BYD Co Ltd, a prominent player in the new energy vehicle sector, has demonstrated its resilience by retaining its position as China’s top-selling automotive brand in the market, a remarkable feat considering intense price competition and a sluggish demand environment. In a stock market disclosure released on Monday, the company unveiled its robust financial performance for the first half of the year, showcasing a remarkable surge in net earnings.
According to the filing, BYD’s net earnings for the first six months soared to 10.95 billion yuan ($1.50 billion), marking a staggering 204.7% surge from the preceding year’s figure of 3.6 billion yuan. This remarkable growth was underpinned by a substantial 72.7% increase in revenue, which reached an impressive 260.12 billion yuan. This development further solidified the stronghold of BYD in a rapidly evolving automotive market.
The Shenzhen-based automaker’s strategic endeavors have not gone unnoticed, as it boasts investments from renowned entities like Warren Buffet’s Berkshire Hathaway. BYD’s electric vehicle (EV) line, including the Dynasty and Ocean series, reached an unprecedented milestone, delivering a record-breaking 700,244 vehicles during the second quarter.
Notably, a subsidiary of BYD made significant inroads into the market by securing an agreement in August to acquire the mobility business of U.S.-based Jabil Inc in China. The multi-billion-dollar deal, totaling $2.2 billion, exemplifies BYD’s commitment to expanding its footprint beyond the domestic sphere.
However, the company’s profitability faced headwinds due to heightened price competition within the market. To maintain its competitive edge, BYD executed a strategic move in February, launching eight new vehicle versions with reduced prices ranging from 4% to 25%. The outcome of this maneuver was evident in the second quarter, with BYD achieving sales of 612,425 battery-only EVs from April to June, including 10% directed towards overseas markets.
The intensification of competition was further fueled by Tesla’s entry into a price war, as the electric giant offered substantial discounts to entice prospective buyers. BYD responded adeptly to this challenge, as reflected in its reported net profit of 6.82 billion yuan for the April-June quarter, signifying a notable 144.7% surge. This figure fell within BYD’s projected net profit range of 6.37 billion yuan to 7.57 billion yuan, albeit falling short of the remarkable fivefold increase experienced in the first quarter.
Concurrently, Tesla’s performance also bore the brunt of the shifting landscape, with a decline in its quarterly automotive gross margin during the second quarter. The shift in focus from profits to bolstering sales was indicative of the broader market dynamics impacted by the global pandemic, which contributed to consumer hesitancy in making vehicle purchases. The China Association of Automobile Manufacturers confirmed this trend, citing a second consecutive monthly contraction in passenger vehicle sales in July.
Reflecting the market sentiment, BYD’s gross profit margin for the second quarter narrowed slightly to 18.73%, compared to the 17.86% recorded in the preceding three months. Despite these challenges,the undisputed status of BYD as China’s preeminent automotve brand signifies the potential for sustained market success in the region. As the company continues its expansion initiatives, venturing into international markets like Singapore and Australia with new showrooms, its position as a prominent EV manufacturer is poised for further growth and reach.
*(1 USD = 7.2928 Chinese yuan renminbi)*