'World's No.1 Electric Vehicle Maker BYD Sees Sharp Drop in Q1 Net Profit Due to Price Competition'

China's BYD, the world's top electric vehicle (EV) seller, saw its first-quarter (January to March) net profit plunge due to intense price competition in the local market. Sales also dropped significantly as consumers delayed purchases in anticipation of further discounts.

On the 27th, BYD announced that its net profit for the first quarter reached 4.13 billion yuan (approximately 798.6 billion KRW). This represents a 43.5% decrease from the record high of 7.3 billion yuan in the fourth quarter of last year (October to December). During the same period, revenue fell 23.1% to 120.2 billion yuan. Vehicle deliveries also declined by 25.6% to 508,706 units.

[Image source=Reuters Yonhap News]

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Despite the sales slump and profit decline, BYD is approaching the top spot in the overall Chinese automobile market. According to the China Passenger Car Association, BYD’s vehicle deliveries in the first quarter dropped 25.6% compared to the previous quarter but surged 77% year-on-year. Volkswagen, the leader in the entire Chinese market, delivered 607,412 units, marking a 15.4% decrease from the previous year.

Regarding these results, Gao Chen, an EV analyst in Shanghai, told Hong Kong’s South China Morning Post (SCMP), "BYD is offering huge discounts on both gasoline and electric vehicles," adding, "Consumers are holding back demand, expecting further price cuts, which is causing difficulties." He also noted, "The first quarter is traditionally a slow season due to the week-long Spring Festival holiday."

Price competition in China’s EV market has been led by Tesla. After BYD overtook Tesla as the world’s number one EV seller, Tesla significantly cut prices for the Model 3 and Model Y twice?in October last year and January this year. The Model 3’s price dropped to as low as 229,900 yuan.

Following Tesla’s lead, Chinese companies such as Xpeng, BYD, and Aiways began competing with price cuts to clear inventory. Starting in March, BYD discounted its Dynasty series from the original 212,800 yuan by up to 20,000 yuan. For the popular Seal model, BYD offered a subsidy of 8,888 yuan plus an additional 2,500 yuan cash reward for customers switching from gasoline cars to electric vehicles.

Despite initiating the price cuts, Tesla has not achieved significant results. According to financial filings submitted to the U.S. Securities and Exchange Commission (SEC), Tesla’s first-quarter sales in the Chinese market amounted to $4.891 billion (approximately 6.554 trillion KRW), a modest 5.18% increase year-on-year. However, this falls far short of Tesla’s overall first-quarter global sales growth rate of 24%. Due to sluggish performance in the Chinese market and other factors, Tesla’s stock price fell on the Nasdaq on the 26th (local time), causing its market capitalization to dip below $500 billion.

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