Source: Wall Street News

On the afternoon of May 25, the stock prices of two car companies, Great Wall Motor and BYD, dived one after another. The Hong Kong stock market closed.$GREATWALL MOTOR (02333.HK)$It fell more than 7%,$BYD COMPANY (01211.HK)$It fell more than 5%.

According to the news, Great Wall Motor and BYD got into a “fight”.

5/25,Great Wall Motor issued a statement saying that on April 11, the BYD Qin PLUS DM-i and Song PLUS DM-i used normal pressure fuel tanks, and it is suspected that the vehicle's evaporated pollutant emissions did not meet standards.

In response to this,BYD's official microblog posted a statement saying it resolutely opposes any form of unfair competition, believes its test report is invalid, and the Great Wall cannot use this as a basis.

BYD said that its products and related tests meet national standards, have passed certification by national authorities, and that relevant departments are welcome to investigate, obtain evidence and test at any time.

The reported model is a popular BYD product

According to data, the plug-in hybrid models promoted mainly by the Weipai brand of Great Wall Motor and the Haval brand have a certain competitive relationship with BYD's DM-i models.

Recently, the Haval brand of Great Wall Motor released two plug-in hybrid models, Fierce Dragon and Fierce Dragon MAX. The official guide price is 139,800 yuan - 179,800 yuan. Industry insiders believe that the benchmarks for the above two models are BYD Song Pro DM-i and Song Plus DM-i.

Meanwhile, BYD's Song Pro DM-i Champion Edition will go on sale today, May 25, and the price is expected to reach 120,000.

The models involved in the report this time, the BYD Qin Plus and Song PLUS are both BYD's best-selling models.In the first 4 months of this year, the two models together accounted for nearly 1/3 of BYD's sales.

Looking at sales data from both parties, Great Wall Motor's cumulative sales in January-April this year were 337,300 units, a year-on-year decline of 21.67 percent. The cumulative sales volume of BYD was 776,600 units, an increase of about 96.61% over the previous year.

Previously, the industry was involved in a price war

A price war broke out for new energy vehicles in January and February, followed by fuel vehicles in March.

According to Cinda Securities, Tesla announced price cuts on January 6. The price cuts for the main models Model 3 and Model Y ranged from 20,000 to 48,000 yuan, starting the first shot in this round of price war. Faced with Tesla's price reduction pressure, many new car builders questioned the world, Xiaopeng, etc. followed up on the price reduction.

At the beginning of March, starting with subsidies from the Hubei government, the price war spread to the fuel vehicle market. The Hubei provincial government and many car companies, mainly Dongfeng Motor, introduced huge car purchase subsidies. The maximum discount for Dongfeng models reached 90,000 yuan. Subsequently, local governments such as Hangzhou, Hefei, Beijing, Chengdu, etc., and OEMs such as Chery, Geely, GAC, Changan, and BYD followed up price cuts, and the price war spread across the board.

According to Cinda Securities analysis, the reasons behind this price war are: 1) automotive products account for about 10% of the company's zero consumption, and local governments are motivated to drive economic growth through automobile industry promotions; 2) the subsidy policy was withdrawn at the end of 2022, and automobile sales pressure increased after the opening of the year; 3) the electrification transformation of joint venture brands was slow, product strength declined, and was squeezed by new energy sources and independent brands; 4) the national 6B standard switch is imminent, and the country's 6A model inventory needs to be digested urgently.

HoweverThere is a trend where this round of price war came to an end temporarily after Tesla took the lead in stopping price increases.

At the beginning of May, according to Tesla's official website in China, the price of all Model3 models increased by 2,000 yuan to 231,900 yuan, and the price of all ModelY models increased by 2,000 yuan to 263,900 yuan.

Xiangcai Securities said that Tesla, which set off a price war in the automobile industry, unexpectedly increased prices this time in the context of lower costs. The significance of this is more to send a signal that prices have stopped falling and that prices are stabilizing, hitting on consumers who are hesitant and continue to wait and see to promote sales.

Looking ahead to the future market, CITIC Securities believes that the off-season for automobile consumption has passed, and is looking forward to the release and delivery of models unveiled at the Shanghai Auto Show in May and June to further stimulate consumer demand.

In terms of segmentation, it said that although increased competition in the electric vehicle sector is unavoidable, it is expected that companies with strong “ability to reduce costs” will be more likely to increase their share in the competitive environment of 2023. Structurally, it focuses on enterprises with strong cost reduction capabilities and scale effects. In particular, it believes that hybrid technology can effectively relieve cost pressure in the electric vehicle sector.

Furthermore, on May 9, five departments including the Ministry of Industry and Information Technology announced that the country's 6b emission standards will be implemented as scheduled on July 1, 2023, but for some RDE test reports, the results of “monitoring only” will allow sales of 6b models from other countries until December 31, 2023, adding a half-year transition period.

CITIC Securities said that it is expected that setting a transition period will ease the price war. Based on industry research, it deduces that the industry currently still has around 500,000 fuel vehicles in stock that do not meet the national 6b RDE test. The transition period directly favors Japanese, long-tail legal and Korean car companies that were relatively unprepared to switch national standards. German and independent brands were not affected, but the extension of the inventory cycle favors the May-June industry price system. The possibility of a large-scale price war at this point is significantly reduced, and OEMs will all benefit from the easing of the price war.

Editor/jayden