Chinese automakers like BYD and Geely saw stock declines after new incentives and warnings about a potential industry crisis.
Chinese auto stocks dropped sharply after BYD announced aggressive new incentives across more than 20 models, and the chairman of Great Wall Motors warned of instability in the country’s automotive sector.
Chinese Automakers Face Sharp Stock Losses Amid BYD Discounts and Industry Warnings
On Monday, shares of major Chinese automakers plunged following a fresh wave of trade-in incentives from EV leader BYD and critical comments from Great Wall Motors’ chairman, who likened the current state of the industry to the real estate crisis triggered by Evergrande.
BYD’s Hong Kong-listed shares ended the day down by 8.6%, while Geely dropped 9.5%. Other manufacturers such as Nio and Leapmotor also fell between 3% and 8.5%.
China’s Prolonged Price War Escalates
China’s auto market has been entrenched in a price war for years, with automakers offering steep discounts and bundling once-premium features—like smart driving systems—at no additional cost.
BYD intensified the competition over the weekend by rolling out new subsidies and trade-in deals for more than 20 of its models. One notable example is the Seagull hatchback, a fully electric entry-level vehicle, which now starts at just 55,800 yuan (approximately $7,765) after applying trade-in benefits.
A BYD customer service representative confirmed that customers must trade in their old vehicles to qualify for the subsidies. On Monday, Geely responded with similar discount offerings.
“Evergrande-Like” Risks in China’s Auto Industry
In an interview with Sina Finance, Wei Jianjun, Chairman of Great Wall Motors, issued a stark warning about the health of the industry. He drew comparisons between the automotive sector and China’s debt-laden property sector, stating that a financial implosion similar to Evergrande might already be brewing within the car industry.
Without naming specific companies, Wei criticized major Chinese automakers for focusing too heavily on stock valuations and market capitalization rather than on sustainable business fundamentals.
“Some vehicles that used to cost 220,000 yuan are now sold at 120,000 yuan. What kind of industrial product can be discounted by 100,000 yuan and still guarantee quality? That’s simply not possible,” he said.
Mounting Pressure on the Supply Chain and Government Scrutiny
Wei further emphasized the strain on suppliers, who face delayed payments and continuous pressure to cut prices. He also accused some automakers of compromising on safety and reliability in pursuit of lower costs.
His remarks come shortly after China’s top economic planner warned about unhealthy levels of competition in certain sectors. The agency noted that some firms were even selling products below cost, which distorts fair market conditions and may trigger regulatory action.
With competition intensifying and profits shrinking, industry experts believe a major reassessment of pricing and operational strategies in China’s auto sector is imminent. Such a shift could have significant consequences—not only for domestic players but also for their ambitions in international markets.
