BYD Co., China’s largest electric vehicle manufacturer, witnessed a steep selloff in its Hong Kong-listed shares, with a more than 10% slide over two consecutive days, triggered by a dramatic reduction in prices for its electric and plug-in hybrid vehicles. On Monday, the stock dropped 8.6%, and the downward trend extended into Tuesday, with an additional 4% decline during early morning trade.

The cause? BYD announced aggressive discounts of up to 34% on 22 of its electric and plug-in hybrid models, available until the end of June 2025 in China. This bold move has sparked investor concerns over a renewed price war in China’s already hyper-competitive electric vehicle market.

The Price War Intensifies in China’s EV Market

This development comes at a time when BYD is facing slowing growth in domestic sales. While the company reported a 21% year-on-year increase in April deliveries, it marked the smallest monthly gain since August 2020, excluding February 2024’s Lunar New Year-related drop. This sluggish momentum triggered the company to slash prices to defend market share and stimulate demand.

But the timing and scale of the cuts suggest deeper challenges. According to Bloomberg Intelligence analyst Joanna Chen, BYD is prioritising volume growth over margins in 2025, a strategy that may force competitors to respond with even deeper discounts or risk losing market share.

Geely Tops BYD in China’s EV Race

In a significant market shift, Geely Automobile Holdings Ltd. overtook BYD in April. Geely’s Xingyuan compact hatchback emerged as the top-selling model in China, displacing BYD’s popular Seagull EV, according to data from the China Automotive Technology and Research Center.

This highlights the intensifying battle for leadership in China’s electric car segment, where brands are now competing not just on innovation but also on affordability. BYD's price cuts are seen as a countermeasure to regain the top spot.

BYD’s Growth Momentum Shows Cracks

Despite the recent stock slide, 2025 had started on a strong note for BYD. The company:

• Hit a record high in its Hong Kong-listed stock last week.

• Posted its best-ever monthly sales figures in China.

• Outsold Tesla Inc. in Europe for the first time in April 2025.

• Raised HK$43.5 billion (approximately $5.5 billion) through a share sale in March.

But the aggressive price cuts now cast a shadow on its profitability and pricing power, signaling that the growth trajectory may be entering a turbulent phase.

Technology and Innovation Still a BYD Strength

Even amidst the financial pressure, BYD continues to push the boundaries of EV technology. It has unveiled a new lineup of electric cars capable of charging in five minutes, positioning itself as a leader in fast-charging solutions. Furthermore, the company has made its “God’s Eye” advanced driver-assistance system standard on cars priced from 100,000 yuan ($13,900) and even included it in affordable models like the Seagull hatchback.

Interestingly, several of the discounted models feature this God’s Eye technology, suggesting that BYD is aiming to democratize advanced features to boost adoption.

Morgan Stanley’s Outlook: Price Cuts May Continue

Analysts at Morgan Stanley believe that the price competition initiated by BYD will likely persist through the second half of 2025, further pressuring industry-wide margins. They warn that even with government subsidies encouraging EV adoption, automakers may be compelled to sacrifice profitability to stay relevant in the Chinese market.

This means investors should brace for thinner margins, despite higher volumes. The key will be whether BYD can offset losses with operational efficiency and scale, or if its margins will take a permanent hit.

Investors Await May Sales Data for Clarity

All eyes are now on BYD’s upcoming monthly sales report for May, scheduled for release on Sunday. This data will offer a clearer picture of how effective the price cuts have been in driving demand. If sales numbers are robust, it might reassure investors that the move was strategic and well-timed. If not, it may reinforce fears of margin erosion and market volatility.

Market Capitalisation Still Robust—For Now

Even after the recent dip, BYD's market valuation stands at around $158 billion, making it larger than Ford, GM, and Volkswagen combined. However, continued share price pressure could erode this edge if sentiment doesn't rebound soon.

Final Word: Strategy or Sacrifice?

The current scenario reflects a broader dilemma for EV makers in China—maintain price integrity or boost volume at any cost. BYD has clearly chosen the latter path for now, banking on its brand strength, scale, and technological edge to weather the storm.

The coming weeks will be crucial. BYD needs to prove that its massive price cuts translate to equally massive sales wins, or risk becoming a cautionary tale in the high-stakes EV race.

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