Shares in Chinese electric vehicle giant BYD closed sharply lower on Monday, along with those of other Chinese EV firms, as the company’s weekend price-cuts spurred concerns that a renewed price war in the world’s biggest auto market could impede profits across the industry.

BYD, the world’s biggest EV assembler, cut prices on 22 models to boost sales, in a move announced on Friday.

Analysts at Citi said in a Monday note that the move may have increased traffic in BYD’s showrooms by 30 to 40 percent from the previous weekend.

Price war

The analysts said they anticipated peers would take similar measures in order to retain market share.

BYD’s Hong Kong-listed shares closed down 8.6 percent on Monday.

The company said it would offer discounts ranging from 10 percent to 30 percent on 22 of its battery and plug-in hybrid models until the end of June.

The discounts mostly affected lower-priced models under 150,000 yuan ($20,872, £15,390), with its lowest-priced model, the Seagull hatchback EV, reduced 20 percent to 55,800.

The largest discount was for the Dynasty series Qin Plus DM-i, which fell 34 percent to 63,800 yuan.

Morgan Stanley analysts said some of the cuts had been in place since April but the official announcement “sends a strong signal” about cutthroat competition in Chinese EVs.

Following BYD’s announcement, Stellantis-backed Leapmotor said it would offer discounts of up to 30 percent on two of its extended-range SUVs until 8 June, while on Monday IM Motors, a unit of state-backed SAIC Motor, said it would offer a discount of nearly 20 percent on one of its SUVs.

China has several dozen EV makers but only three are known to be profitable, BYD itself, Li Auto and Seres, which makes Aito-branded EVs co-developed with Huawei.

Overseas sales

The price cutting in China has also affected sales and profit margins for Tesla, which operates a factory in Shanghai and counts China as an important market.

Nick Lai, head of Asia-Pacific auto research at Morgan Stanley, said companies with multiple brands and models across price segments were more likely to weather the price-cutting storm as they could ensure stable sales volumes.

He noted that many Chinese carmakers rely on revenue from overseas sales as they are able to achieve higher profit margins abroad.

BYD sold more EVs in Europe than Tesla for the first time in April in spite of heavy tariffs, according to figures from Jato Dynamics, and is planning to start production at its first European car plant in Hungary later this year.