Finance
China’s EV price war is heating up. What’s behind the big discounts?
Customers look at BYD electric cars at an auto show in Yantai, in eastern China’s Shandong province on April 10, 2025.
Stringer | Afp | Getty Images
BEIJING — Competition in China’s electric car market just got fiercer with consequences for the domestic economy and even the global auto market.
Industry giant BYD last week announced a slew of discounts — some of nearly 30% or more — across several of its lower-end battery-only and hybrid models. The budget-friendly Seagull compact car saw its price drop to 55,800 yuan ($7,750).
Other major Chinese automakers have begun following suit.
“BYD’s action this time has made the industry rather nervous,” Zhong Shi, an analyst with the China Automobile Dealers Association, said in Mandarin, translated by CNBC.
“The industry is in [a state of] relatively large shock,” he said, noting smaller automakers are now more worried about their ability to compete.
The industry has been a rare bright spot in an economy that has been seeing slower growth and lackluster consumer demand. Part of Beijing’s latest attempt to spur consumption included subsidies for new energy vehicles, a category that includes battery-only and hybrid-powered cars.
“The latest car price competition underscores how supply-demand imbalance continues to fuel deflation,” Morgan Stanley’s Chief China Economist Robin Xing said in a report Wednesday.
“There is growing rhetoric about the need for rebalancing [to more consumption], but recent developments suggest the old supply-driven model remains intact,” he said. “Thus, reflation is likely to remain elusive.”
China’s electric car market has already been in a price war for the last two years, partly fueled by Tesla.
But this time, traditional automakers, including state-owned ones, are feeling significant heat as the share of new energy vehicles has come to account for about half of new passenger cars sold in China.
Last week, Great Wall Motors Chairman Wei Jianjun warned of an “Evergrande” in China’s auto industry that had yet to explode, comparing the fast-growing EV industry to the country’s bloated real estate sector. The outspoken private sector autos executive was speaking to Chinese media outlet Sina in an interview posted on May 23.
Once China’s real estate giant, Evergrande defaulted on its debt in late 2021 as the property market slumped after Beijing cracked down on the company’s high debt levels. Demand for homes also fell following tighter government regulations, leaving the developer struggling to finance the remaining construction of pre-sold units.
As Chinese media scrutiny on automakers’ financial situation rose, BYD on Wednesday refuted reports that it excessively pressured one of its dealers on cash flow. The dealer, Jinan Qiansheng in the eastern province of Shandong, did not immediately respond to a CNBC request for comment. BYD referred CNBC to its statement to Chinese media.
In the early years of China’s state-supported efforts to become a global leader in the emerging electric vehicle industry, the Ministry of Finance said it found at least five companies cheated the government of over 1 billion yuan ($140 million). The high-level policy encouraged a flood of startups, of which only a handful survived.
A 19% price drop over two years
In China, the average car retail price has fallen by around 19% over the past two years to around 165,000 yuan ($22,900), according to a Nomura report this week, citing industry data from Autohome Research Institute.
Price cuts were far steeper for hybrid or range-extension vehicles, at 27% over the last two years, while battery-only cars saw prices slashed by 21%, the report said. It noted that traditional fuel-powered cars saw a below-average 18% price cut.
In contrast, the average price of a new car in the U.S. was $48,699 in April, up nearly 1% from two years earlier, according to CNBC calculations of data from Cox Automotive. The average electric car price last month was an even higher $59,255.
BYD’s latest round of price cuts didn’t include the company’s higher-end models priced around 200,000 yuan, such as its flagship Han electric sedan. Reuters pointed out the newest model of the Han released in February was about 10% cheaper than its previous version, according to its calculations.
The Chinese auto giant, which was backed by Warren Buffett in its early years, has rapidly captured market share in China with its wide range of cars at various price points. The company reported a net profit increase of 49% to 14.17 billion yuan last year. Total current liabilities rose by more than 60% to 57.15 billion yuan. Cash and cash equivalents fell slightly to 102.26 billion yuan.
Price war to continue
Rather than reflecting market expansion, double-digit growth of new energy vehicles sales in China is just eating into internal combustion engine cars’ slice of the pie, Ying Wang, Fitch managing director, APAC Corporate ratings, told reporters Tuesday. She noted how the country’s auto market hasn’t grown much since 2018, and expects autos retail sales to only increase by low single digits this year.
Automakers will keep on using price cuts to gain market share in China this year, she said. Wang pointed out another option is for companies to include more features, such as advanced driver-assist systems, for free instead of asking consumers to pay more for them as an add-on.
Geely-backed Zeekr in March said it was releasing its advanced driver-assist system for free, while Tesla has attempted to charge its customers for a similar feature. A month earlier, BYD announced it was rolling out driver-assist capabilities to more than 20 of its car models.
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In the last several months, China’s top leaders have increasingly called for efforts to address non-productive business competition, known as “involution.” The term was mentioned in the premier’s annual work report in March and in the market regulator’s meeting last week which called for “comprehensively rectifying ‘involutionary’ competition.”
However, the massive effort to produce lower-cost electric cars in China, and the automakers’ subsequent move to expand into other markets, has increased worries about the impact on other countries’ auto industries.
The European Union slapped tariffs on imports of China-made electric cars after probing the companies over the use of government subsidies in their manufacture. The U.S. also imposed duties of 100% on China-made electric cars, quashing hopes that the vehicles might enter the world’s second-largest auto market.
But in the EU, tariffs have had limited effect. In April, BYD outsold Tesla in Europe for the first time, according to JATO Dynamics. Tesla’s Europe sales plunged by 49% that month, according to the European Automobile Manufacturers’ Association.
— CNBC’s Bernice Ooi contributed to this report
Cybersecurity and enterprise software stocks have been market dogs in 2026, with fears that AI will wipe out a wide range of companies in the enterprise space dominating the narrative. But they snapped a brutal losing streak this past week, joining in the broader market rally that saw all losses from the U.S.-Iran war regained by the Dow Jones Industrial Average and S&P 500.
Cybersecurity has been “a victim of some of the AI-related headlines,” Christian Magoon, Amplify ETFs CEO, said on this week’s “ETF Edge.”
It wasn’t just niche cybersecurity names. Take Microsoft, for example, which was recently down close to 20% for the year. Its shares surged last week by 13%.
A big driver of the pummeling in software stocks was a rotation within tech by investors to AI infrastructure and semiconductors and some other names in large-cap tech, Magoon said, and since cybersecurity stocks and ETFs are heavily weighted towards software companies, they were left behind even as those businesses continue to grow on a fundamental basis.
But Wall Street now has become more bullish with the stocks at lower levels. Brent Thill, Jefferies tech analyst, said last week that the worst may be over for software stocks. “I think that this concept that software is dead, and then Anthropic and OpenAI are going to kill the entire industry, is just over-exaggerated,” he said on CNBC’s “Money Movers” on Wednesday.
“Big Short” investor Michael Burry wrote in a Substack post on Wednesday that he is becoming bullish about software stocks after the recent selloff. “Software stocks remain interesting because of accelerated extreme declines last week arising from a reflexive positive feedback loop between falling software stocks and changes in the market for their bank debt,” he wrote.
The Global X Cybersecurity ETF (BUG), is down about 12% since the beginning of the year, with top holdings including Palo Alto Networks, Fortinet, Akamai Technologies and CrowdStrike. But BUG was up 12% last week. The First Trust NASDAQ Cybersecurity ETF (CIBR) is down 6% for the year, but up 9% in the past week.
Piper Sandler analyst Rob Owens reiterated an “overweight” rating on Palo Alto Networks which helped the stock pop 7% — it is now down roughly 6% on the year. Its peers saw similar moves, including CrowdStrike.
Performance of Global X cybersecurity ETF versus S&P 500 over past one-year period.
Magoon said expectations may have become too high in cybersecurity, and with a crowding effect among investors, solid results were not enough to to push stocks higher. But the down-and-then-back-up 2026 for the sector is also a reminder that when stocks fall sharply in a short period of time, opportunity may knock.
“Once you’re down over 10% in some of these subsectors, you start to see the contrarians start to say, ‘well, maybe I’ll take a look at this,'” Magoon said.
He said AI does add both opportunity and uncertainty to the cybersecurity equation, increasing demand but also introducing new competition. But he added, “I think the dip is good to buy in an AI-driven world,” specifically because the risks to companies may lead to more M&A in cyber names that benefits the stocks.
For now, investors may look for opportunity on the margins rather than rush back into beaten-up tech names. “I think investors are still going to remain underweight software,” Thill said.
But Magoon advises investors to at least take the reminder to keep an eye on niches in the market during pronounced downturns. “The best-performing are often the least bought and do the best over the next 12 months versus late-in-the-game piling on,” he said.
While that may have been a mindset that worked against the last investors into cybersecurity and enterprise software in mid-2025 when the negative sentiment started building, at least for now, it’s started working for the stocks in the sector again.
Meanwhile, this year’s biggest winner is also a good example of what can be an extended trade in either a bullish or bearish direction. Last year, institutional ownership of energy was at multi-year lows, Magoon said, referencing Bank of America data. “Reverse sentiment can be a great indicator,” he said.
But he cautioned that any selective buying of stocks that have dipped does have to contend with the risk that there is a potentially bigger drawdown in the market yet to come in 2026. That is because midterm election years historically have been marked by large drawdowns. “If you think it is bad right now, it could get a lot worse,” Magoon said. But he added that there’s a silver-lining in that data, too, for the patient investor. The market has posted very strong 12-month returns after midterm election drawdowns end. So, for investors with a longer-term time horizon and no need for short-term liquidity, Magoon said, “stick in there.”
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New innovation in the exchange-traded fund industry could come at a cost to investors during extreme conditions.
According to MFS Investment Management’s Jamie Harrison, ETFs involved in increasingly complex derivatives and less transparent markets may be in uncharted territory when it comes to violent downturns.
“Those would be something that you’d want to keep an eye on as volatility ramps up,” the firm’s head of ETF capital markets told CNBC’s “ETF Edge” this week. “As innovation continues to increase at a rapid pace within the ETF wrapper, [it’s] definitely something that we advise our clients to be really front-footed about… Lack of transparency could absolutely be an issue if we’re going to start seeing some deep sell-offs.”
His firm has been around since 1924 and is known for inventing the open-end mutual fund. Last year, ETF.com named MFS Investment Management as the best new ETF issuer.
“It’s important to do due diligence on the portfolio,” he said. “Having a firm that has deep partnerships, deep bench of subject matter experts that plays with the A-team in terms of the Street and liquidity providers available [are] super important.”
Liquidity as the real issue?
Harrison suggested the real issue is liquidity, particularly during a steep sell-off.
“We’ve all seen the news and the headlines around potential private credit ETFs. That picture becomes much more murky,” he added. “It’s up to advisors, to investors [and] to clients to really dig in and look under the hood and engage with their issuers.”
He noted investors will have to ask some tough questions.
“What does this look like in a 20% drawdown? How does this liquidity facility work? Am I going to be able to get in? Am I going to be able to get out? And if I’m able to get out, am I able to get out at a price that’s tight to NAV [net asset value], and what’s the infrastructure at your shop in terms of managing that consideration for me,” said Harrison.
Amplify ETFs’ Christian Magoon is also concerned about these newer ETF strategies could weather a monster drawdown. He listed private credit as a red flag.
“If your ETF owns private credit, I think it’s worth taking a look at, kind of what the standards are around liquidity and how that ETF is trading, because that should be a bit of a mismatch between the trading pace of ETFs and the underlying asset,” the firm’s CEO said in the same interview.
Magoon also highlighted potential issues surrounding equity-linked notes. The notes provide fixed income security while offering potentially higher returns linked to stocks or equity indexes.
“Those could potentially be in stress due to redemptions and the underlying credit risk. That’s another kind of unique derivative,” Magoon said. “I would very closely look at any ETF that has equity-linked notes should we get into a major drawdown or there be a contagion in private credit or something related to the banking system.”
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