Chinese electric vehicle powerhouse BYD reported an 18.6% rise in fourth-quarter profit on Tuesday, marking its slowest quarterly growth in two years.
The sluggish numbers come as the electric vehicle sales frenzy in China’s auto market loses steam amid a brutal pricing battle between automakers.
The Shenzhen-based company posted a net profit of 8.67 billion yuan ($1.20 billion) for October-December.
Revenues grew 15.1% to 180.04 billion yuan.
________________________________________________________________________
- BYD reports slowest profit growth in 2 years as EV price war intensifies in China.
- The company slashed prices on 93% of models in China by avg. 17% in 2023, deepest cut 21.6%
- Cost controls and rising exports could offset domestic margin pressure from discounting.
________________________________________________________________________
BYD Feels the Heat as Electric Vehicle Price War Intensifies in China
While still impressive, these figures pale compared to BYD’s blockbuster performance in recent years.
For 2023, net profit surged 80.7% to 30.04 billion yuan as BYD capitalized on the electric vehicle boom in China.
The company unseated Tesla as the world’s top EV seller in Q4 thanks to aggressive discounts and pricing.
Slashing Prices to Stay Ahead of the Pack
However, BYD has doubled down on its combative pricing strategy in 2024 to defend its EV sales crown.
On Monday, it launched a new version of its popular Seal electric sedan, undercutting the prior model’s price by 5.3%.
BYD had cut prices on models that accounted for 93% of its China sales in 2023.
They did this over a dozen times, and the average reduction was 17%.
The deepest discount was a hefty 21.6% reduction.
While other automakers like Tesla, Geely, GAC Aion, Leapmotor, and Xpeng have joined the discounting fray, none can match the breadth and depth of BYD’s price offensive.
Profitability at Risk Amid Price War
Analysts warn that BYD’s aggressive discounts will inevitably eat into its profit margins in the domestic Chinese market.
However, cost controls and rising higher-priced exports could offset some pricing pressure.
“The latest round of price cuts would inevitably result in a margin hit,” said John Zeng of GlobalData.
“Yet that could be largely offset by BYD’s strong cost control and growing higher-priced exports.”
Zeng forecasts BYD’s exports could reach 300,000-400,000 units this year, up from over 240,000 in 2023, which accounted for 8% of global sales.
BYD’s auto business gross profit margin improved by 2.63 percentage points to 23.02% in 2023, indicating its ability to mitigate the discounting impact partially.
New Models to Fuel EV Demand
BYD is aggressively rolling out new models to spur sales amid the price competition.
On Tuesday, it unveiled the Yuan Up subcompact electric SUV, the latest addition to its Dynasty series. Its starting price is 96,800 yuan.
Built on BYD’s e-Platform 3.0 architecture with blade battery packs, the Yuan Up boasts an impressive range of over 1,000 km (621 miles).
As automakers battle for buyers’ wallets, government incentives like trade-in rebates and lower loan down payments aim to sustain consumer demand for electric vehicles in China.
While BYD’s slowing profit growth highlights the challenges of the escalating EV price war, the company’s pricing power, cost discipline, and new product pipeline position it to weather the storm.
For Chinese car buyers, the discounts show no signs of letting up.
Leave a Reply