Chinese carmaker BYD on Wednesday reported half-year net profit up 24.4% year-on-year, driven by strong demand for clean vehicles in China and despite a price war.
Favorable context in China
The Asian country, the world’s largest emitter of greenhouse gases in absolute terms, aims for car sales to consist primarily of electric and hybrid vehicles by 2035.
Generous purchasing subsidies have allowed sales to take off in recent years, while many innovative local manufacturers have emerged to support this transition in the world’s largest car market.
This context was more than favorable for BYD (an acronym for “Build Your Dreams”), which dominates sales of so-called “clean” vehicles in China.
The group generated a net profit of 13.63 billion yuan (1.71 billion euros) in the first half, an increase of 24.4%, the group said.
Its half-year turnover also increased significantly year-on-year (+15.7%) to 301.1 billion yuan (37.9 billion euros).
According to BYD, “brand power”, economies of scale and “cost control” in production explain this good performance.
In July, hybrid and pure electric models accounted for more than half of car sales in China for the first time, according to the China Federation of Personal Automobile Manufacturers (CPCA).
Initially, generous purchase subsidies allowed sales to take off. But the Chinese market now appears to have reached a form of maturity.
Remote duel with Tesla
BYD is now on track to dethrone Tesla as the leading seller of electric vehicles this year, with a 17.7% share of the global market, compared with Tesla’s 17.2%, according to estimates from Counterpoint Research cited by Reuters.
This would be the first time in a full year. While BYD had risen to number one in the last quarter of last year, Tesla remained the leader throughout 2023.
At the start of the year, the American manufacturer still dominates, but not by much: Tesla sold just over 813,000 units in the first half of the year, compared to BYD’s 726,000.
The trend remains favourable for the Chinese manufacturer, with sales volumes up 18% during the first half of the year, while Tesla’s fell 9% at the same time.
BYD’s growth is notably driven by its international development: overseas deliveries accounted for 11.9% of BYD’s total car sales during the first seven months of the year, almost double compared to the same period last year, according to Reuters calculations.
Reduced prices
To keep pace in China, local manufacturers have launched a price war since last year, to the detriment of their profitability.
Chinese automaker XPeng, one of Tesla and BYD’s competitors in China, reported fresh quarterly losses earlier this month.
Seeking alternative outlets, Chinese brands have been accelerating overseas in recent years, with many Western countries now fearful of seeing their markets flooded with bargain-priced vehicles.
In July, the European Union (EU) increased its surcharges on electric vehicles imported from China. From October, they could reach 36%. A project that still needs to be validated by a vote of the member states.
Brussels believes that prices are artificially low due to Chinese state subsidies, which distorts competition and harms the competitiveness of European manufacturers.
More radically, the United States announced in May the quadrupling of customs duties (from 25% to 100%). Canada warned on Monday of a 100% surcharge starting in October, in the name of alleged “unfair competition” from vehicles manufactured in China.
However, BYD is accelerating its internationalisation, particularly in Europe, where the group plans to open a factory in Hungary and another in Turkey.
BYD’s installation in Turkey should allow the group to access the European market while avoiding Brussels surcharges.
BYD, which originally specialized in battery design and manufacturing, diversified into automobiles beginning in 2003. Many foreign manufacturers (Tesla, BMW, Mercedes, Audi, Toyota, Ford, etc.) now rely on the company for their batteries.
Source: BFM TV
