Tesla’s China Price War Sparks $18 Billion BYD Rout: Tech Watch

·3 min read

(Bloomberg) -- A Tesla Inc.-inspired price war among electric vehicle makers in China is taking a toll on even the most resilient players, as evidenced by BYD Co.’s $18 billion drop in the past month.

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The US-listed shares of the electric-vehicle maker that’s backed by Warren Buffett have declined 14% since the start of February, underperforming Tesla’s 9% advance. In comparison, a gauge of global EV makers fell 9% over the same period.

Traders are growing wary of BYD’s prospects after the firm’s dealers slashed prices of some models to boost sales. The change in sentiment underscores the wave of caution that’s sweeping the industry following moves by Nio Inc. and XPeng Inc. to follow Tesla’s lead in lowering prices as demand slows. Buffett’s steady offloading of shares that’s now topped the $500 million mark is also weighing on the stock.

“A gradual industry shift is underway as excessive price cuts can lead to buyers holding back, awaiting even lower prices, while also having an excessively negative impact on margin for all players,” said Robert Mumford, an investment manager at GAM Hong Kong Ltd. “Lower input prices to date are not likely to offset a negative hit to margins.”

Investors are now sifting through the pile of stocks to determine the likely winners and losers from the price war, Mumford said. In this respect, some say Shenzhen-based BYD may hold up relatively well as it has better pricing power and controls most of its supply chain by producing its own chips and batteries.

The company also is showing strong volume momentum, reporting 85% year-on-year growth to more than 190,000 units in February, after a record sales year in 2022. Analysts’ forward earnings estimates have risen around 20% since December.

China’s BYD Reports Better-Than-Expected Profit on EV Boom

For Citigroup Inc. analysts Jeff Chung and Beatrice Lam, BYD will continue to gain market share over the long-term as competitors burn through cash to increase their scale, leading to market consolidation and “intensified competition.”

Tech Chart of the Day

Intel Corp. is one of the weakest-performing chip stocks this year and 11 analysts have a sell-equivalent recommendation on the shares — the most of any Nasdaq 100 component. The biggest maker of computer processors is followed by Tesla Inc. and Cognizant Technology Solutions Corp., which have six sell ratings apiece. This year, the chipmaker has forecast one of the worst quarters in its history and slashed its dividend payment to the lowest level in 16 years in an effort to preserve cash and focus on a turnaround plan.

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  • Tesla Inc. slashed prices of its Model S sedan and Model X SUV in the US late Sunday night by $5,000 and $10,000, respectively, as the company seeks to goose demand in the final month of the quarter.

  • Temu, a shopping platform owned by Chinese e-commerce heavyweight PDD Holdings Inc., wants to surpass Shein — at least on one important measure — within a year.

  • China will take forceful measures to support the development of high-end manufacturing, President Xi Jinping said in first comments at the closely watched National People’s Congress.

--With assistance from Subrat Patnaik.

(Updates with Intel forecast in Tech Chart of the Day section)

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