BYD’s Hong Kong-listed shares fell 3.6% after the Chinese electric vehicle manufacturer announced further price cuts. The price war in China’s electric vehicle market has reached a critical point where leading manufacturers are sacrificing margins to maintain market share. This situation raises investor concerns about the long-term sustainability and profitability of China’s electric mobility sector.
Dramatic Electric Vehicle Stock Decline Hits Entire Sector
Tuesday’s trading brought significant losses across all major players in China’s electric vehicle market. BYD (HK:1211) dropped to HK$409.80 and became one of the main drivers behind the Hang Seng index decline.
BYD’s competitors recorded similar losses:
- Xpeng Inc (HK:9868) fell 1.7%
- NIO Inc (HK:9866) lost 2.1%
- Li Auto Inc (HK:2015) declined 2.4%
- Leapmotor Technology (HK:9863) dropped 3.0%
- Geely Automobile (HK:0175) lost 3.2%
Electric Vehicle Price War Reaches Dangerous Proportions
The current pricing strategy of Chinese electric vehicle manufacturers represents a double-edged sword. While price cuts and free technology offerings increase vehicle attractiveness for consumers, they simultaneously and dramatically reduce company margins.
BYD recently announced it would provide driver assistance technologies free of charge across several lower-priced models. This decision, though welcomed by consumers, raises serious questions about the impact on the company’s future returns.
Success Paradox: European Expansion Versus Domestic Pressure
Despite domestic challenges, BYD achieved a significant milestone in the European market. In April 2025, BYD’s electric vehicle sales in Europe surpassed rival Tesla for the first time, representing a breakthrough moment for the Chinese company.
European data also showed Tesla’s dramatic sales decline of nearly 50% in April, confirming BYD’s growing strength in international markets. This contrasting development – success abroad versus pressure at home – creates a complex situation for company management.
Controversial “Zero Mileage” Phenomenon in Used Car Market
China’s Ministry of Commerce convened an extraordinary meeting with automotive associations and manufacturers including BYD regarding the growing phenomenon of selling “used cars with zero mileage.” This phenomenon involves vehicles that were officially registered and received license plates but were never driven.
According to Great Wall Motor Chairman Wei Jianjun, at least 3,000 to 4,000 sellers of these specific automobiles exist on Chinese used car platforms. This practice is perceived as:
- A potential method for supporting new car sales
- A way to meet aggressive sales targets
- Possible distortion of market statistics
- An indicator of Chinese automotive market oversaturation
Impact on Investors and Sector Future Outlook
Reports of the ministerial meeting further deepened losses in Chinese automaker stocks. Hong Kong’s Hang Seng Automobile Index fell by more than 2%, reflecting growing investor nervousness.
The current situation creates a dilemma for long-term investors in the electric mobility sector. On one side stands growing global electric vehicle adoption and technological progress, while on the other side, intense competitive pressure and eroding margins in the key Chinese market are evident.
Experts warn that if the price war continues at its current pace, market consolidation may occur, where only the most efficient players with the strongest financial reserves will survive.
