On November 28, Caijing Society news (Editor: Feng Yi), the news that BYD requested suppliers to reduce prices has continued to ferment in the market, attracting attention to the new energy vehicle industry.

Today, the auto sector in the Hong Kong stock market has once again entered into an adjustment, reflecting the market's worries. BYD shares (01211.HK) fell by nearly 3% throughout the day, NIO-SW (09866.HK) fell by over 2%, and Xpeng Motors (09868.HK), Beiqi Autos (01958.HK), and other auto manufacturers followed suit in the decline.

Following BYD's request for a 10% price reduction from suppliers that sparked market discussions, there are reports that SAIC Datong also wrote to suppliers, aiming for a 10% cost reduction.

However, compared to the car companies' blunt price reduction demands, perhaps their expectations for industry development in the announcements are more worth paying attention to.

Previously, it was rumored that in BYD's passenger vehicle price reduction email, they mentioned that by 2025, the market competition will become fiercer, with phrases like 'final battle' and 'elimination round,' making the market tense.

According to reports, SAIC Datong, in its letter to suppliers, also stated that the current auto market is facing an oversupply issue; with many new cars flooding the market, the imbalance between supply and demand is not expected to be fundamentally improved in the short term, causing the price war to be difficult to calm down; 'cost reduction' will be the main theme of the auto industry in 2025.

Interestingly, according to data from the PCA, from November 1st to 17th, there were 1.106 million passenger vehicles retailed in the market, a 30% year-on-year growth, and a 3% increase from the previous period; during the same period, 0.581 million new energy vehicles were retailed, with a 66% year-on-year growth and a 7% increase from the previous period.

According to industry sources interviewed, the auto industry chain has been trending towards lower prices in recent years, currently facing structural or phased production capacity issues, with the entire industry in a situation of increasing output without increasing revenue.

According to previous quarterly analysis reports by Orient analysts Jiang Xueqing and Yuan Junxuan, in the third quarter the profitability of whole vehicle companies declined, while the gross margin of parts companies showed weaker year-on-year performance.

Financial data also indicates that in the third quarter, the net income attributable to A-share whole vehicle industry was 16.736 billion yuan, a year-on-year decrease of 21.5% and a quarter-on-quarter decrease of 21.1%; while the net income attributable to parts industry was 18.468 billion yuan, a year-on-year increase of 0.2% and a quarter-on-quarter decrease of 6.5%.

In the Hong Kong stock market, currently apart from BYD, NIO, Xiaopeng, and Leap Motor among other car companies are still in a loss-making phase. NIO founder Li Bin mentioned the company's profitability target in a recent internal memo, indicating to be achieved by 2026.

According to incomplete statistics, as of now, NIO has accumulated losses of 100 billion, Xiaopeng has incurred nearly 40 billion in cumulative losses, and Ideal Auto in the first three quarters has also fallen into the dilemma of increasing revenue but decreasing profits.

Overall, despite the current prosperity of the new energy auto industry, due to fierce market competition, the industry reality remains that merely gaining sales volume does not equate to profitability. Surging sales volume cannot completely dispel market doubts about the profitability of the industry chain.

Orient Securities also warns that if car companies continue to decrease prices in 2024, and the price reduction exceeds expectations, it will impact the overall industry profitability.