As price war concerns intensify, China EV shares are facing increasing pressure.

• Nearly 20% reduction in price for Leapmotor's new EV C10 SUV version has been reported.
• On Monday, BYD released a new version of its top-selling car at a lower price, while also reducing the prices of various EV models.
• Tesla on Friday announced new incentives to lure consumers in China on Friday.

The shares of Chinese electric vehicle makers listed in Hong Kong declined on Tuesday due to increasing concerns about price wars in the industry.

The world's largest and most crowded EV market, which is located in China, is facing intense competition from both local players and U.S. giants such as Tesla, who are trying to capture as much market share as possible through promotions and price cuts.

According to Yuqian Ding, head of China auto research at HSBC Qianhai, while price cuts may negatively impact near-term earnings and margins, an increase in demand for EVs could offset this, as their appeal broadens to more consumers.

Despite the increasing consumer interest in electric vehicles, the "wait for a better price" mindset remains a hindrance to sales for EV manufacturers, according to Ding.

The majority of electric vehicles in China's auto market are produced by domestic brands.

On Tuesday, Chinese EVs faced pressure, with Hong Kong-listed shares of falling 3.9%, while shares dropped 3.6% and was down 1.8%. However, shares were up 0.4%.

Nio is set to report its December quarter earnings later in the day.

A piece of China's EV pie

The competition in the country's EV market has increased, with domestic car manufacturers striving to surpass American rival Tesla through advanced technology and affordable pricing.

On Friday, Tesla introduced new incentives to attract customers in China, such as discounts on car insurance and limited-time preferential financing plans.

In January, despite earlier price cuts, Tesla lost market share in China, particularly in large cities, according to Morgan Stanley.

A new EV called "Mega," a multi-purpose vehicle priced at 559,800 Chinese yuan ($77,756), and scheduled to start deliveries in March, was launched by Li Auto. The minivan features a built-in refrigerator and sofa.

Li Auto reported a 21.8% increase in vehicle deliveries from February 2020 to February 2021, reaching a total of 20,251 vehicles. However, compared to January 2021's deliveries of 31,165 vehicles, there was a 35% decrease in month-over-month deliveries.

The South China Morning Post reports that the new EV version of the C10 SUV has had its prices cut by nearly 20% compared to the presale price, with a back-end support.

According to SCMP, Zhu Jiangming, founder and CEO of Leapmotor, the company prices its vehicles based on production costs.

Xpeng and Nio lost market share in various regions, while BYD experienced growth in major cities but losses in less developed areas, where it faced intense competition from state-owned enterprises, according to Morgan Stanley research.

The market share of Li Auto decreased in the last quarter of 2023, despite the launch of a new model last week, according to analysts at a U.S. investment bank.

BYD well positioned

On Monday, BYD introduced a new version of its top-selling car and reduced the prices of various EV models.

The Atto 3, known as the Yuan Plus crossover overseas, was priced lower than its predecessor, according to Reuters.

Bernstein analysts wrote in a client note that BYD's unparalleled cost structure and product innovation ability, resulting from its high degree of vertical integration, will allow the company to succeed in the ongoing EV race in China and abroad.

Bernstein predicts that China's EV market will experience a 25% year-on-year growth in demand, despite intensifying competition due to "continued pricing pressure."

Beijing announced that its initiatives to promote the growth of the new energy sector, such as tax reductions and infrastructure support, led to a 37.9% increase in sales of new energy vehicles in 2023.

The document states that we supported 10 cities to serve as national comprehensive freight hubs in order to strengthen operation chains and facilitate smooth logistics flows.

Chinese President Xi Jinping urged for increased support of new energy vehicle development, particularly through the construction of charging infrastructure, just last week.

— CNBC's Evelyn Cheng contributed to this story.