![](https://static.bangkokpost.com/media/content/20230313/c1_2526590.jpg)
Traders have been abandoning Chinese auto stocks as a price war started by Tesla and BYD spread across the whole industry, a sign of weak consumer sentiment amid pessimism about the pace of economic recovery.
BYD, the world's biggest electric-vehicle (EV) maker by sales, slumped 11% in Hong Kong and 7.8% in Shenzhen last week. SAIC, China's biggest carmaker, tumbled 6.7% in the same span in Shanghai.
The country's main trio of electric-car makers, Li Auto, Nio and Xpeng shed between 2.6% and 15% in Hong Kong.
The price war intensified last week as premium carmakers like BMW and Mercedes-Benz Group and local players such as SAIC and Guangzhou Automobile got in on the act.
The biggest cut came from French automaker Citroen. It chopped 40% off the price of its C6 model to about 130,000 yuan (US$18,660) in central Hubei province, according to local media.
Tesla and BYD had already shaved between 20,000 and 46,000 yuan off their vehicles.
"It's a sign of weak consumer confidence. Consumers won't spend, because the economic recovery is weaker than expected," said Wang Zheng, chief investment officer at Jingxi Investment Management in Shanghai.
The dive in auto stocks is a setback for the country's leaders, who have made the revival of household consumption a top priority this year, as set out in the government work report addressed to the National People's Congress in Beijing.
While economists from UBS to Goldman Sachs expect China's growth to accelerate this year after the full reopening of international borders, recent key economic data suggest the recovery will take time. Both imports and exports declined in February, while a deflation in factory-gate prices deepened.
Sales of passenger cars fell 15% from a year earlier in the first two months of 2023, according to data from the industry association.
"Price cuts by major carmakers including Tesla have sidelined more potential buyers as they expect more aggressive cuts to be on the way," said Chen Siqi, an analyst at CSC Financial in Beijing.
Another reason for the low sales is that some motorists who would otherwise have bought a car this year may have brought forward their purchase to the end of last year because they feared tax breaks and EV subsidies would be scrapped in 2023.
China sold 6.9 million EVs last year, almost double the number in 2021, according to the industry data.
Electric cars, one of the few fast-growing sectors, will be less of a growth driver for auto sales in China this year, because shrinking fiscal revenue makes it difficult for the government to extend its subsidies on purchases, according to Iris Pang, Hong Kong-based chief economist for Greater China at ING.
"New EVs will be less supportive of sales growth this year," she said in a note on February 28. "There has been no indication that there will be a renewal of the cash subsidies on EVs. The fiscal burden has risen and the government may not want to spend on subsidies to boost consumption when the economy is recovering."
Cuts in such subsidies ranged from 10% to 30% in the three years to 2022, and no budget has been allocated so far this year, according to the analyst.
Pang expects growth in vehicle sales in China to slow to around 5% this year from 10% in 2021.
"The strength of the recovery in the auto market is slower and weaker than expected," said Lu Jiamin, an analyst at Cinda Securities in Beijing. "That's because of macro factors; the economic recovery is still at a nascent stage."