Auto stocks took a hit in the morning, as competition in the auto market intensified and the looming threat of US auto tariffs weighed heavily.

Auto stocks took a hit in the morning. As of writing, Li Auto-W (02015) fell 5.71% to HK$120.5, while XPeng-W (09868) and GAC Group (02333) dropped 3.8% and 2.33% to HK$83.45 and HK$13.44, respectively.

On the news front, according to the Science and Technology Daily, the auto market in February will face more intense competition. In the context of limited market demand, simple "price wars" can no longer attract potential customers. The product technology attributes, including enhanced smart driving, and more consumer-oriented financial services have become the most prominent features of the February auto market. Chen Shihua, vice-secretary-general of the China Association of Automobile Manufacturers, said that the industry competition has further intensified this year, reflected in the competition in terms of smart configuration, new products and services.

Moreover, the United States imposed 25% additional tariffs on goods from Mexico and Canada and 10% additional tariffs on goods from China. Minmetals Securities released a research report saying that the tariffs would affect the value of the US auto industry of over US$200bn, accounting for 37% of the overall market size. The brokerage noted that the additional tariffs and China's countermeasures would have a limited impact on the Chinese auto industry, but companies with operations in Mexico would need to find other ways.