Chinese regulatory authorities have granted the electric vehicle manufacturers BYD and NIO permission to test their automated driving technology on public roads. This represents a significant advancement for the companies, while Xpeng has not received this approval.

China, known for its pro-innovation stance, has also granted the US electric car manufacturer Tesla permission for its advanced "Autopilot" version. Now, nine car manufacturers, including BYD and NIO, are allowed to test their self-driving functions in designated areas of seven cities, including Beijing, Shanghai, Guangzhou, and Shenzhen.

Before these technologies of automated driving at levels 3 ("highly automated driving") and 4 ("fully automated driving") come onto the roads, several tests and safety assessments must still be carried out, as the Chinese Ministry of Transport explained.

Analysts view these developments positively. Angus Chan, automotive analyst at Bocom International, sees the approval as an opportunity for car manufacturers to collect real-world road data and advance their technologies.

The stocks of BYD and NIO reacted positively to the news, as automated driving technology is considered a mega-trend of the future. Despite this positive development, the stocks of both companies have significantly lost value over the last twelve months. The BYD stock fell by 12.72 percent and is currently trading at 233.40 Hong Kong dollars. NIO was hit even harder: its stock lost 52.87 percent and is now at 4.41 US dollars.

A reason for the decline in prices is the weakening demand due to the weak global economy. In China, the enthusiasm for electric cars is waning as economic growth stagnates. This forces car manufacturers to offer discounts, which impact profits.

BYD was only able to slightly increase its revenue in the first quarter of 2024 and significantly missed analysts' expectations. Revenue rose to 124.94 billion Renminbi (CNY), compared to the expected 131.72 billion CNY. Earnings per share rose from 1.42 CNY to 1.57 CNY.

NIO recorded a revenue decline from 10.68 billion CNY in the first quarter of 2023 to 9.91 billion CNY in the first quarter of 2024, representing a drop of over seven percent. The company continues to operate at a significant loss and remains far from achieving profitability.

Although regulatory approval represents a significant step, it remains to be seen whether BYD and NIO can sustainably strengthen their positions in the competition for the top spot in autonomous driving.