China’s BYD posts slowest quarterly profit growth in two years

Chinese electric vehicle giant and world’s top EV player, BYD, reported an 18.6% rise in fourth-quarter profit, its slowest since the first quarter of 2022. It has attributed this to EV sales losing momentum in the world’s biggest auto market amid a brutal price war among rivals. The company’s net profit totaled 8.67 billion yuan (USD 1.20 billion) last quarter, with revenue up 15.1% at 180.04 billion yuan, according to BYD’s stock market filing. For the whole of 2023, its net profit jumped 80.7% to 30.04 billion yuan.

Thanks to its relentless discounts, the company was able to dethrone Tesla as the world’s top EV seller in the fourth quarter. This year, the automaker has taken an even more aggressive stance. In one such move, the company set the starting price of a new version of its Seal electric sedan 5.3% below that of its predecessor, the 16th model it has rolled out this year with a face-lift and a lower price. The deepest discount offered by the carmaker this year is 21.6%.

Last year, BYD cut the prices of the 13 models that accounted for 93% of its total China sales by an average of 17%, Reuters reported, as per its calculations. Several other automakers have joined the price war this year, including Tesla, Geely Auto, GAC Aion, Leapmotor and Xpeng but their discounts pale in comparison with BYD in terms of their depth and the number of models.

However, the cons of such rigorous discounting is that the carmaker is suffering in terms of its domestic profit margins. “The latest round of price cuts would inevitably result in a margin hit,” John Zeng, head of market forecast for China at London-based consultancy GlobalData, told Reuters. However, that could be largely offset by BYD’s strong cost control and its growing higher-priced exports, he added, forecasting BYD’s exports at 300,000-400,000 units this year. The company exported more than 240,000 cars last year, which translates to about 8% of its global sales.

Meanwhile, sales of autos and related products that made up 80% of BYD’s operating revenue recorded a 23.02% gross profit margin last year, up 2.63 percentage points from a year earlier.