Shares of BYD, a prominent Chinese electric vehicle manufacturer, decreased by up to 8% on Monday following a report of a profit decline attributed to heightened price competition in the automotive sector. The company disclosed that its net profit for the second quarter of the year fell to 6.4 billion yuan (approximately $900 million or £660 million), representing a 30% decrease compared to the same period in the previous year.
BYD indicated in its report that “increased price competition” among electric vehicle brands in China has significantly affected the industry. The company faces competition from local rivals such as Nio and XPeng, as well as US automaker Tesla, all of which have reduced prices to attract customers. While BYD’s stock experienced an initial dip at the Hong Kong market’s opening on Monday, it showed slight recovery throughout the day.
The company noted that competition within the sector has intensified, characterizing it as reaching a “fever pitch.” Issues including “excessive marketing” practices have contributed to market disruptions, according to BYD’s statements. In response to the competitive landscape, many electric vehicle manufacturers have resorted to subsidizing car dealers and providing zero-interest loans to buyers, prompting warnings from the Chinese government to mitigate these aggressive discounting practices.
Average car prices in China have reportedly decreased by around 19% over the past two years, now averaging about 165,000 yuan (approximately $23,100 or £17,100). Despite achieving notable sales volumes internationally, BYD’s earnings did not meet analysts’ modest growth expectations. The company has set a target of 5.5 million car sales for the year but had only sold approximately 2.49 million by the end of July.
While the company’s recent performance has raised concerns among some investors, experts indicate a balanced view on its standing in the market, noting that price cuts might maintain consumer interest but could also lead to challenges such as oversupply in the future.
Source: https://www.bbc.com/news/articles/cx2pr1wwq44o?at_medium=RSS&at_campaign=rss