The electric vehicle (EV) price competition in China shows no signs of slowing down, which is intensifying pressure on businesses to thrive. According to data from the China Passenger Car Association, Tesla’s sales in China dropped by 15% in May compared to the previous year. In contrast, BYD saw a 14% increase in year-on-year sales, maintaining its position as the leading brand by volume. However, BYD also had to introduce significant discounts as its rate of sales growth decreased compared to April. Analysts from CLSA, led by Xiao Feng, stated in a report on Wednesday, “We anticipate further price competition in the upcoming weeks, as BYD is still not meeting its sales targets.” Although these analysts have a strong belief in BYD, rating its Hong Kong-listed shares as outperform, they view Geely as the most favorable option for investors, citing their balanced internal structure and competitive pricing. CLSA has set a price target of 483 Hong Kong dollars ($61.55) for BYD, and 23 HKD for Geely, indicating potential gains of nearly 20% and 28%, respectively, from Friday’s closing prices. Geely, a major conglomerate, includes electric vehicle brands such as Galaxy, Zeekr, and Lynk and Co., which utilize similar technologies and manufacturing processes. Macquarie analysts noted that Geely’s Galaxy NEV brand effectively competes with BYD’s popular models by offering superior specifications at lower prices. They quoted an auto dealer in the affluent Suzhou region, who manages dealerships for BYD, Geely, and Xpeng, saying, “Geely’s success is expected to continue as they continue to introduce new models against BYD’s entire range.” The Macquarie analysts have given Geely a price target of 22 HKD and also rate it as outperform. They express even greater optimism for the U.S.-listed electric vehicle company Xpeng, with a price target of $24, as Xpeng is poised to gain market share thanks to its advanced driver-assist technology and upcoming vehicle models. Recent delivery figures reveal that Xpeng delivered over 30,000 vehicles in May for the seventh consecutive month, a significant milestone among its competitors. Last month, the company also launched a new vehicle from its lower-priced Mona brand. Among publicly traded new energy vehicle firms, which encompass battery-only and hybrid vehicles, Leapmotor and Li Auto have shown relative stability, each delivering over 40,000 units in May. Both companies are listed in Hong Kong, while Li Auto is also traded in New York. According to CLSA analysts, “By continuously expanding their product range and offering cost-effective models, Leapmotor has managed to secure a stable market share in China’s mass electric vehicle sector and shows strong growth potential.” They have set a price target of 72 HKD, reflecting over 30% growth potential from Friday’s closing prices. However, Leapmotor reported a net loss in the first quarter, contrasting with a profit in the previous quarter. On the other hand, Li Auto managed to stay profitable in the first quarter, as detailed in results shared on May 29. According to Morgan Stanley analysts in a report on May 29, “We still see significant potential, as a better-than-expected first quarter should bolster investor confidence in a gradual recovery in the second quarter.” They set a price target of $36, suggesting more than 20% upside from Thursday’s closing. The analysts added that “Li Auto has found its rhythm for a steady return, setting the stage for a significant revival in volume and margins in the second half of 2025 with the introduction of new models.” Li Auto is particularly recognized for its SUVs, which come with a gasoline tank to extend the battery range. Prices begin at approximately 244,000 yuan ($34,000). Meanwhile, industry leader BYD offers some models starting at 55,800 yuan, with most priced between 100,000 and 200,000 yuan. The company also has a high-end sub-brand, Yangwang, with models priced above 1 million yuan. Analysts who remain bullish on the stock see promise in BYD’s growth abroad. The perspective on BYD from European investors is “more optimistic,” in contrast to the cautious views prevalent in China after the automaker’s recent price reductions, according to Nick Lai, head of Asia Pacific auto research at JPMorgan, in a report on Wednesday. Lai and his team highlighted discussions with BYD’s senior management last week in London. “Overall, we continue to have a long-term positive outlook for the company and believe that earnings contributions from the international market and BYD’s premium products will increasingly become significant,” stated JPMorgan’s analysts. They project that BYD’s international business and premium brands will contribute more than 40% to its vehicle earnings by 2025, up from 20-25% last year, despite accounting for only about 20% of total volume. Analysts have assigned an overweight rating for BYD, with a price target of 600 HKD. Nonetheless, the risk posed by a surge of inexpensive vehicles entering markets like Europe has prompted tariff increases. In China, official sources are also raising concerns about excessive competition. “We believe the end of the ongoing price war will ultimately depend on simple economics,” said Macquarie analysts, noting that the combined production capacity for electric and conventional vehicles exceeds 50 million units, far above the annual wholesale volume of 25 to 27 million vehicles. “As such, the market may stabilize either through increased demand or a right-sizing of capacity and consolidation,” the analysts concluded, suggesting this process might take three to five more years. — Report contributed by CNBC’s Michael Bloom.
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By Press Room
