BYD dominance is taking a toll on smaller Chinese EV rivals
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BYD on Aug 28 posted a 33 per cent jump in second-quarter profit.
PHOTO: REUTERS
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Chinese electric carmaker BYD’s relentless growth is squeezing out smaller rivals, with Li Auto joining fellow upstart Xpeng in releasing disappointing earnings.
In a stark highlight of their contrasting fortunes, BYD on Aug 28 posted a 33 per cent jump in second-quarter profit, while around the same time, Li Auto posted a bigger-than-estimated 52 per cent drop in earnings – sending its US-listed shares tumbling. Xpeng last week forecast third-quarter revenue well below analyst expectations amid a bruising price war in China. Neither Li Auto or Xpeng have managed to break into the top 10 largest Chinese EV makers by sales.
BYD’s rise to become the dominant force in China’s car market – overtaking established Western carmakers
In another sign of slowing demand for EVs, automotive researcher J.D. Power said on Aug 28 that battery-powered models will account for just 9 per cent of sales in the US in 2024, down from its previous forecast of 12.4 per cent.
BYD’s result is “impressive, as most of its EV peers in China and around the world have been incurring significant losses for some time and are faced with potential liquidity issues”, Barclays analysts Jiong Shao and Lian Xiu Duan wrote in a note.
The profits will also arm BYD with the power to accelerate EV industry consolidation, they added. Consultancy AlixPartners said in July that fewer than 20 Chinese electric car brands will be profitable by the end of the decade, as market leaders like BYD and Tesla further entrench their positions.
“You can easily tell from the sales data that top carmakers are accounting for a bigger share now, while low ranked performers may be phased out as soon as in two years,” said Shanghai-based consultancy AutoForesight managing director Yale Zhang. “The consolidation is pushed by the market, and the price war is one of the most effective and cruel methods.”
BYD has established its dominance in recent years by pioneering battery and hybrid technologies that it has deployed across a wide line-up. Offerings include the affordable Seagull hatchback, now one of China’s best-selling EVs, which starts from 69,800 yuan (S$12,800), to the luxury Yangwang supercar series, which sell for more than 1 million yuan each. The carmaker’s growth has also been supported by the popularity of plug-in hybrids, whose sales are increasing at a faster pace than battery EVs.
While Tesla may have been the first major EV maker in the China market to slash prices nearly two years ago, BYD has intensified the price war. It cut the prices of its Qin Plus sedan series by about 20,000 yuan in February, forcing other EV manufacturers and legacy carmakers to follow suit.
“BYD isn’t immune to the price pressure, but its scale and vertical integration provide crucial support to profitability, and allow it to cut prices more if necessary to squeeze out smaller rivals and accelerate industry consolidation,” said Bloomberg Intelligence’s China car analyst Joanna Chen.
China’s best-selling car brand also has ambitions for the global market. In an interview with Bloomberg News on Aug 26, executive vice-president Stella Li said she expects international sales to grow to nearly half of BYD’s total in the future. Overseas deliveries of passenger vehicles made up about 12 per cent of the total as of July. The company is chartering its own fleet of ships to help achieve that goal, with the BYD 01 embarking on export voyages 2024.
Indeed, BYD’s July sales surpassed that of Honda Motor and Nissan Motor for a fourth consecutive month, data released on Aug 29 by the Japanese carmakers showed. In July, BYD sold 340,799 passenger cars, higher than Nissan’s 261,386 units and Honda’s 302,625. BLOOMBERG
