Online Reporter
The fallout is becoming impossible to ignore in the fierce battle among Chinese carmakers.
With BYD Co reporting a staggering 30 percent plunge in quarterly profit last Friday, its first decline in over three years, it became clear that not even dominant players are safe in the cutthroat battle for market share. The carmaker’s stock dropped as much as 8 percent in Hong Kong on Monday, before paring losses.
Despite robust overseas sales, BYD’s net income of 6.36 billion yuan ($892 million) for the three months through June 30 fell short of analysts’ estimates for a modest increase.
Heavy discounting saw BYD’s gross margin contract to 18 percent from 18.8 percent in the first half of 2024, although that figure is still among the top in the industry, exceeding rivals such as Zhejiang Geely Holding Group Co and Chery Automobile Co.
The Shenzhen-based giant blamed “industry malpractices” and “excessive marketing” for pressuring its bottom line — an ironic twist considering BYD has been a major driver of the price war, leading multiple rounds of cuts since 2023, including its latest in May. Its most recent discounting campaign prompted the government to warn automakers off “rat-race competition,” saying that price wars can affect supply-chain security and seriously damage the international reputation of “Made-in-China.”
BYD’s stumble comes as a shock given its global expansion has gained pace this year, with the brand making major inroads in markets like Brazil, which accounts for about one-third of its international sales, Australia, Singapore and parts of Europe. Overseas revenue, excluding Hong Kong, Macau and Taiwan, was up 50 percent in the first six months versus the same period a year ago to 135.4 billion yuan.
Calling the margin shrinkage “scars of competition,” a note published by research firm Sanford C. Bernstein over the weekend observed that margin pressure persisted despite the higher overseas sales mix. — Bloomberg
