Nomura analysts said on Wednesday that while competition in China’s auto market is expected to remain fierce, further declines in car prices appear unlikely in the second half of the year.
The brokerage said a renewed round of discounts, triggered by BYD in late May, had reignited a price war, but anticipated that promotions and government subsidies will contribute to a higher demand.
The analysts noted, however, that sales may remain lower in the near term — as major automakers are preparing new models and/or focusing on strategy shifts.
Nomura said that the entry of tech firms like Xiaomi and Huawei into the auto industry could further stimulate market demand — and pointed out Xiaomi YU7 SUV’s strong sales as a key factor boosting demand for battery electric vehicles in China.
The tech giant’s second model was launched late last month, with a starting price of 253,500 yuan ($35,300) — 10,000 yuan below Tesla‘s refreshed Model Y, which it aims to rival.
The YU7 attracted “record-high bookings,” with the “only bottleneck for Xiaomi” appearing to be “production capacity,” the analysts noted.
Luxeed, the EV brand co-developed by Huawei and Chery, began offering a 20,000 yuan ($2,790) purchase discount in late June, valid through the end of July.
Aito, another Huawei-backed brand, has been posting steadily increasing weekly insurance registrations in China over the past three months.
The company sold 9,400 vehicles in the first week of July. In June, the brand was the second best-selling Chinese new energy vehicle brand in the ranking, after BYD.
Piling up inventory and ambitious sales targets will fuel competition for several automakers in the second-half, according to Nomura.
Citing industry data from Autohome Research Institute, the Japanese firm said that the average vehicle retail price in China has dropped around 19% in the past two years to around 165,000 yuan — equivalent to $23,000.
Despite cutting prices earlier this year, Nomura analysts pointed out that BYD faces challenges in reaching its full-year sales target of 5.5 million units, despite its 30% market share in China.
The automaker’s monthly sales have been increasing year over year globally. However, the percentage of growth has been declining — sales grew 19% in April, 14% in May and 11% in June.
First-half volumes of the brand reached 2.1 million fully electric and hybrid vehicles, meaning it reached 38.2% of the annual guidance.
As of June 30, most Chinese automakers had yet to reach even a third of their annual goals.
The only brand to achieve half of the target was XPeng, which delivered 197,189 out of the 380,000 units it aims to achieve.
The Geely Group, which includes brands like Zeekr and Polestar, revised its annual target from 2.71 million units to 3 million units, as it reported on first-half volumes.
Last week, the group said it sold 1.409 million vehicles in the January-June period — 47% of the revised guidance.
Premium brand Zeekr aims to deliver 320,000 vehicles by year-end. In the first half of the year, the brand delivered 90,730 units, meaning it reached 28.4% of the target.
