China’s electric car price war has shown few indications that it will disappoint and put more pressure on businesses to survive. Tesla’s Chinese sales fell 15% in May, a year ago, in May, data from the China Passenger Automobile Association showed. By contrast, BYD reported a 14% increase in sales from the previous year as it reached number one in the market, but as sales growth slowed from the April pace, it had to announce a sharp discount. “As BYD is still lagging behind its sales targets, we expect additional price competition in the coming weeks,” a team of analysts led by CLSA analyst Xiao Feng said in a report Wednesday. Analysts are still highly convicted and have an outperform rating of BYD’s Hong Kong listed stocks, but they see Geely as the “best position” for investors as they balance the optimally in their internal business structure and compete in vehicle prices. The CLSA price target is HKD 483 ($61.55) for BYD and HKD 23 for Geely, and is also listed in Hong Kong. This is an advantage of nearly 20% and 28% from the end of Friday, respectively. Geely is a large conglomerate with electric car brands Galaxy, Zeekr, Lynk and Co., which shares some of the same technology and manufacturing systems. “Geely’s Galaxy NEV brand has managed to target popular BYD models with better specs and lower prices,” Macquarie analyst said in a report Thursday, citing a call with car dealers who manage BYD, Geely and Xpeng dealers in the relatively wealthy Suzhou area near Shanghai. “Experts believe Geely will continue to succeed, as we are increasing new models to compete with the entire BYD model lineup,” the report said. Macquarie analysts have a price target of 22 HKD on Geely, assessing stock outperformation. But they’re even more fond of US-listed electric car startup Xpeng with a price target of $24. XPENG is likely to benefit from short-term market share benefits given its sophisticated driver assist system and future car models, analysts said. The latest shipping data showed that XPENG delivered more than 30,000 vehicles for the seventh consecutive month in May. The company launched a new car last month under the low-cost Mona brand. Among the new energy vehicle companies that are now open to the public, the categories that include battery-only hybrid and hybrid-powered cars, Leapmotor and Li Auto, each delivering over 40,000 vehicles in May. The companies have a Hong Kong listing, but Li Auto also trades in New York. “Through a growing product matrix and cost-effective model, Leapmotor has achieved a stable market share in the Chinese mass EV market and has strong growth potential,” said analysts at CLSA. They have a price target of 72 HKD, or upside of 30% since the end of Friday. Leapmotor reported a net loss in the first quarter compared to its fourth quarter profit. However, according to results released on May 29, Li Auto remained profitable in the first quarter. They have a price target of $36 against an increase of more than 20% since the end of Thursday. “The management team has found a stable, solid pace of comebacks. With the launch of new models, it is supporting a more material revival of volume/margin to 2H25,” the analyst added. “Li Auto’s premium model lineup can avoid fierce pricing competition in the mass market.” Li Auto is best known for its SUVs that come with gas tanks to expand the battery’s operating range. The price is approximately 244,000 yuan ($34,000). In contrast, industry giant BYD currently sells some cars for 55,800 yuan, with most models falling in the 200,000 yuan price range for 100,000 yuan. The company also has a high-end sub-brand called Yangwang. Analysts who still love stocks are seeing possibilities in BYD’s overseas expansion. The story of BYD among European investors “sounds more optimistic,” contrary to China’s more cautious sentiment following the automaker’s recent price promotion, Jpmorgan’s Nick Lai, head of Asia Pacific Auto Research, said in a report Wednesday. Lai and his team also cited a conversation with Senior BYD Management in London last week. “Overall, we maintain a long-term positive view of the company and believe that (revenue) contributions from overseas markets and BYD’s premium portfolio will play an increasingly important role,” a JP Morgan analyst said. “BYD’s overseas business and premium brands estimate that they will contribute more than 40% of vehicle revenue (up from 20-25% last year) in 2025. Analysts rate BYD overweight with a price target of 600 hkd. However, the risk of low-cost cars flooding in markets such as Europe has prompted increased tariffs. In China, official commentary has also issued warnings about excessive competition. “We believe that the end of the current price war will end in simple economics,” Macquarie analysts point out that both electric and traditional vehicles have exceeded 50 million units, far exceeding 25-27 million vehicles per year. “Therefore, the market is likely to be stable with higher demand or integration with capabilities of the right size,” the analyst said. “I believe this will take at least three to five years.” – CNBC’s Michael Bloom contributed to this report.
