BYD’s growth slows as China’s fierce auto price war takes a toll

HONG KONG - BYD reported its weakest revenue growth in more than a year in a potential sign of the damage discounting has done in China, the world’s biggest auto market.

Revenue rose 67 per cent to 140 billion yuan (S$26.3 billion) in the three months ended June, the smallest gain since the first quarter of 2022, according to Bloomberg calculations based on first-half earnings published on Monday.

Net income more than doubled to 6.8 billion yuan after the company sold a record number of plug-in hybrid and fully electric vehicles.

China’s auto market has been embroiled in a fierce price war in 2023.

BYD’s still-robust financial performance will help as it navigates another period of market discounting with a preferred strategy of cutting prices on newly released models.

Over the weekend, BYD unveiled a slightly cheaper range of 2023 Tang vehicles at the Chengdu Auto Show.

The continued strong sales volume in recent months has enabled BYD to maintain its lead over Volkswagen as China’s best-selling car brand in 2023, having leapfrogged the German auto giant in the first quarter.

It sold 700,000 clean cars during the second quarter, beating the previous high of 683,400 in the final three months of 2022. It notched 156.3 billion yuan in revenue during the earlier period and benefited from a record gross margin of 19 per cent.

BYD’s margin in the second quarter was 18.7 per cent. Total passenger electric vehicle (EV) sales have hit 1.5 million so far in 2023, through July.

“Since BYD has offerings across almost all segments and price-points, BYD as a whole has been net-impervious to price cuts,” said Mr Jack Shea, chief financial officer at Shenzhen-based hedge fund Snow Bull Capital, which has invested in both BYD and Tesla.

In a post-earnings research note, Citigroup’s Jeff Chung described BYD’s performance as “exceptional” in the face of the sector-wide price war, China’s weakening economy and EV subsidy changes.

Known for selling affordable cars to the masses, BYD has been making progress in bolstering its appeal to a wider range of consumers.

It unveiled two luxury brands – Yangwang and Fang Cheng Bao – enabling it to sell EVs in the one-million-yuan price category, more than double the cost of some of its earlier higher-end vehicles.

It pushed two cheaper models, called the Seagull and Dolphin, to undercut its peers. 

While BYD has a seemingly unassailable lead at the top of the market, weaker foreign rivals and smaller Chinese EV players are making moves to boost their capabilities, especially in the so-called smart EV, autonomous driving space.

Xpeng snapped up Didi Global’s smart car business on Monday in a US$744 million (S$1 billion) deal.

Xpeng’s appeal in the intelligent vehicle space won it a US$700 million investment in July from Volkswagen, which is seeking to turn around its fortunes in the rapidly changing China auto market. BLOOMBERG