BYD revenues stagnate amid Chinese domestic price war

Chinese EV leader BYD saw its first quarter revenues fall short of estimates, largely on the back of ongoing price cuts in its home market of China.

Net income rose by 11pc year-on-year to RMB4.57bn ($631mn) in the the first quarter. However, revenue grew by only 4pc to RMB124.94bn.

The increase in net income despite broadly stable revenues is explained partly by a 161pc increase in government grants, which rose to just under RMB1.8bn, as well as a 153pc increase in what the OEM calls "gains from investments in joint ventures".

However, the automaker saw its operating expenses grow significantly in a number of areas. As a testament to the competitiveness of the battle for attention in the firm's home market, BYD reports a 46pc year-on-year rise in "sales expenses", which it says is "mainly due to the increase in advertising and exhibition expenses", as well as depreciation and amortisation.

Indeed, the intensely competitive domestic Chinese EV market has forced BYD to lower prices. And, as a result of diminishing margins on its Chinese sales, it seems the firm hopes to boost profit margin by selling its EVs for higher prices in foreign markets.

That said, Chinese OEMs are facing the prospect of increased tariffs in the EU and US, which — although BYD has dampened expectations for its US ambitions —will require higher prices even for breakeven for Chinese OEMs compared to their Chinese prices.

"Many Chinese EV makers will target exports, which command a price premium, to soothe the pain at home, especially since capacity has risen so fast over the past couple of years," says Michael Havemeyer, vice-president at consulting firm USI.

The firm's Dolphin SUV starts at RMB 99,800 ($13,800) in China but up to £31,695 ($39,740) in the UK. The company's Atto 3 crossover begins at £36,990 ($46,380) in the UK while BYD reportedly slashed the Chinese price to the equivalent of just $19,280.

BYD recently teased an upcoming PHEV pickup called the Shark on Chinese social media site Weibo, which looks set to be exported. It has established corporate locations in the UK, Netherlands, and Hungary, and is targeting European consumers with a sponsorship of this year's Uefa Euro 2024 football tournament.

But according to David Kelly, chief corporate officer at automotive software provider Cubic, Chinese OEMs like BYD are struggling to gain a foothold in the European market due to nascent distribution infrastructure.

“Chinese EVs are currently overloading EU ports due to a lack of established distribution channels, sales network and local knowledge — something that traditional OEMs have built up over countless years," he says.