China had put too much effort into pursuing market value and raising their stock prices.
Wei, one of the Chinese industry's most outspoken company chiefs, said that the Chinese electric vehicle industry was in an unhealthy state given its heavy losses and how a prolonged price war was weighing on the supply chain.
Suppliers were struggling to survive, he added, due to an ongoing pressure to lower prices and delayed payments, and accused carmakers of cutting corners on safety and reliability.
'Some products have been reduced from 220,000 yuan to 120,000 yuan in the past few years. What kind of industrial products can be reduced by 100,000 yuan and still have quality assurance? Well this is absolutely impossible," he said, again not naming any companies.
Last week, China's state planner warned against excessive competition in some industries, saying that some firms were even selling below cost, disrupting fair competition and warned that it may take corrective action.
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