BYD has cut the prices of five models by up to 20% in a move that could spark a price war in China which has become the world’s largest car market.
The company said the move was aimed at gaining market share although industry watchers are more sceptical, saying it is in response to weak sales. BYD reported a 15% fall in January compared with a 16.2% increase in China’s car sales during the month.
The company already sells some of China’s cheapest cars, but has now cut prices on its five best selling models – the F0, F3, F3R, G3 and F6 – by between CNY3,000 (US$455.8) and CNY15,000 ($2,275).
The biggest cuts, between 10% and 20%, have come on the G3 and BYD said it hoped the overall cuts, the first the company has made in several years, will lift G3 and F6 monthly sales to over 10,000.
Analysts said other automakers in China may follow suit by cutting prices of low-end models although Geely, which makes sub-compacts and small hatchbacks as well as other models, said it has no plan to drop prices.
Reuters noted that BYD shares have lost almost a fifth of their value this year after falling 40% in 2010 on lower than expected sales, and as investors cast doubts on its high valuation fanned by the support of US investor Warren Buffett, and hopes on its development of electric cars.
Weak sales and the delay in commercial sales of BYD’s S6 SUV and electric cars continued to cast a shadow over its stock price.
Most industry experts predict that car sales in China’s will slow to between 10% and 20% this year from 2010’s record high as 10% purchase tax is reintroduced along with potentially new restrictive policy on car sales and the government’s moves to curb inflation.