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Investing.com -- Shares in Chinese automakers fell sharply Tuesday after their rival BYD (HK:1211) announced a major push into driver assistance technology in collaboration with DeepSeek.

US-listed shares of Xpeng (NYSE:XPEV), Li Auto (NASDAQ:LI), and Nio (NYSE:NIO) fell 6%, 3.8% and 2.3% respectively. Meanwhile Geely Auto (HK:0175) stock tumbled over 10% in Hong Kong trading.

BYD, which had previously taken a more measured approach to autonomous driving, saw its shares jump to a record high in early Hong Kong trading before reversing gains and closing down 0.7%.

At a live-streamed launch on Monday, founder and chairman Wang Chuanfu emphasized that advanced driver-assistance features would soon be as essential as seatbelts and airbags. BYD introduced “DiPilot,” an assisted driving system that will be available across its lineup, including a budget-friendly model priced at 69,800 yuan ($9,555).

Nomura analysts noted that this move likely makes BYD the first carmaker in China to offer such advanced features in vehicles under 70,000 yuan. “BYD is changing its competition strategy from price cutting last year to functions’ upgrade in 2025,” the analysts said.

The automaker revealed plans to integrate AI from DeepSeek into the most advanced version of its driver-assistance system. These technologies, which rely on software, AI, and sensor-based data, aim to reduce human involvement while enhancing safety on the road.

BYD stated that smart vehicles could enhance road safety by continuously analyzing road conditions and preemptively avoiding hazards. Over time, AI and big data will further refine the technology.

More than 20 models featuring BYD’s latest driver-assistance capabilities were launched on Monday. However, the company has yet to disclose whether these advancements will be available in international markets.

BYD's aggressive pricing strategy could ignite a new price war in China’s already fiercely competitive auto market, analysts said, likening it to DeepSeek’s disruptive impact on the AI sector.

The country has seen intense price competition over the past three years, pressuring foreign car manufacturers to restructure and forcing smaller startups to scale back.

BYD has played a key role in this trend, consistently offering discounts on popular models like the Dynasty and Ocean series while rapidly launching new versions at a pace unmatched by international rivals.

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