China Auto Stocks Dip as BYD Launches Trade-In Incentives

SHANGHAI: Stocks of Chinese automakers like BYD, Nio, and Geely plummeted on Monday after industry frontrunner BYD announced new incentives on more than 20 models, while the CEO of Great Wall Motors cautioned that the globe's largest auto industry was in an unstable condition. Shares of BYD Co Ltd listed in Hong Kong ended 8.6 per cent down, while Geely Auto dropped 9.5 per cent. Companies like Nio and Leapmotor finished down by 3 per cent to 8.5 per cent. A prolonged price conflict in the largest automotive market globally has only escalated, as car manufacturers persist in slashing prices and providing features once regarded as luxurious, like smart-assisted driving, at no cost. 

Chinese electric vehicle leader BYD announced over the weekend a new set of subsidies and incentives for over 20 models, lowering the starting price of its most affordable model, the all-electric Seagull hatchback, to 55,800 yuan ($7,765). A customer service representative informed Reuters that customers must trade in their used cars to qualify for the subsidies. On Monday, Geely matched with comparable incentives. On Friday, Wei Jianjun, the chairman of Great Wall Motor, cautioned that the Chinese automotive sector faced its own "Evergrande," alluding to the indebted developer that became the focal point of a liquidity crisis in China's real estate market. "Currently, Evergrande in the automotive sector is operational, yet it has not failed," he stated to Sina Finance during an interview.

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He refrained from mentioning any specific automakers but noted that certain "major manufacturers" in China had focused excessively on increasing market value and boosting their stock prices. Wei, a prominent leader in the Chinese industry, stated that the Chinese electric vehicle sector is in a precarious condition due to its significant losses and the impact of an ongoing price war on the supply chain. He noted that suppliers faced challenges to stay afloat because of continuous pressure to reduce prices and postponed payments, and he blamed car manufacturers for compromising on safety and dependability.

"Several items have seen their prices drop from 220,000 yuan to 120,000 yuan over the last few years." What types of industrial goods can be lowered by 100,000 yuan while still ensuring quality? "Indeed, this is utterly unfeasible," he stated, once more avoiding the mention of any companies. Last week, China's state planner cautioned about excessive rivalry in certain sectors, indicating that some companies were selling at a loss, disturbing equitable competition, and warned that it might implement corrective measures. 

($1 = 7.1866 CNY)