BEIJING – The fallout is becoming impossible to ignore in the fierce battle among Chinese carmakers.<\/p>\n
With BYD reporting a staggering 30 per cent plunge in quarterly profit on Aug 29, its first decline in over three years, it\u2019s become clear that not even dominant players are safe in the cutthroat battle for market share.<\/p>\n
Its shares dropped as much as 8 per cent in Hong Kong on the morning of Sept 1.<\/p>\n
Despite robust overseas sales, BYD\u2019s net income of 6.36 billion yuan (S$1.14 billion) for the three months though June 30 fell short of analysts\u2019 estimates for a modest increase.<\/p>\n
Heavy discounting saw BYD\u2019s gross margin contract to 18 per cent from 18.8 per cent in the first half of 2024, although that figure is still among the top in the industry, exceeding rivals such as Zhejiang Geely Holding Group and Chery Automobile.<\/p>\n
BYD blamed \u201cindustry malpractices\u201d and \u201cexcessive marketing\u201d for pressuring its bottom line \u2013 an ironic twist considering BYD has been a major driver of the price war, leading multiple rounds of cuts since 2023, including its latest in May. <\/p>\n
Its most recent discounting campaign prompted the Chinese government to warn automakers off \u201crat race competition\u201d, saying that price wars can affect supply chain security and seriously damage the international reputation of \u201cMade-in-China\u201d.<\/p>\n
BYD\u2019s stumble comes as a shock given its global expansion has gained pace in 2025, with the brand making major inroads in markets like Brazil, which accounts for about one-third of its international sales, Australia, Singapore and parts of Europe. <\/p>\n
Overseas revenue, excluding Hong Kong, Macau and Taiwan, was up 50 per cent in the first six months versus the same period a year ago to 135.4 billion yuan.\u00a0<\/p>\n
Calling the margin shrinkage \u201cscars of competition\u201d, a note published by research firm Stanford C. Bernstein over the weekend observed that margin pressure persisted despite the higher overseas sales mix. <\/p>\n
\u201cIncreased promotional efforts didn\u2019t achieve anticipated volume growth,\u201d analysts including Eunice Lee wrote, adding higher capital expenditure further weighed on margins. <\/p>\n
Bernstein maintained its outperform rating but lowered its target price from HK$133 to HK$130. Shares in BYD closed in Hong Kong on Aug 29 at HK$114.40, ahead of the earnings release.<\/p>\n
Outside of gross margins weakening, the company\u2019s net profit attributable to shareholders increased at a slower rate, another sign profitability is under pressure, while borrowings jumped to 39.1 billion yuan from 28.6 billion yuan as of the end of 2024.<\/p>\n
Research and development expenses are also rising quickly, up more than 50 per cent year on year, showing the company is leaning heavily into innovation even though margins are tightening. <\/p>\n
BYD is likely deliberately ramping up spending on core technologies \u2013 batteries, electrification and intelligence \u2013 as part of its long-term strategy to secure its lead in new-energy vehicles. <\/p>\n
Arguably, there are fatter margins to be had from premium models like the Yangwang or Fangchengbao.<\/p>\n
The company\u2019s latest financial statements indicate BYD is paying suppliers more quickly than before. <\/p>\n
\u201cThe turnover days of the trade payables and bills payables of the group were at a low level in the automotive industry and further declined during the reporting period as compared with the same period in 2024,\u201d the Aug 29 filing said, without revealing the exact number of days.<\/p>\n
Back in 2023, BYD was taking an average of 275 days to pay suppliers, a period far exceeding global industry norms, data compiled by Bloomberg showed.<\/p>\n
The company said in June it would comply with new government rules to pay suppliers within 60 days, a big adjustment that would likely hit its working capital outflows, reducing any flexibility in a downturn.<\/p>\n
It may also cause adjustments to other parts of its balance sheet down the line \u2013 a report by accounting consultancy GMT Research said that without supply chain financing, BYD\u2019s true net debt would be closer to 323 billion yuan, compared with the 27.7 billion yuan officially on its books as of the end of June 2024.<\/p>\n
Nevertheless, the automaking powerhouse is not yet under any serious financial strain and a slower pace of growth may well be more sustainable as the company transitions from industry-disrupting upstart to global giant. Its average discount \u2013 measured by the margin between a vehicle\u2019s final sale price and suggested sticker price \u2013 dipped slightly in July from the month before, data from China Auto Market shows.<\/p>\n
BYD seems to be increasingly turning its attention outside of China, noting that higher profitability there has made its overseas business a key driver for continued growth. <\/p>\n
\u201cThe group has been proactively advancing the planning and construction of additional overseas production capacity to fully prepare for a surge in international demand,\u201d its interim report said.<\/p>\n
BYD is \u201cwell on track to hit one million units in overseas volumes, ahead of guidance at 800,000\u201d, Bernstein\u2019s Ms Lee said, adding that annual sales, including both domestic and international shipments, are now forecast to come in at around 5.1 million vehicles for 2025. \u201cBYD is our top outperform pick for the sector.\u201d BLOOMBERG<\/p>\n","protected":false},"excerpt":{"rendered":"BEIJING – The fallout is becoming impossible to ignore in the fierce battle among Chinese carmakers. With BYD…\n","protected":false},"author":2,"featured_media":124263,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[37],"tags":[28,112],"class_list":["post-124262","post","type-post","status-publish","format-standard","has-post-thumbnail","category-markets","tag-business","tag-markets"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/124262","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=124262"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/124262\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/124263"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=124262"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=124262"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=124262"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}