**BYD Shares Decline Despite Record Monthly Sales Amid Price War Concerns**
BYD Co. shares have continued to decline, even as the company reported its highest monthly sales this year. The electric vehicle manufacturer sold 382,476 vehicles in the last month, including 376,930 passenger cars, according to a statement released on Sunday. Although this represents a peak for 2023, the year-on-year growth of 15% is the slowest since August 2020, aside from a drop in deliveries in February last year due to the Lunar New Year holiday.
Despite the sales increase, BYD’s stock fell nearly 5% in Hong Kong, following a more than 15% drop the previous week. This decline comes amid reports that the ongoing price war in the automotive industry has drawn the attention of the Chinese government. The People’s Daily, the official newspaper of the Communist Party, criticized the “rat-race competition” and cautioned that price wars could jeopardize supply-chain security. The commentary highlighted concerns that low-priced, low-quality products could harm the international reputation of “Made-in-China,” although it did not specify any companies.
Additionally, China’s automobile industry association has warned against “vicious competition” that could negatively impact profit margins, product quality, and the overall health of the industry. The Ministry of Industry and Information Technology has expressed agreement with these concerns and plans to implement measures to eliminate unhealthy competition in the auto sector, aiming to protect market order and consumer rights.
BYD has been at the forefront of the aggressive price competition that has affected China’s auto industry, impacting profits and clouding the outlook for this rapidly growing sector, which leads globally in electric vehicle technology. The latest round of discounts was introduced late last month, with BYD slashing prices by as much as 34%, prompting similar actions from competitors like Zhejiang Leapmotor Technology Co. and Geely Automobile Holdings Ltd. Leapmotor reported a 148% year-on-year increase in sales, delivering 45,067 vehicles in May, while Geely Auto’s deliveries rose 46% to 235,208 units. Xpeng Inc. also saw a significant increase in sales, tripling in May, largely due to its mass-market MONA M03 model.
Notably, BYD’s sales of battery electric vehicles reached 204,369, surpassing its plug-in hybrid sales of 172,561 for only the second time since early 2024. The company is also expanding its international sales, delivering over 89,000 units in May, marking its highest monthly total on record. Analysts at Citigroup estimate that BYD’s discounts may have led to a 30% to 40% week-on-week increase in dealership traffic. So far this year, BYD has sold 1.76 million units, with a full-year target of 5.5 million. Morgan Stanley analysts, including Tim Hsiao, project that sales will need to average approximately 534,000 units per month for the remainder of 2025 to meet this goal. The fourth quarter is typically a strong period for automotive sales.
**FAQ**
**Q: What is causing the decline in BYD’s stock despite increased sales?**
A: The decline in BYD’s stock is primarily due to concerns over the ongoing price war in the automotive industry, which has attracted government scrutiny and raised fears about profit margins and product quality.