BYD leads the electric car battle in China from a position of strength. The largest manufacturer of these models in the world is gaining market share in the country, partly by competing on prices: it is going to reduce more than 100 versions of its models this year. The record annual profits it reported Tuesday suggest it is well placed to step up the fight.
Fierce competition began a year ago, and BYD now sells some cars up to a fifth below their original price. New designs, like the recent update of the aptly named Destroyer, are also cheaper. The depth and width of the cutouts are greater than those offered by other manufacturers, according to Nomura.
But the results of the firm led by Wang Chuanfu remain the same. Revenue increased to 602 billion yuan (77 billion euros) in 2023, more than 40% more than the previous year. The annual net profit margin grew by one percentage point to 5%, although in October-December it recorded its slowest quarterly profit growth in two years, reflecting the slowdown in the sector.
Their local rivals are in a worse situation. None have the economies of scale or vertical integration that help BYD. Smaller startups such as Nio, Leapmotor and Xpeng remain in the red, although they have managed to reduce their net losses in recent quarters.
BYD is distancing itself from its domestic competitors and its results continue to approach those of its global counterparts. Its operating profit margin is around 6%, compared to more than 10% for Tesla and Toyota, according to Visible Alpha.
But discerning Chinese consumers are also developing a taste for new technologies, such as autonomous driving, in which BYD does not have such a strong lead. Meanwhile, the EU is analyzing whether Chinese vehicle exports are unfairly benefiting from state subsidies. BYD's sales outside the People's Republic accounted for more than a quarter of the total last year and the company wants to expand further abroad.
There are challenges ahead, but the top Chinese automaker is in surprising health.
The authors are columnists for Reuters Breakingviews. The opinions are yours. The translation, of Carlos Gomez Belowit is the responsibility of Five days
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