China’s largest electric car manufacturer, BYD, is grappling with intense competition within its home market. The company’s profit decreased by 30% during the first quarter of the fiscal year (April-June). Net income dropped to 6.36 billion yuan (892 million dollars), with revenue also falling below expectations at 200.9 billion yuan. These figures represent BYD’s most challenging financial results to date, despite its position as a key player in China’s electric vehicle market.
The challenges BYD faces are linked to a fierce price war within the Chinese EV industry. In order to compete with Tesla and other domestic companies, BYD has been offering significant discounts on its cars. However, these discounts are now impacting the company’s financial performance, and its gross margin has declined to 16.3%, the lowest since early 2023. The underlying message to investors is that maintaining high sales volumes is proving to be a costly strategy.