A maximum reduction of 53,000 yuan, BYD has initiated a new round of price wars, Goldman Sachs claims to be a seller, and China International Capital Corporation (CICC) states that there are already certain expectations

Last Friday, leading electric vehicle manufacturer BYD announced price cuts of up to 53,000 yuan for 22 models. Following this announcement, BYD's Hong Kong stock continued to decline, dropping approximately 10% over Monday and Tuesday.

When BYD announced such aggressive promotions, the market realized that this was not just a promotional event—it was a signal of a price war that could potentially redefine the industry landscape. Goldman Sachs analysts stated, "We are sellers." Citigroup analysts expect other domestic automakers to follow suit. CICC believes that this price cut was somewhat anticipated and that the actual extent of the cuts is not as significant as BYD's official announcement suggests.

Price Cut Storm Sweeps 22 Models

This promotion by BYD involves a total of 22 intelligent driving version models from the Dynasty and Ocean series. Among them, the Seal 07DM-i intelligent driving version has the most astonishing price drop, with a limited-time price of 102,800 yuan, a reduction of 53,000 yuan from the guide price, representing a drop of 34%.

The Ocean series has 10 models starting at a limited-time "one price" of 55,800 yuan, while the Dynasty series has 12 intelligent driving version models with a starting price after subsidies dropping to 63,800 yuan. This price level has reached the 60,000 yuan range, directly impacting the price floor of traditional fuel vehicles.

This is the third promotion BYD has launched in less than two months, and the third large-scale promotion this year, with last Friday's promotion being significantly more extensive and impactful than the previous two. From the price cuts on non-intelligent driving entry models at the end of March, to the intelligent driving version trade-in subsidies in early May, to this latest promotion covering the widest range and offering the most substantial subsidies, BYD's pricing strategy is being intensified.

Strategic Choices Under Market Pressure

The frequent price cuts by BYD are a response to the severe challenges facing the entire electric vehicle market. According to data from the China Passenger Car Association, car inventory in China reached 3.5 million units in April, equivalent to 57 days of inventory, the highest level since December 2023.

Morgan Stanley analyst Tim Hsiao pointed out, "Although some discounts have been implemented since April, this formal announcement sends a strong signal of immense pressure in the terminal market."

This judgment hits the nail on the head—under the dual pressures of economic downturn and weak demand, even market leaders must resort to price strategies to stimulate sales.

From sales data, BYD's cumulative sales from January to April this year were approximately 1.38 million units, only completing a quarter of its annual target of 5.5 million units. To achieve a target of 30% year-on-year growth, the sales pressure in the second half of the year can be imagined.

Investor Confidence Under Test

Regarding BYD's significant price cuts, Wall Street investment banks are cautious. Goldman Sachs analyst Shubham Ghosh stated, "We are sellers of BYD."

CICC analysts attempted to alleviate market concerns, pointing out that "this promotion had been somewhat anticipated," mainly influenced by the ramp-up of intelligent driving versions in March and April, high terminal prices, and the general lack of appeal in lower-tier cities. In fact, BYD has been continuously increasing promotions at the terminal level from April to May, with the actual price cuts being lower than the figures presented on the surface However, investors are clearly more concerned about the long-term impact of the price war on the profitability of the entire industry.

Goldman Sachs analyst Keita Umetani wrote in a research report:

"The electric vehicle sector continues to be under pressure, with BYD's stock price dropping 8.6% on Monday after announcing promotional discounts on 22 models, raising concerns among investors about its profitability and gross margin."

Peers Follow Up, Industry Restructuring Accelerates

Cui Dongshu, secretary-general of the China Passenger Car Association, believes that BYD's price cut "will have a certain impact on the current price war in the automotive market." Data shows that there were 65 models that had price cuts in the domestic market in the first four months of this year, a decrease of 56 models compared to the same period last year, indicating that the price war had already cooled down.

However, BYD's move may reignite the flames. Under the pressure of annual sales targets, automakers will inevitably engage in more intense competition to seize market share. As Cui Dongshu stated, competition in the automotive market will further intensify in the second half of this year.

As the new energy vehicle industry shifts from high growth to stock competition, a price war may be unavoidable. But for investors, this price war ignited by BYD means that the profitability expectations and valuation logic of the entire industry will face re-evaluation.

Cui Dongshu expects that competition among automakers in the second half of the year will no longer be a low-level "involution," but will diversify to enhance product competitiveness and capture more market share.

Citigroup research analysts wrote in a report: "We expect peers to follow BYD's price cuts." They noted that Chongqing Changan Automobile has announced a price cut of 25,000 yuan for its Deepal S07 model, and Zhejiang Leapmotor has also reduced prices for its C16 full-size crossover SUV and C11 mid-size SUV.

CICC also pointed out that some traditional brands may face direct competitive pressure and will consider following up on promotions as appropriate