China EV shares are feeling the heat as price war concerns grow

Chinese electric vehicle makers shares listed in Hong Kong fell on Tuesday as worries of price wars in the sector grew.

China's EV market, the world's largest and most crowded, is seeing fierce competition from local players as well as U.S. giants like Tesla to win as much market share as possible through promotions and price cuts.

"While across the board price cuts will put pressure on near-term earnings and margins, this could be offset by a boost in demand as EVs widen their appeal to a broader range of consumers," Yuqian Ding, head of China auto research at HSBC Qianhai told CNBC.

While consumer interest is improving, the "wait for a better price" sentiment continues to constrain sales volumes for EV makers, Ding said.

At least 30% of China's entire auto market is made up of electric vehicles, with most of those EVs coming from homegrown brands.

On Tuesday, most Chinese EVs continued to face pressure. Hong Kong-listed shares of Li Auto fell 3.9%, while Nio shares dropped 3.6% and Xpeng was down 1.8%. BYD shares were up 0.4%.

Nio is set to report its December quarter earnings later in the day.

Competition in the country's EV space has intensified, with local automakers pushing to outsell U.S. rival Tesla with fancy tech and competitive pricing.

Tesla announced new incentives to lure consumers in China on Friday, including discounts in car insurance products, and preferential financing plans for a limited time only.

Despite price cuts announced earlier, Tesla still lost market share in China in January, mainly in the large cities, according to Morgan Stanley.

Li Auto launched a new EV called "Mega" — a multi purpose vehicle priced at 559,800 Chinese yuan ($77,756), and scheduled to start deliveries in March. The minivan comes