Hong Kong /
China’s largest electric vehicle manufacturer, BYDreported for the first time higher quarterly revenue than its US rival teslabut a tough price war in its domestic market hindered its profitability.
BYD’s revenue for the third quarter reached 201 billion yuan ($28.2 billion), surpassing the $25.2 billion sales Tesla reported last week. The Warren Buffett-backed automaker sold a record 1.1 million cars in the three-month period, boosted by a new round of Chinese government subsidies for electric vehicles.
However, the 24 percent increase in sales came at the expense of gross margins, which fell from 22.1 last year to 21.9 percent. Net profit was 11.6 billion yuan, up 11.5 percent from the previous year.
Instead of offering direct discounts, BYD has in recent months launched longer-range models equipped with more advanced features at lower prices than its previous versions. The strategy helped it consolidate its market leadership amid fierce price competition, but reduced the group’s net profit per vehicle, according to analysts.
A continuing price war in the world’s largest auto market is undermining the margins of both local brands and foreign auto groups. Volkswagen warned that the operating profit of its Chinese joint ventures may reach the lower end of its 2024 forecast, reaching 1.6 billion euros instead of 2 billion.
Due to a high level of vertical integration, which includes control of battery and computer chip production, BYD’s 21.9 percent gross margin remains well ahead of Tesla’s 17 percent, and Tesla’s 14.2 percent. Zeekr, and 6.4 percent of Xpeng, both Chinese rivals.
Analysts assured that overseas expansion will be key to BYD’s future growth, especially in a context of growing Western protectionism.
“Although BYD is developing its overseas market presence at a rapid pace, its global expansion faces several uncertainties, including the complexity of the local operation, policy changes and geopolitical risks,” Goldman Sachs analysts wrote in a note. research note this month.
The European Union decided to charge additional tariffs of 17 percent on imports of BYD battery vehicles, on top of the existing 10 percent tariff. Although BYD recently opened a factory in Thailand (its first plant outside China), overseas sales only accounted for 7.9 percent of total monthly sales in September, down from 9.8 percent a year earlier.
“BYD’s export visibility is unlikely to improve in the near term,” Citi analysts wrote in a report.
The company’s Hong Kong-listed shares closed down 0.7 percent ahead of the results presentation.
