Chinese electric vehicle maker BYD Co. (SHE: 002594) announced sweeping price cuts of up to 34% across 22 models Monday, triggering another round of price competition that threatens to squeeze Tesla Inc. (Nasdaq: TSLA) and other rivals in the world’s largest auto market.
The aggressive discounts, effective through June 30, reduced BYD’s entry-level Seagull hatchback to 55,800 yuan ($7,700), while the Seal dual-motor hybrid sedan saw its biggest price reduction of 34% to 102,800 yuan from 156,000 yuan.
BYD shares tumbled 8.6% Monday in Hong Kong trading and fell an additional 4% Tuesday as investors worried about a fresh price war hurting industry profit margins. Other Chinese automakers, including Geely, Great Wall Motor, and Xpeng, also declined between 4% and 9%.
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The move came after BYD posted its slowest year-on-year growth in vehicle deliveries in more than four years, with April sales rising 21% compared to earlier monthly gains exceeding 100%.
Tesla, which has struggled in China for five consecutive months with year-over-year sales declines, faces renewed pressure from BYD’s pricing strategy. Tesla’s China shipments plunged 49% in February to just 30,688 vehicles, the lowest since July 2022.
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BYD now dominates China’s new energy vehicle market with a 29.3% share in March, while Tesla held just 5.6% in the first quarter, according to China Passenger Car Association data.
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The Chinese company has also begun challenging Tesla globally. BYD reported annual revenue of 777 billion yuan ($107 billion) for 2024, surpassing Tesla’s $97.7 billion. In Europe, BYD outsold Tesla in April for the first time with 7,231 new battery-electric vehicle registrations, marking a 161% year-over-year increase.
Citi analysts estimate the price cuts could drive a 30% to 40% weekly surge in BYD sales, potentially offsetting margin pressure through higher volumes.
The discounts aim to reduce dealer inventory, which rose by approximately 150,000 units in the first four months of 2025, equal to about half a month’s retail sales, according to industry publication CnEVPost.
Morgan Stanley analysts said BYD’s price competition will likely continue into the second half of the year, with ripple effects across global electric vehicle markets.
BYD’s cost advantages stem from its position as China’s second-largest battery manufacturer after CATL and its vertical integration across the supply chain. The company stopped making gasoline-powered vehicles in 2022 and now produces only electric and hybrid models.
Tesla CEO Elon Musk said on an October 2024 earnings call that the company is on track to make affordable models available in the first half of 2025. However, mass production isn’t expected until 2026, according to unnamed sources cited by Reuters.
Also read: Tesla Announces New Low-Priced Model To Distract From 55% Profit Drop, Cybertruck Recall
China’s electric vehicle penetration rate approaches 50%, compared with less than 10% in the United States. The market has experienced several price wars that have driven down EV costs and accelerated adoption. Industry executives warn that prolonged price competition could force weaker manufacturers out of business as profit margins compress across the sector.
BYD, which stands for “Build Your Dreams,” became the first automaker globally to produce 10 million new energy vehicles in November 2024.
Information for this story was found via Bloomberg, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
