BYD’s shares are higher after the Chinese electric vehicle maker posted a 200% profit increase in the first half
A BYD ATTO 3 is on display during the British Motor Show at Farnborough International Exhibition Center on August 17, 2023 in Farnborough, England.
John Keeble | Getty Images News | Getty Images
Shares of China-listed Chinese automaker BYD rose more than 5% on Tuesday, a day after posting a surge in first-half earnings.
Thanks to record deliveries, the Chinese electric car maker on Monday reported a 204.68% increase in net profit for the first half — net profit of 10.95 billion yuan ($1.50 billion) for the period January-June, compared with March 3 .59 billion yuan yuan a year earlier.
Hong Kong-listed shares of the automaker rose 5.6% on Tuesday, while shares in Shenzhen rose as much as 4.75%.
The strong numbers are mainly due to rapid growth in the new energy vehicle business, the company said in a statement storage tray.
According to the stock exchange report, sales increased by 72.72% in the first six months compared to the first half of 2022.
“If you look at the BYD numbers, the revenue growth has clearly been very strong, but we're even more impressed with the margins. BYD's gross margin was 18% in the first half. That's Tesla's gross margin,” said Jiong Shao. Barclays China Technology Analyst.
China's top-selling car brand posted its best-ever quarterly results. Sales of new energy passenger cars totaled 700,244 units in the second quarter. up about 98% year-on-yearso the company.
In comparison, the US rival Tesla reported deliveries of 466,140 vehicles worldwide in the second quarter.
China is the largest car market in the world by sales and production. It is also the largest electric car market in the world and a key driver for the development towards electric cars.
“BYD is targeting a mass market that Tesla cannot reach,” Vivek Vaidya, an associate partner at Frost & Sullivan, said Tuesday on CNBC's Street Signs Asia.
“You will see Chinese-made vehicles that offer a significant price advantage over Tesla.” [with] similar characteristics, amazing looking cars,” said Vaidya.
price war
BYD is under pressure from price competition between domestic rivals and Tesla.
Elon Musk's electric car maker slashed prices on its Model S and Model X in August as the company looked to gain market share amid increasing competition in China. The additional cuts came the same month that Tesla cut prices on its Model Y and Model 3.
Earlier this year, BYD and its domestic competitors such as Nio and Xpeng also lower prices.
“The lower price to squeeze out the weaker players is really a good thing for the health of the industry,” Barclays' Shao told CNBC's Squawk Box Asia on Tuesday.
“BYD's operating margin was 5%, which is quite a healthy operating margin, and many players in China's electric vehicle market even have negative gross margin, not to mention operating margin,” Shao said.
The price cuts come as consumers remain cautious on spending amid a weaker-than-expected economic recovery in China following the lifting of tough Covid restrictions.
Frost & Sullivan's Vaidya said the brands are slashing prices to get as many of their products on the market as possible.
“Electric vehicles differ slightly from internal combustion engine vehicles. EVs also make money for the OEMs that sell them,” Vaidya said, in this case referring to OEMs like Tesla.
“For example, if they drive, Tesla has charging stations and therefore Tesla gets some money back for every mile driven with Tesla. So the price discounts or price war that takes place is there to get the product out there,” Vaidya said.
“After that, it will start making money.”
competitive landscape
