BYD reports significant profit and delivery decline amid price war
What's the story
BYD, a global leader in electric vehicle (EV) production, has reported a decrease in its quarterly profit due to a significant drop in deliveries.
The firm disclosed a net profit of CNY 4.57 billion for the first quarter of the year, marking a 47.3% decline from the previous quarter.
This slump is attributed to an aggressive price war with Tesla in China, which also led to a 30.6% dip in the company's revenue quarter-on-quarter to CNY 124.9 billion.
Worrying
BYD's profit margin for 2024 at risk
Despite the quarterly downturn, BYD's net profit saw an annual increase of 10.6% in the first quarter.
Ivan Li, a fund manager at Loyal Wealth Management in Shanghai, attributed this performance to "the overall weak market sentiment and steep discounts BYD offered Chinese customers."
Li warned that if the price war continues, BYD's profit margin could further decrease, potentially impacting profitability for the entire year.
Decline
Delivery numbers take a hit
The Shenzhen-based automaker reported deliveries of 624,298 electric and plug-in hybrid cars from January to March, a significant drop compared to 944,254 units in the last quarter of 2023.
The majority of these four-wheelers were sold in mainland China - the world's largest automotive market, where EV sales account for about 60% of the global total.
Despite this decline, BYD maintained a 33.1% share of the Chinese EV market in the first quarter.
Strategy
BYD's response to price war and future targets
In response to the intense price competition, BYD reduced prices for almost all its cars by 5% to 20% since February 18.
Despite these price reductions, the company still holds a significant share of the Chinese EV market.
Looking ahead, BYD's target for 2024 is to increase its electric car deliveries by 20%, or 3.6 million units, as announced by Chinese billionaire Wang Chuanfu at an investors' conference in March.