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Business Standard
6 hours ago
- Automotive
- Business Standard
BYD unleashes EV industry reckoning as price war alarms China's market
The price war engulfing China's electric vehicle industry has already sent share prices tumbling and prompted an unusual level of intervention from Beijing. The shakeout may just be getting started. For all the Chinese government's efforts to prevent price cuts by market leader BYD Co. from turning into a vicious spiral, analysts say a combination of weaker demand and extreme overcapacity will slice into profits at the strongest brands and force feebler competitors to fold. Even after the number of EV makers started shrinking for the first time last year, the industry is still using less than half its production capacity. Chinese authorities are trying to minimise the fallout, chiding the sector for 'rat race competition' and summoning heads of major brands to Beijing last week. Yet previous attempts to intervene have had little success. For the short term at least, investors are betting few automakers will escape unscathed: BYD, arguably the biggest winner from industry consolidation, has lost $21.5 billion in market value since its shares peaked in late May. 'What you're seeing in China is disturbing, because there's a lack of demand and extreme price cutting,' said John Murphy, a senior automotive analyst at Bank of America Corp. Eventually there will be 'massive consolidation' to soak up the excess capacity, Murphy said. For automakers, relentless discounting erodes profit margins, undermines brand value and forces even well-capitalised companies into unsustainable financial positions. Low-priced and low-quality products can seriously damage the international reputation of 'Made-in-China' cars, noted the People's Daily, an outlet controlled by the Communist Party. And that knock would come just as models from BYD to Geely, Zeekr and Xpeng start to collect accolades on the world stage. For consumers, price drops may seem beneficial but they mask deeper risks. Unpredictable pricing discourages long-term trust — already people are complaining on China's social media, wondering why they should buy a car now when it may be cheaper next week — while there's a chance automakers, as they cut costs to stay afloat, may reduce investment in quality, safety and after-sales service. Auto CEOs were told last week they must 'self-regulate' and shouldn't sell cars below cost or offer unreasonable price cuts, according to people familiar with the matter. The issue of zero-mileage cars also came up — where vehicles with no distance on their odometers are sold by dealers into the second-hand market, seen widely as a way for automakers to artificially inflate sales and clear inventory. Chinese automakers have been discounting a lot more aggressively than their foreign counterparts. BofA's Murphy said US automakers should just get out. 'Tesla probably needs to be there to compete with those companies and understand what's going on, but there's a lot of risk there for them.' Others leave no room for doubt that BYD, China's No. 1 selling car brand, is leading the way on price cuts. 'It's obvious to everyone that the biggest player is doing this,' Jochen Siebert, managing director at auto consultancy JSC Automotive, said. 'They want a monopoly where everybody else gives up.' BYD's aggressive tactics are raising concerns over the potential dumping of cars, dealership management issues and 'squeezing out suppliers,' he said. The pricing turmoil is also unfolding against a backdrop of significant overcapacity. The average production utilization rate in China's automotive industry was mere 49.5% in 2024, data compiled by Shanghai-based Gasgoo Automotive Research Institute show. An April report by AlixPartners meanwhile highlights the intense competition that's starting to emerge among new energy vehicle makers, or companies that produce pure battery cars and plug-in hybrids. In 2024, the market saw its first ever consolidation among NEV-dedicated brands, with 16 exiting and 13 launching. 'The Chinese automotive market, despite its substantial scale, is growing at a slower speed. Automakers have to put top priority now on grabbing more market share,' said Ron Zheng, a partner at global consultancy Roland Berger GmbH. Jiyue Auto shows how quickly things can change. A little over a year after launching its first car, the automaker jointly backed by big names Zhejiang Geely Holding Group Co. and technology giant Baidu Inc., began to scale down production and seek fresh funds. It's a dilemma for all carmakers, but especially smaller ones. 'If you don't follow suit once a leading company makes a price move, you might lose the chance to stay at the table,' AlixPartners consultant Zhang Yichao said. He added that China's low capacity utilization rate, which is 'fundamentally fueling' the competition, is now even under more pressure from export uncertainties. While the push to find an outlet for excess production is thrusting more Chinese brands to export, international markets can only offer some relief. 'The US market is completely closed and Japan and Korea may close very soon if they see an invasion of Chinese carmakers,' Siebert said. 'Russia, which was the biggest export market last year, is now becoming very difficult. I also don't see Southeast Asia as an opportunity anymore.' A price cut demand by BYD to one of its suppliers late last year attracted scrutiny around how the car giant may be using supply chain financing to mask its ballooning debt. A report by accounting consultancy GMT Research put BYD's true net debt at closer to 323 billion yuan ($45 billion), compared with the 27.7 billion yuan officially on its books as of the end of June 2024. The pain is also bleeding into China's dealdership network. Dealership groups in two provinces have gone out of business since April, both of them ones that were selling BYD cars. Beijing's meeting with automakers last week wasn't the first attempt at a ceasefire. Two years ago, in mid 2023, 16 major automakers, including Tesla Inc., BYD and Geely signed a pact, witnessed by the China Association of Automobile Manufacturers, to avoid 'abnormal pricing.' Within days though, CAAM deleted one of the four commitments, saying that a reference to pricing in the pledge was inappropriate and in breach of a principle enshrined in the nation's antitrust laws.
Time of India
7 hours ago
- Automotive
- Time of India
BYD unleashes an EV industry reckoning that alarms Beijing
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads The price war engulfing China 's electric vehicle industry has already sent share prices tumbling and prompted an unusual level of intervention from Beijing. The shakeout may just be getting all the Chinese government's efforts to prevent price cuts by market leader BYD Co. from turning into a vicious spiral, analysts say a combination of weaker demand and extreme overcapacity will slice into profits at the strongest brands and force feebler competitors to fold. Even after the number of EV makers started shrinking for the first time last year, the industry is still using less than half its production authorities are trying to minimize the fallout, chiding the sector for 'rat race competition' and summoning heads of major brands to Beijing last week. Yet previous attempts to intervene have had little success. For the short term at least, investors are betting few automakers will escape unscathed: BYD, arguably the biggest winner from industry consolidation, has lost $21.5 billion in market value since its shares peaked in late May.'What you're seeing in China is disturbing, because there's a lack of demand and extreme price cutting,' said John Murphy, a senior automotive analyst at Bank of America Corp. Eventually there will be 'massive consolidation' to soak up the excess capacity, Murphy automakers, relentless discounting erodes profit margins, undermines brand value and forces even well-capitalized companies into unsustainable financial positions. Low-priced and low-quality products can seriously damage the international reputation of 'Made-in-China' cars, noted the People's Daily, an outlet controlled by the Communist Party. And that knock would come just as models from BYD to Geely, Zeekr and Xpeng start to collect accolades on the world consumers, price drops may seem beneficial but they mask deeper risks. Unpredictable pricing discourages long-term trust — already people are complaining on China's social media, wondering why they should buy a car now when it may be cheaper next week — while there's a chance automakers, as they cut costs to stay afloat, may reduce investment in quality, safety and after-sales CEOs were told last week they must 'self-regulate' and shouldn't sell cars below cost or offer unreasonable price cuts, according to people familiar with the matter. The issue of zero-mileage cars also came up — where vehicles with no distance on their odometers are sold by dealers into the second-hand market, seen widely as a way for automakers to artificially inflate sales and clear automakers have been discounting a lot more aggressively than their foreign Murphy said US automakers should just get out. 'Tesla probably needs to be there to compete with those companies and understand what's going on, but there's a lot of risk there for them.'Others leave no room for doubt that BYD, China's No. 1 selling car brand, is leading the way on price cuts.'It's obvious to everyone that the biggest player is doing this,' Jochen Siebert, managing director at auto consultancy JSC Automotive, said. 'They want a monopoly where everybody else gives up.' BYD's aggressive tactics are raising concerns over the potential dumping of cars, dealership management issues and 'squeezing out suppliers,' he pricing turmoil is also unfolding against a backdrop of significant overcapacity. The average production utilization rate in China's automotive industry was mere 49.5% in 2024, data compiled by Shanghai-based Gasgoo Automotive Research Institute April report by AlixPartners meanwhile highlights the intense competition that's starting to emerge among new energy vehicle makers, or companies that produce pure battery cars and plug-in hybrids. In 2024, the market saw its first ever consolidation among NEV-dedicated brands, with 16 exiting and 13 launching.'The Chinese automotive market, despite its substantial scale, is growing at a slower speed. Automakers have to put top priority now on grabbing more market share,' said Ron Zheng, a partner at global consultancy Roland Berger Auto shows how quickly things can change. A little over a year after launching its first car, the automaker jointly backed by big names Zhejiang Geely Holding Group Co. and technology giant Baidu Inc., began to scale down production and seek fresh a dilemma for all carmakers, but especially smaller ones. 'If you don't follow suit once a leading company makes a price move, you might lose the chance to stay at the table,' AlixPartners consultant Zhang Yichao said. He added that China's low capacity utilization rate, which is 'fundamentally fueling' the competition, is now even under more pressure from export the push to find an outlet for excess production is thrusting more Chinese brands to export, international markets can only offer some relief.'The US market is completely closed and Japan and Korea may close very soon if they see an invasion of Chinese carmakers,' Siebert said. 'Russia, which was the biggest export market last year, is now becoming very difficult. I also don't see Southeast Asia as an opportunity anymore.'The pressure of cost cutting has also led analysts to express concern over supply chain finance risks.A price cut demand by BYD to one of its suppliers late last year attracted scrutiny around how the car giant may be using supply chain financing to mask its ballooning debt. A report by accounting consultancy GMT Research put BYD's true net debt at closer to 323 billion yuan ($45 billion), compared with the 27.7 billion yuan officially on its books as of the end of June pain is also bleeding into China's dealdership network. Dealership groups in two provinces have gone out of business since April, both of them ones that were selling BYD meeting with automakers last week wasn't the first attempt at a ceasefire. Two years ago, in mid 2023, 16 major automakers, including Tesla Inc., BYD and Geely signed a pact, witnessed by the China Association of Automobile Manufacturers, to avoid 'abnormal pricing.'Within days though, CAAM deleted one of the four commitments, saying that a reference to pricing in the pledge was inappropriate and in breach of a principle enshrined in the nation's antitrust discounting continued unabated.
Straits Times
10 hours ago
- Automotive
- Straits Times
BYD unleashes an EV industry reckoning that alarms Beijing
The Chinese government is trying to prevent price cuts by market leader BYD from turning into a vicious spiral. PHOTO: REUTERS BEIJING - The price war engulfing China's electric vehicle (EV) industry has sent share prices tumbling and prompted an unusual level of intervention from Beijing. The shakeout may just be getting started. For all the Chinese government's efforts to prevent price cuts by market leader BYD from turning into a vicious spiral, analysts say a combination of weaker demand and extreme overcapacity will slice into profits at the strongest brands and force feebler competitors to fold. Even after the number of EV makers starting shrinking for the first time in 2024, the industry is still using less than half its production capacity. Chinese authorities are trying to minimise the fallout, chiding the sector for 'rat race competition' and summoning heads of major brands to Beijing last week. Yet previous attempts to intervene have had little success. For the short term at least, investors are betting few automakers will escape unscathed: BYD, arguably the biggest winner from industry consolidation, has lost US$21.5 billion (S$27.7 billion) in market value since its shares peaked in late May. 'What you're seeing in China is disturbing, because there's a lack of demand and extreme price cutting,' said John Murphy, a senior automotive analyst at Bank of America Corp. Eventually there will be 'massive consolidation' to soak up the excess capacity, Mr Murphy said. For automakers, relentless discounting erodes profit margins, undermines brand value and forces even well-capitalised companies into unsustainable financial positions. Low-priced and low-quality products can seriously damage the international reputation of 'Made-in-China' cars, the People's Daily, an outlet controlled by the Communist Party, said. And that knock would come just as models from BYD to Geely, Zeekr and Xpeng start to collect accolades on the world stage. For consumers, price drops may seem beneficial but they mask deeper risks. Unpredictable pricing discourages long-term trust – already people are complaining on China's social media, wondering why they should buy a car now when it may be cheaper next week – while there's a chance automakers, as they cut costs to stay afloat, may reduce investment in quality, safety and after-sales service. Auto CEOs were told last week they must 'self-regulate' and shouldn't sell cars below cost or offer unreasonable price cuts, according to people familiar with the matter. The issue of zero-mileage cars also came up – where vehicles with no distance on their odometers are sold by dealers into the second-hand market, seen widely as a way for automakers to artificially inflate sales and clear inventory. Chinese automakers have been discounting a lot more aggressively than their foreign counterparts. Mr Murphy said US automakers should just get out. 'Tesla probably needs to be there to compete with those companies and understand what's going on, but there's a lot of risk there for them.' Others leave no room for doubt that BYD, China's No. 1 selling car brand, is the culprit. 'It's obvious to everyone that the biggest player is doing this,' Jochen Siebert, managing director at auto consultancy JSC Automotive, said. 'They want a monopoly where everybody else gives up.' BYD's aggressive tactics are raising concerns over the potential dumping of cars, dealership management issues and 'squeezing out suppliers,' he said. The pricing turmoil is also unfolding against a backdrop of significant overcapacity. The average production utilization rate in China's automotive industry was mere 49.5 per cent in 2024, data compiled by Shanghai-based Gasgoo Automotive Research Institute show. An April report by AlixPartners meanwhile highlights the intense competition that's starting to emerge among new energy vehicle makers, or companies that produce pure battery cars and plug-in hybrids. In 2024, the market saw its first ever consolidation among NEV-dedicated brands, with 16 exiting and 13 launching. Jiyue Auto shows how quickly things can change. A little over a year after launching its first car, the automaker jointly backed by big names Zhejiang Geely Holding Group and technology giant Baidu, began to scale down production and seek fresh funds. It's a dilemma for all carmakers, but especially smaller ones. 'If you don't follow suit once a leading company makes a price move, you might lose the chance to stay at the table,' AlixPartners consultant Zhang Yichao said. He added that China's low capacity utilization rate, which is 'fundamentally fueling' the competition, is now even under more pressure from export uncertainties. While the push to find an outlet for excess production is thrusting more Chinese brands to export, international markets can only offer some relief. 'The US market is completely closed and Japan and Korea may close very soon if they see an invasion of Chinese carmakers,' Mr Siebert said. 'Russia, which was the biggest export market last year, is now becoming very difficult. I also don't see South-east Asia as an opportunity anymore.' The pressure of cost cutting has also led analysts to express concern over supply chain finance risks. A price cut demand by BYD to one of its suppliers late in 2024 attracted scrutiny around how the car giant may be using supply chain financing to mask its ballooning debt. A report by accounting consultancy GMT Research put BYD's true net debt at closer to 323 billion yuan (S$57.9 billion), compared with the 27.7 billion yuan officially on its books as of the end of June 2024. The pain is also bleeding into China's dealdership network. Dealership groups in two provinces have gone out of business since April, both of them ones that were selling BYD cars. Beijing's meeting with automakers last week wasn't the first attempt at a ceasefire. Two years ago, in mid 2023, 16 major automakers, including Tesla Inc., BYD and Geely signed a pact, witnessed by the China Association of Automobile Manufacturers, to avoid 'abnormal pricing.' Within days though, CAAM deleted one of the four commitments, saying that a reference to pricing in the pledge was inappropriate and in breach of a principle enshrined in the nation's antitrust laws. BLOOMBERG Join ST's Telegram channel and get the latest breaking news delivered to you.
Yahoo
3 days ago
- Business
- Yahoo
BofA's Hartnett Says Stocks Are Close to Setting Off Sell Signal
(Bloomberg) -- Global stocks are close to triggering a sell signal as both fund inflows and the market breadth are running too hot, says Bank of America Corp. strategist Michael Hartnett. Next Stop: Rancho Cucamonga! ICE Moves to DNA-Test Families Targeted for Deportation with New Contract Where Public Transit Systems Are Bouncing Back Around the World US Housing Agency Vulnerable to Fraud After DOGE Cuts, Documents Warn The Global Struggle to Build Safer Cars He cited a data point that stock and high-yield bond inflows have totaled 0.9% of fund managers' overall assets in the past four weeks. In his view, investors should sell if the ratio increases to more than 1%. At the same time, about 84% of country indexes are trading above their 50- and 200-day moving averages, suggesting the market is in overbought territory, Hartnett said. Global equities hit a record high this week on optimism around US-China trade negotiations and as robust economic data eased recession fears in the US. The focus later on Friday is on the US jobs report as investors look for confirmation of a healthy labor market. In terms of flows, global equity funds have attracted about $515 billion so far this year, tracking their second-biggest inflows on record, according to the weekly Bank of America note citing EPFR Global data. Hartnett has recommended international equities over US stocks, adding that the S&P 500's rebound is not supported by earnings growth. The index closed Thursday at 5,939.30 points, about 3% below its February record. --With assistance from Michael Msika. Cavs Owner Dan Gilbert Wants to Donate His Billions—and Walk Again YouTube Is Swallowing TV Whole, and It's Coming for the Sitcom Millions of Americans Are Obsessed With This Japanese Barbecue Sauce Is Elon Musk's Political Capital Spent? Trump Considers Deporting Migrants to Rwanda After the UK Decides Not To ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
3 days ago
- Business
- Yahoo
BofA's Hartnett Says Stocks Are Close to Setting Off Sell Signal
(Bloomberg) -- Global stocks are close to triggering a sell signal as both fund inflows and the market breadth are running too hot, says Bank of America Corp. strategist Michael Hartnett. Next Stop: Rancho Cucamonga! ICE Moves to DNA-Test Families Targeted for Deportation with New Contract Where Public Transit Systems Are Bouncing Back Around the World US Housing Agency Vulnerable to Fraud After DOGE Cuts, Documents Warn The Global Struggle to Build Safer Cars He cited a data point that stock and high-yield bond inflows have totaled 0.9% of fund managers' overall assets in the past four weeks. In his view, investors should sell if the ratio increases to more than 1%. At the same time, about 84% of country indexes are trading above their 50- and 200-day moving averages, suggesting the market is in overbought territory, Hartnett said. Global equities hit a record high this week on optimism around US-China trade negotiations and as robust economic data eased recession fears in the US. The focus later on Friday is on the US jobs report as investors look for confirmation of a healthy labor market. In terms of flows, global equity funds have attracted about $515 billion so far this year, tracking their second-biggest inflows on record, according to the weekly Bank of America note citing EPFR Global data. Hartnett has recommended international equities over US stocks, adding that the S&P 500's rebound is not supported by earnings growth. The index closed Thursday at 5,939.30 points, about 3% below its February record. --With assistance from Michael Msika. Cavs Owner Dan Gilbert Wants to Donate His Billions—and Walk Again YouTube Is Swallowing TV Whole, and It's Coming for the Sitcom Millions of Americans Are Obsessed With This Japanese Barbecue Sauce Is Elon Musk's Political Capital Spent? Trump Considers Deporting Migrants to Rwanda After the UK Decides Not To ©2025 Bloomberg L.P.
