Li Auto led declines in Chinese electric vehicle (EV) maker shares in Hong Kong on Monday, amid concerns that stiffer competition in the domestic market will erode margins and as investors took profits from gains fuelled by the oil shock.

Beijing-based Li Auto tumbled 14 per cent to HK$64.90 by close of trading, the worst performer on the Hang Seng Index on Monday, after the company cut prices on its latest model by nearly 9 per cent. Peers also suffered sell-offs, with BYD retreating 2.8 per cent to HK$93.80 and Xpeng sliding 1.1 per cent to HK$60.65.

The renewed pullback in Chinese EV stocks followed a brief rally that was driven by expectations of rising demand for alternative energy after the outbreak of the US-Israel war on Iran at the end of February.

The latest rout underscores investors’ lingering concerns about the overcapacity facing China’s EV sector, a key target of Beijing’s so-called anti-involution campaign to eliminate excessive production.

“EV’s penetration in China is already pretty high so it’s difficult to see continuing fast sales,” said Dai Ming, a fund manager at Huichen Asset Management in Shanghai. “While sales abroad are doing well, that addition is not enough to counter the decline in the domestic market. EV manufacturers will come under pressure this year in either sales or profitability.”

Li Auto slashed the price on the latest model in its L9 SUV series to 509,800 yuan (US$74,834) from 559,800 yuan in presales. The cut signalled that the years-long price war in China’s auto market had yet to run its course and that the profitability of key players may remain under pressure.