BYD's blended price rose 1 percent month-on-month in June, while those of Nio, Xpeng, and Li Auto remained stable.

(A Nio ES8 on display at a small-scale auto show in Shanghai in May 2024. Image credit: CnEVPost)

The intense price war seen in China's electric vehicle (EV) industry at the start of the year has eased significantly over the past two months. Morgan Stanley shared their thoughts on the current situation in a new research note.

"EV price competition eases...for now," analyst Tim Hsiao's team said in a July 4 research note, which found that prices at major EV companies have remained largely stable last month.

Blended prices for BYD (HKG: 1211, OTCMKTS: BYDDY) and the EV startups were largely stable in June, but it's worth monitoring whether there will be another round of promotions and price cuts in the seasonally slow months of July and August, the note said.

BYD's blended price rose 1 percent in June month-on-month with the 2023 Champion Edition of the Han, Tang and Frigate 07 exiting the market, while retail prices for the remaining models remained stable, Morgan Stanley said.

The team expects the Qin L and Seal 06 DM-i, as well as upcoming new models such as the Song L, Song Plus DM-i 5.0, Seal 06 GT, Tang Max and Denza Z9GT, to bolster sales momentum in the third quarter.

Nio's (NYSE: NIO) blended price was steady in June, but price trends varied by models.

Retail prices for Nio's larger models, the ES7, ES8, EC7 and ET7, fell by RMB 5,000 ($690) in June, while prices for its smaller models, the ET5, ET5 Touring, ES6 and EC6, rose by RMB 1,000 to RMB 3,000, according to Morgan Stanley.

This likely reflects Nio's desire to leverage a more flexible promotional strategy to achieve a more favorable product mix and higher average selling price in the third quarter before launching the Onvo L60 in September, the team said.

In addition to BaaS (battery as a service) vouchers and NOP+ (Navigate on Pilot Plus) free trials, the overall discounts offered by Nio remain high at RMB 18,000 to RMB 28,000, according to Morgan Stanley.

Xpeng's (NYSE: XPEV) retail prices remained largely unchanged in June, but discounts for models other than the X9 MPV (multi-purpose vehicle) remained high, averaging around RMB 23,000, according to Morgan Stanley.

The X9 has remained the best-selling electric MPV over the past few months, but sales momentum for the G9, G6 and P7i will likely remain dependent on store-level promotions, Morgan Stanley said.

Li Auto (NASDAQ: LI) retail prices remained largely unchanged in June, but the company extended its 0 down payment promotion and RMB 10,000 credit for spec upgrade to July 15, the team said.

Li Auto will hold a smart driving launch event on July 5 at 8 pm Beijing Time, and will likely launch its HD map-free city NOA (Navigate on Pilot) feature nationwide, the team noted.

Data released earlier this month by the China Passenger Car Association (CPCA) showed a similar picture.

Wholesale sales of Chinese passenger new energy vehicles (NEVs) were estimated at 970,000 units in June, up 28 percent year-on-year and up 8 percent from May, the CPCA said in a July 2 report.

In June, price wars in China's auto market cooled off, spurring consumer sentiment among groups that had been on the sidelines, the CPCA said.

($1 = RMB 7.2686)

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