Shares in Chinese automakers Xpeng and Geely Auto tumbled on Tuesday on concern they will struggle to compete against BYD's move to offer free smart driving features on almost all of its models.

Xpeng's shares fell as much as 9.2 percent and Geely's dropped as much as 11.4 percent, each enduring their biggest one-day percentage decline since October 8, 2024. BYD's Hong Kong-listed shares rose 4.5 percent to reach a record high before closing 0.7 percent lower.

BYD on Monday put on sale 21 models equipped with its "God's Eye" advanced driver-assistance system (ADAS) similar to that offered by rival Tesla, at no additional cost. The cheapest model the Chinese electric vehicle giant is offering is the Seagull, priced at US$9,555.

BYD's move far undercuts rivals, and analysts said it could start a new price war in an already hyper-competitive market, comparing it to how Chinese artificial intelligence startup DeepSeek recently roiled the global AI sector with its low-price offering.

The "era of smart driving popularisation has come," Nomura analysts wrote in a note.

BYD is deploying three different versions of the "God's Eye" ADAS across most of its line-up. All three offer automated parking and lane-keeping features, in the scope of conventional level 2 technologies.

The basic version, from the Seagull to models costing up to 219,800 yuan (US$30,078), will enable autonomous driving on highways though the driver must keep their hands on the wheel and take control when necessary.

The two higher-end versions, which will be installed on more expensive BYD-branded cars and its premium Denza and Yangwang brands, will enable the car to drive autonomously – though also under human supervision – in more complex urban traffic.

BYD had previously only offered such features in models priced from US$30,000.

Tesla has these features available in China in its EVs priced from US$32,000. It charges US$8,000 for its Full Self-Driving (FSD) driver assistant software in the United States, or US$99 a month on a subscription basis. FSD is not yet available in China.

Xpeng declined to comment, instead referring to comments its founder He Xiaopeng made online on Monday, ahead of BYD's event.

"We welcome the official upcoming announcement by a leading automaker I respect extremely for its smart driving strategy that will bring about the popularisation of smart driving not only in China but also globally," He said. (Reuters)