BYD’s Stock Rises as Chinese EV Maker Reports a 200% Surge in H1 Profit

Shares of Chinese automaker BYD listed in China surged over 5% on Tuesday, following the announcement of a significant increase in first-half profit.

Thanks to a record number of deliveries, BYD, a leading electric car manufacturer, reported a staggering 204.68% surge in net profit for the first half of the year. This translates to net earnings of 10.95 billion yuan ($1.50 billion) from January to June, compared to 3.59 billion yuan in the same period last year.

Hong Kong-listed shares of BYD rose by 5.6%, while stocks in Shenzhen saw an increase of up to 4.75% on Tuesday.

The impressive financial results were primarily driven by the rapid growth of BYD’s new energy vehicle business, as stated in their official stock filing.

According to the filing, revenue in the first six months witnessed a remarkable 72.72% increase compared to the first half of 2022.

“BYD’s top-line growth has been exceptionally strong, but what truly impresses us is their margins. In the first half of the year, BYD achieved a gross margin of 18%, which is on par with Tesla,” commented Jiong Shao, Barclays’ China technology analyst.

BYD, China’s best-selling car brand, achieved its highest-ever quarterly sales results. The company recorded a total of 700,244 units in sales for passenger new energy vehicles during the second quarter, representing a phenomenal year-on-year increase of approximately 98%.

In comparison, Tesla reported global deliveries of 466,140 vehicles for the second quarter.

China, the largest auto market in the world in terms of sales and production, also leads as the largest electric vehicle market. This highlights its crucial role in driving the adoption of electric cars.

“BYD focuses on the mass market segment that Tesla cannot reach,” explained Vivek Vaidya, associate partner at Frost & Sullivan.

Vaidya added, “China-made vehicles will offer significant price advantages over Tesla while providing similar features and stunning designs.”

BYD faces intense price competition from domestic rivals as well as Tesla.

In a bid to gain market share in China’s increasingly competitive market, Elon Musk’s Tesla recently reduced the prices of its Model S, Model X, Model Y, and Model 3. BYD, along with its domestic competitors Nio and Xpeng, also implemented price cuts earlier this year.

“The price cuts aimed at outpacing weaker players are beneficial for the overall health of the industry,” remarked Shao from Barclays.

Shao further noted, “BYD achieved a healthy operating margin of 5%, which stands out as numerous players in the Chinese EV market struggle with negative gross margins.”

These price reductions come at a time when Chinese consumers remain cautious in their spending due to a slower-than-expected economic recovery following the easing of Covid restrictions.

Vaidya from Frost & Sullivan explained that the brands are lowering prices to maximize their market penetration. He stated, “Electric vehicles differ from internal combustion engine vehicles in that they generate revenue for the OEMs. Therefore, the discounting and price wars are aimed at increasing market presence, ultimately leading to profitability.”

Vaidya added, “Once these vehicles are on the road, companies like Tesla benefit from additional revenue streams such as charging services. Therefore, the current price competition aims to establish a strong market presence, with long-term profitability as the ultimate goal.”