China auto shares fall as BYD rolls out trade-in incentives

Shares of Chinese automakers, including BYD, Nio, and Geely, dropped sharply on May 26, 2025 after BYD introduced new price discounts and Great Wall Motor’s chairman warned about the industry’s risks.

BYD’s shares fell 8.6% in Hong Kong, Geely’s dropped 9.5%, while Nio and Leapmotor also saw declines between 3% and 8.5%.

The market reacts to ongoing price competition among automakers in China.

BYD recently announced subsidies on more than 20 models, cutting the starting price of its Seagull hatchback to about US$7,765 with trade-in offers.

Great Wall Motor chairman Wei Jianjun compared the current auto market to the Evergrande property crisis, warning that some companies focus too much on stock prices and are overleveraged, risking long-term stability.

China’s state planner has cautioned against excessive price wars that harm suppliers and disrupt fair competition, signaling possible government actions to control unhealthy industry rivalry.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ China’s massive overcapacity drives unsustainable price competition

China’s current automotive crisis stems from a fundamental supply-demand imbalance that creates pressure for aggressive pricing.

The country has developed capacity to produce over 40 million internal combustion vehicles annually while rapidly expanding electric vehicle production capacity to approximately 20 million units by the end of 2024 1.

This production capability significantly exceeds China’s domestic demand, creating a surplus that has transformed China from exporting just 1 million vehicles in 2020 to an estimated 6 million in 2024 1.

The resulting price war is forcing even industry leaders like BYD to reduce prices dramatically, with its entry-level Seagull hatchback now starting at just 55,800 yuan ($7,765) after incentives.

Great Wall Motors’ warning about an “Evergrande” situation in the auto industry reflects growing concerns that manufacturers cannot sustain profitability while continuously cutting prices.

The domestic market remains strong with 31.4 million vehicles sold in 2024 (a 4.5% year-on-year increase), but this growth rate isn’t sufficient to absorb the expanding production capacity 2.