BYD's Aggressive Pricing Triggers EV 'Rat Race:' Stock Tumbles, Authorities Voice Concern

Chinese EV giant BYD Co. Ltd. BYDDY BYDDF is reportedly facing backlash for its aggressive discounts that have triggered a price war in the fiercely contested EV market in China.

What Happened: BYD's stock fell over 5% on the Hong Kong exchange following last week's 15% plunge, due to reports that the price war had caught Beijing's attention, Bloomberg reported on Sunday.

The Chinese Communist Party’s (CCP) newspaper, The People's Daily, slammed the "rat race" in the domestic EV sector, which it said could hurt domestic supply chains and damage the "Made in China" reputation. However, it did not name any specific companies, the report said.

The report also mentioned that China's automobile association criticized the price war, which could impact the sector's growth and bring about quality issues, while China's Ministry of Industry and Information Technology agreed with the stance.

Why It Matters: The news comes in as China's EV price war has led to an intense competition in the country among EV manufacturers offering aggressive discounts to drive up sales.

Interestingly, BYD and other Chinese players are bolstering their presence in markets outside of China, with BYD already surpassing Elon Musk's Tesla Inc. TSLA in European sales as the company is offering the Euro-spec version of its best-selling EV hatchback in the region for $26,000.

On the flip side, a major BYD dealer in China has reportedly closed down over 20 dealerships in the country across 4 major cities, citing what the dealer said were policy changes by the automaker that impacted the company's cash flow.

Elsewhere, experts like Future Fund LLC's Gary Black indicate that BYD's price war could threaten Tesla's position in the country.

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