BYD Sees Profit Slowdown Amid China EV Competition

Chinese electric vehicle (EV) manufacturer BYD reported an 18.6% increase in fourth-quarter profit, marking its slowest growth since early 2022. The company's net profit reached CNY$8.67 billion (US$1.20 billion) in the last quarter of 2023, with revenue up 15.1% at CNY$180.04 billion.

BYD's aggressive pricing strategy, including discounts, has propelled it to surpass Tesla as the world's leading EV seller in the fourth quarter. However, this tactic has raised concerns about its impact on domestic profit margins. John Zeng, head of market forecast for China, GlobalData, noted that the recent price cuts would inevitably dent BYD's margins. "The latest round of price cuts would inevitably result in a margin hit," said Zeng

Despite this challenge, BYD's cost control measures and expanding exports are expected to partially offset the margin pressure. Zeng forecasts BYD's exports to reach 300,000-400,000 units in 2024, following the export of over 240,000 cars in 2023, representing about 8% of its global sales.

However, BYD's profit growth fell short of expectations, reaching CNY30.04 billion for the entirety of 2023, below analyst estimates of CNY$31 billion. Intensifying competition, including from the entrance of Huawei into the car market, contributed to this shortfall.

While BYD maintained a dominant market share of about one-third in plug-in hybrid and battery-powered EV sales in China, recent data suggests a decline following Huawei's market entry. Automobility reported BYD's share of new energy vehicle sales in China fell to 30.8% in early 2024, down from 35% at the end of 2023.

Despite these challenges, BYD continues to forge partnerships to expand its market presence in Mexico. The company recently teamed up with BBVA Mexico to offer financing for electric and hybrid vehicles in the country. This alliance aims to support BYD Motors Mexico's growth and provide competitive rates to over 30 million BBVA customers.

Jorge Vallejo, CEO, BYD Motors Mexico, expressed confidence in reaching 30,000 units sold by 2024, reflecting optimism in the Mexican market's potential for eco-friendly vehicles. BBVA Mexico's extensive customer base stands to benefit from favorable financing options.