BYD net profit up 410% y-o-y, but down 44% on previous quarter

BYD on Thursday reported strong revenue growth in its first quarter, with net profit up 410% from last year despite concerns about slowing demand following a Covid-hit 2022. The EV giant’s profit growth is slowing, however, and was down 43.5% from the previous quarter due to an ongoing national price war and a rush of purchases before subsidies were ended late last year. 

Why it matters: BYD’s figures reflected a broader trend of growing competition and shrinking profits for automakers in China, as car brands were hit by the phasing-out of electric vehicle subsidies and a price war started by Tesla’s price cuts. BYD continues to lead the sector however, with a 35% share of the country’s electric vehicle market. 

Details: China’s biggest electric car maker said on Thursday it made RMB 4.1 billion ($597 million) from January through March, representing an impressive surge of 410.9% year-on-year, but a 43.5% drop from the previous quarter.

• The firm’s profit margin also fell slightly from 19% in the fourth quarter of 2022 to 17.8%, as it was hurt by Beijing’s subsidies cuts and its reduced sales volume, Jefferies analysts wrote in a Friday report.
• Sales nearly doubled from a year ago to 552,100 vehicles during the period, although that number represented a decline of 19% from the previous quarter. January and February are traditionally low seasons due to the Lunar New Year holidays.
• The Chinese auto giant is significantly ramping up its spending on research and development, with R&D expenses jumping 164.2% annually to RMB 6.2 billion during the first quarter, close to rival automaker Geely’s spend of RMB 6.8 billion for the entirety of last year.
•  Analysts expected the automaker’s profitability to recover as lithium prices began falling after a strong two-year run, and its dominance in the mainstream car segment could continue on better cost control.

Context: China’s auto industry has faced downward pressure as general passenger car sales declined 4.5% from last year to 4.9 million units in the first quarter of this year. 

• Industrial profit from the automobile manufacturing sector dropped 24.2% over the same period from a year ago, according to data from the National Bureau of Statistics.
• Sales of Volksagen’s partner SAIC fell 27% annually to around 891,200 units in the first quarter. At the same time, Chinese automaker Great Wall Motor reported RMB 217 million in net loss.
• BYD is among the Chinese automakers forced to match Tesla’s repeated aggressive price cuts to maintain their sales volumes. On March 16, BYD launched a new version of its popular Han sedan priced from RMB 209,800. Previously, the cheapest version cost RMB 269,800.
• The company on Wednesday began selling the Seagull budget car with a price range of between RMB 73,800 and RMB 89,800. At the same time, BYD is also venturing into the ultra-luxurious sector, recently announcing pre-sales of the U8, an off-roader from its Yangwang brand, for a little over one million yuan.