BYD is growing in dominance in China's auto market, having outperformed established Western auto companies such as Volkswagen AG by selling 3 million vehicles.
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Chinese electric carmaker BYD Co.'s continued growth is crowding out smaller rivals, and Li Auto Inc. also joined fellow newcomer Xpeng Inc. in posting disappointing earnings.
A clear sign of their contrasting fortunes is that BYD on Wednesday reported a 33 percent rise in second-quarter profit, while around the same time Li Auto reported a far-better-than-expected 52 percent drop in earnings — sending its U.S.-listed shares tumbling. Xpeng last week forecast third-quarter revenue well below analysts' expectations amid the ongoing price war in China. Neither Li Auto nor Xpeng has managed to make it into the top 10 largest Chinese EV makers in terms of sales.
BYD’s dominance of the Chinese auto market — outpacing established Western automakers such as Volkswagen AG to sell 3 million units last year — comes amid a broad slowdown in EV demand globally. Ford Motor Co., Porsche AG and Mercedes-Benz Group AG have all scaled back their EV ambitions in recent months, while Tesla Inc. is well behind the pace of 1.8 million cars sold last year.
In a further sign of waning E.V. demand, automotive researcher J.D. Power said Wednesday that battery-powered models will make up just 9 percent of U.S. sales this year, down from its previous forecast of 12.4 percent.
Barclays analysts Jiong Shao and Lian Xiu Duan wrote in a note that BYD's result “is impressive, as most of its EV peers in China and around the world have been running at significant losses for some time and are facing potential liquidity issues.”
He said profits will also give BYD the power to accelerate the consolidation of the EV industry. 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 such as BYD and Tesla further consolidate their positions.
“You can easily tell from the sales data that the top carmakers are now capturing a bigger share, while lower-ranked performers can be out in as little as two years,” said Yale Zhang, managing director at Shanghai-based consultancy AutoForesight. “The market drives consolidation, and price wars are one of the most effective and ruthless methods.”
BYD has established its dominance in recent years by pioneering battery and hybrid technology, which it has deployed across its wide lineup. This includes the affordable Seagull hatchback, now one of China’s best-selling EVs with prices starting at 69,800 yuan ($9,800), and the luxury Yangwang supercar series, which sells for more than 1 million yuan. The carmaker’s growth has also been supported by the popularity of plug-in hybrids, sales of which are growing at a faster pace than battery EVs.
Tesla may have been the first major EV maker to cut prices in the Chinese market nearly two years ago, but BYD has escalated the price war further. It cut prices of its Qin Plus sedan series by about 20,000 yuan in February, forcing other EV makers and legacy automakers to do the same.
“BYD is not immune to pricing pressure, but its scale and vertical integration provide key support for profitability, and allow it to cut prices further if needed to squeeze out smaller rivals and accelerate industry consolidation,” said Joanna Chen, a China auto analyst at Bloomberg Intelligence.
China’s best-selling car brand also has ambitions for the global market. In an interview with Bloomberg News on Monday, Executive Vice President Stella Li said she expects international sales to grow to about half of BYD’s total sales in the future. Overseas deliveries of passenger vehicles accounted for about 12 percent of the total as of July. The company is chartering its own fleet of vessels to help it achieve that goal, with the BYD 01 embarking on export voyages this year.
Indeed, BYD's sales in July surpassed Honda Motor Co. and Nissan Motor Co. for the fourth consecutive month, data released by the Japanese carmakers showed on Thursday. In July, BYD sold 340,799 passenger cars, higher than Nissan's 261,386 units and Honda's 302,625 units.
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First Publication Date: 03 September 2024, 07:28 AM IST