Shares of China’s BYD continue to tumble following price cuts

Shares in BYD fell as much as 2.96% in early trade Tuesday, continuing losses recorded in the prior session.

The plunge of more than 9% on Monday was a reversal of its record high last week, as investors assessed the Chinese electric vehicle giant’s price cuts on May 23.

The company announced on the Chinese social media platform Weibo that it was reducing the prices on 22 electric and plug-in hybrid models until the end of June.

For instance, the price tag of the Seagull hatchback was reduced by 20% to 55,800 Chinese yuan ($7,780), while that of the Seal dual-motor hybrid sedan was cut by 34% to 102,800 yuan.

The latest developments follow other price revisions the automaker announced earlier in the year, such as the release of its Han sedans and Tang SUVs at a starting price that was 10.35% and 14.3% lower than that of previous versions.

Analysts from Citi expect BYD’s price reduction to have caused a 30% to 40% spike in footfall at its dealership stores between May 24 and 25, compared to the previous weekend.

Shares of other Chinese automakers also declined on Monday as investors turned cautious about stiffer competition and a potential price war in the sector.

Shares in Geely Automobile were last seen trading 7.29% lower, while Great Wall Motor Co and Li Auto had lost 2.94% and 4.93% respectively. Meanwhile, shares in Xpeng were down 4.19%.

Looking ahead, Citi’s analysts are not concerned that BYD’s price cuts would erode its competitors’ market share.

Instead, they expect “robust sales growth” for new energy vehicle companies with prices below 200,000 Chinese yuan as “competition remains relatively mild,” the analysts wrote in a May 26 note.