Chinese electric vehicle giant BYD has posted a 30% year-on-year fall in second-quarter net profit, marking its first quarterly decline in over three years. Net profit dropped to ¥6.4 billion (approximately US$895 million), despite a 14% rise in revenue to ¥200.9 billion ($895M)
Key Factors Behind the Decline
- Intense Price Competition: The company pointed to aggressive discounting and intensified industry “price wars” as key factors eroding margins
- Regulatory Crackdown: Authorities have flagged concerns over excessive marketing and prolonged supplier payments, pressing automakers to curb such practices
- Margin Pressure: BYD saw its gross margins decline—from approximately 18.7% a year ago to 16.3%—and its working capital deficit balloon to ¥122.7 billion, underlining strained liquidity
- Global Sales vs. Domestic Headwinds: While international demand surged—BYD doubled overseas EV sales to 550,000 units in the first seven months—the downturn in China dampened overall profitability
Market and Strategic Implications
| Aspect | Impact |
|---|---|
| Investor Sentiment | BYD’s Hong Kong-listed shares plunged up to 8% at open, its sharpest single-day loss since May 26 |
| Target Delivery Risks | The company has sold only 2.49 million vehicles by end-July—just 45% of its 2025 target of 5.5 million units—raising doubts about meeting full-year guidance |
| Strategic Shift to Global Expansion | BYD continues to invest heavily in new energy vehicle R&D and international capacity building—including facilities in Europe—emphasizing long-term resilience |
Summary
Despite strong global sales, BYD confronted its first net profit drop in 3.5 years, reflecting mounting pressure from domestic market turbulence and pricing dynamics. As analysts adjust forecasts, investor scrutiny is heightened, especially around BYD’s ability to deliver on ambitious targets amid tightening margins.
