Chinese EV Names Jump In Hong Kong As Tesla Scraps Discount For Chinese Model Y

Chinese EV makers leaped on news that Tesla was scrapping a Model Y discount Friday as investors hoped that the move signaled the beginning of a détente to the country’s EV price war.

Xpeng was up 4%, Li Auto was trading 3% higher and Nio rose 2% by lunch time in Hong Kong trading. BYD was up just over 1%.

The South China Morning Post reported Friday morning that Tesla Inc TSLA has rescinded a discount on the performance edition of its Model Y in China just 10 weeks after it was offered.

The performance-edition Model Y, made in Shanghai, was priced at 363,900 RMB ($49,735) Friday morning in China, up by 14,000 RMB from its previous discounted sales price.

Analysts told SCMP that the move reflected Tesla’s new drive towards profitability on the mainland as it competes in particular with rivals Li Auto Inc LI, XPeng Inc XPEV and Nio Inc NIO in a price war it began earlier this year with them.

China represents the largest global market for EV makers accounting for 60% of all the world’s EV sales. Tesla’s Model Y is a central component of the world’s largest EV maker’s portfolio, and in the first quarter of 2023 it became the world’s best-selling vehicle.

The move comes after Tesla’s disastrous Q3 earnings which fell far short of analysts’ expectations. In mainland China, the company posted a 32.8% month-on-month sales decline for its EVs ,to 43,507 units according to the China Passenger Car Association. That compared badly to rival Li Auto, which delivered an increase of 3.3% in EVs to mainland customers the same period, with 36,060 EV deliveries.

Tesla is faces its most pressing competition on the mainland from BYD Company Limited BYDDY BYDDF, China’s largest energy-efficient vehicle maker. BYD, which announces Q3 earnings next week, said earlier in October that it expected to increase net profit by 67% to 102% over the same period in 2022. Based on those estimates BYD is trading at a significant discount to its rival Tesla right now.