Investment value of Wang Chuanfu in China declines by 1.8 billion dollars as investors express concerns over potential electric vehicle price competition
Billionaire co-founder of Chinese electric vehicle giant BYD, Wang Chuanfu, saw his net worth diminish by $1.8 billion in a single day after investors grew apprehensive following the company's decision to offer steep discounts of up to 34% on its entry-level electric and hybrid models.
Despite the setback, Wang, who serves as BYD's chairman and CEO, maintains a fortune of $28.3 billion, primarily secured by his ownership of BYD shares, according to Forbes estimates. However, the company's dual-listed shares experienced a sharp fall of 9.2% in Hong Kong and 6.2% in Shenzhen on Monday.
The price reductions were announced by BYD on Friday, with the company releasing details on its website and Chinese social media platforms. A total of 22 pure electric and plug-in hybrid models will see price cuts until the end of June, with some models experiencing reductions in excess of 20%.
One of the most significantly discounted models is the Seal 07 DM-i, a hybrid sedan with assisted driving features, which now sells for 102,800 yuan after a 53,000 yuan ($7,400) price cut, representing a 34% discount. The Song Plus EV also saw its price drop by over 20% to 117,800 yuan.
Although BYD has previously used discounts to stimulate sales, the latest cuts have sparked fears of an escalating price war in China's burgeoning electric vehicle market, according to analysts. Ke Yan, the head of research at DZT Research, comments that investors are cashing in their shares in anticipation of the impact of the price cuts.
BYD aims to appeal to price-sensitive consumers with more aggressive discounts, as per feedback from Yale Zhang, the managing director of consultancy Automotive Foresight. In February, the company attempted to boost deliveries by adding self-driving functions to lower-priced models, a strategy that may not have achieved the expected results, according to Zhang.
Recent concerns surrounding smart driving software, following a fatal crash involving a Xiaomi electric vehicle, have added to the rationale for BYD to focus on direct price cuts to drive sales in its home market, China. BYD's 2025 delivery target is 5.5 million vehicles globally.
Some competitors, such as Geely Automobile and Great Wall Motor, have experienced a similar dip in their stock prices following BYD's price cuts. Other automakers may soon find themselves in a similar position due to the intensifying competition, experts predict.
The escalating price war has led to a general decline in Chinese EV manufacturers' stock prices, with companies like Li Auto and XPeng also experiencing declines. The relentless pursuit of lower prices has raised concerns about the sustainability of the price war, particularly given the substantial financial losses reported by many Chinese EV startups on a regular basis.
The price reductions by BYD have heightened competition in China's electric vehicle market, putting pressure on competitors like Geely and Great Wall Motor while also highlighting the challenges faced in maintaining profitability within a market marked by oversupply and slowing demand.
Wang Chuanfu, the billionaire chairman and CEO of Chinese electric vehicle company BYD, continues to embrace innovation in the technology-driven business sector, despite facing a $1.8 billion net worth decrease due to investors' concerns following steep discounts on BYD's electric and hybrid models. The finance industry closely watches the developments in China's competitive electric vehicle market, as other manufacturers such as Geely Automobile and Great Wall Motor have faced similar impacts due to the ongoing price war.
