Chinese EV makers NIO, Xpeng, Li Auto see shares slip up to 6% after BYD's new partnership with DeepSeek

NIO Inc.'s stock is trading lower on Tuesday following an announcement by BYD Auto regarding the inclusion of self-driving technology in its vehicles.

The announcement is probably seen as a competitive challenge for NIO, as BYD's integration of advanced technology into more affordable models could pressure premium EV brands.

Apart from NIO, shares of several Chinese electric vehicle makers saw notable declines on Tuesday.

US-listed shares of Xpeng dropped close to 6%, while Li Auto fell 4%.

Meanwhile, in Hong Kong trading, Geely Auto shares experienced a sharper decline, tumbling over 10% to close on Tuesday.

BYD and DeepSeek's plans

BYD revealed plans to introduce its "DiPilot" assisted driving system, developed in collaboration with DeepSeek.

The advanced driver-assistance technology will be available across BYD's lineup, including a model priced at just 69,800 yuan ($9,555).

DeepSeek’s artificial intelligence model will power the more advanced versions of the DiPilot system.

These driver-assistance programs leverage AI, software, and sensors to control vehicles and reduce human intervention.

BYD’s founder and chairman, Wang Chuanfu, emphasized during a live-streamed launch event that advanced smart driving will soon be as essential a safety feature as seatbelts and airbags.

Notably, this marks a shift in BYD's stance.

In March 2023, the company acknowledged the complexities of liability in autonomous vehicles while recognizing the safety benefits of self-driving technology.

Nomura analysts noted that BYD’s move to include driver-assistance features in a sub-70,000-yuan car likely makes it the first automaker in China to do so.

Wall Street analysts on NIO and Li Auto

Last week, NIO stock faced a downgrade as JP Morgan analyst Nick Lai shifted his rating from "buy" to "hold".

Lai also lowered the price target for the US-listed shares of the Chinese electric vehicle maker from $7 to $4.70 per American depositary receipt.

While Lai acknowledged that the company’s new ET9 sedan could support sales volumes, he highlighted that the vehicle’s high-end positioning would limit its broader market impact.

The ET9, with a starting price of approximately $100,000, is not targeted at mass-market consumers.

On the other hand, Macquarie analyst Eugene Hsiao upgraded Li Auto from neutral to outperform, setting a price target of $29.00.

The upgrade comes after the company's recent quarterly performance, which saw vehicle volumes fall below the anticipated guidance range due to a higher proportion of the lower average selling price (ASP) models, L6 and L7.

Hsiao highlighted that while first-quarter premium EV volumes might remain seasonally weak, concerns over battery electric vehicle (BEV) SUV competition appear to be already reflected in Li Auto's current stock price, supporting the more optimistic stance.

Macquarie also has a neutral rating on shares of XPeng. The firm has a price target of $18.00 for the stock.