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Analysts say the price wars are likely to continue

Tesla TSLA -1.92%decrease; red down pointing triangle and Li Auto LI -9.60%decrease; red down pointing triangle cut prices further in China amid an intensifying price war that comes as sales of electric vehicles in the world’s largest auto market surpassed that of traditional cars for the first time.

Chinese hybrid specialist Li Auto cut prices by up to 30,000 yuan ($4,144) for all models, including its L7, L8, L9 series and its new, full-electric MEGA model, the company said Monday on its Weibo and WeChat accounts. Tesla cut prices by CNY14,000 for its 3, Y, S and X models, its website showed Sunday, after the EV maker cut prices in the U.S. late last week.

In China, the starting price of Tesla’s Model 3 is now CNY231,900, while its Model Y, Model S and Model X now start at CNY249,900, CNY684,900 and CNY724,900, respectively.

The price cuts came as new data showed that, for the first time, China sold more electric and hybrid cars than internal-combustion ones. Retail sales of new-energy cars, which include EVs and plug-in hybrids, made up 50.39% of all passenger-vehicle sales in the first two weeks of April, according to data the China Passenger Car Association released over the weekend.

Analysts said the price wars are likely to continue.

CCB International equity analyst Ke Qu forecast “growing and intensified competition in the second quarter” that will likely continue into the third quarter. He noted that more than 40 automakers in China have cut prices or offered discounts this month alone after BYD, the world’s top seller of EVs, reduced prices by 10%-15% for major models in February.

“This is the first time in the history of the auto market that such a large-scale price reduction has occurred,” he said.

Nomura analyst Joel Ying said the power of price setting in China “has completely transferred” to EV makers, adding that other automakers “will have to seek changes to find their position in a market that’s constantly changing.”

Li Auto’s price cuts followed lower-than-expected sales for MEGA, its first fully electric model, in the first quarter. Li Auto launched the new L6 model last week and will attend the Beijing Auto Show starting Thursday. Tesla’s cuts came ahead of earnings this week, with investors concerned about globally slowing sales and the company’s eroding first-mover advantage.

Li Auto’s Hong Kong shares were 9.4% lower in Monday afternoon trading, the worst performer on the benchmark Hang Seng Index. Its ADRs have lost 30% so far this year, while Tesla’s shares have dropped 41%.

Hipgnosis said there is no certainty any formal Blackstone offer will be made and it continues to recommend the $1.4 billion takeover by Concord Chorus

Hipgnosis Songs Fund SONG -0.11%decrease; red down pointing triangle, home to the catalogue of artists such as Neil Young, Shakira and Red Hot Chili Peppers, said it received a $1.50 billion offer approach from Blackstone Funds that it would be prepared to recommend to shareholders if a formal takeover was made.

The London-listed song catalog fund said Sunday that it had received the approach on Saturday but cautioned that there is no certainty any formal offer will be made and it continues to recommend the $1.40 billion takeover by Apollo-backed music company Concord Chorus as announced on Thursday.

Blackstone said Saturday that it had made a number of proposals to the board of Hipgnosis, the latest being $1.24, or about 1.0 pound, a share. The price is an 8.8% premium to Friday’s closing price of 91.90 pence and a 6.9% premium to the Concord price.

Under the Concord deal, accepting shareholders will get $1.16 in cash for each share held, or about 93.2 pence.

Concord, headquartered in Nashville, Tenn., is an active buyer of music rights, including the catalogues of Phil Collins and his Genesis bandmates Tony Banks and Mike Rutherford. It is owned by Alchemy Copyrights.

Apollo Capital Management has agreed to provide financing for the acquisition in the form of debt capital, as well as a minority, indirect equity interest in the Concord-controlled Bidco.

Hipgnosis appointed advisors on Nov. 23 to conduct due diligence on its assets, and asked its investment advisor to propose alternative terms for its future arrangements.

The decision followed shareholders’ rejection of a plan to sell 29 music catalogs to Hipgnosis Songs Capital and continuation of Hipgnosis as a closed-end investment company.

It most recently said that the company won’t restart paying dividends after an independent report estimated that the value of the company’s assets was lower than previous calculations.

The company’s portfolio was most recently valued at $1.95 billion, down from $2.62 billion at Sept. 30.

The deal agreed Thursday includes an extra $25 million if Concord and the company’s investment advisor—Blackstone-backed Hipgnosis Song Management—reach agreement on the termination of the investment advisory agreement by a set deadline.

The Concord deal has the support of Hipgnosis shareholders owning 29.38% of its issued share capital.

“The acquisition represents an attractive opportunity for our shareholders to immediately realize their holding at a premium, mitigating the risks we see ahead to achieving a material improvement in the share price,” Hipgnosis Chairman Robert Naylor said on Thursday.

He added that the board believes Concord is the right owner to take on the Hipgnosis catalogue and manage it in the interests of composers and performers.

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