Although BYD Co. overtook Tesla Inc. for the final three months of 2023 as the world’s largest electric vehicle seller and plans to grow sales 20% this year, posting net profit just below analysts’ forecasts was enough to trigger the worst of the selloff. in shares of a Chinese company for the year.
BYD shares fell 6.1% in Hong Kong after the automaker reported 2023 net profit of 30.04 billion yuan ($4.16 billion) on Wednesday. Although it was the midpoint of a preliminary forecast of 29 billion to 31 billion yuan given in January, the result fell short of analysts’ average forecast of 30.94 billion yuan.
The Shenzhen-based company told analysts about its sales targets on the call, according to people familiar with the matter. Analysts at Morgan Stanley cited the figure in a report, adding that BYD is confident of strong earnings this year and calling it “impressive” amid a challenging environment for the sector. BYD shares are up 11% in the past year.
The results, reactions and forecasts highlight the dramatic ups and downs of the electric vehicle market. As an industry leader, BYD may struggle to maintain its share due to seasonal sales fluctuations during the Lunar New Year in China, where BYD’s sales are concentrated. At the same time, shares of smaller competitors such as Li Auto Inc. and Zhejiang Leapmotor Technology Co. rose as they beat earnings expectations.
The 20% growth target assumes sales of 3.6 million vehicles in 2024. BYD’s export outlook is good, with a goal of selling 500,000 vehicles outside China this year and then doubling that figure in 2025, according to people familiar with the automaker’s call with analysts.
BYD sold 3.02 million electric and hybrid vehicles last year – a record – including 942,000 in the latest quarter to meet its target annual goal. Discounting during this period, including dealer incentives, caused net profit to decline quarter-on-quarter to 8.67 billion yuan.
The overall stellar success has given BYD gross margins of 20.2% in 2023, higher than Tesla for the first time since 2017, which scored 18.2%, its worst level since 2019. The company doesn’t just make its own electric vehicles, it makes more of its own parts, including EV batteries and semiconductor chips, meaning its EVs are more affordable thanks to a long-term bet to become a highly integrated automaker.
Even BYD’s announcement of a dividend of 3.1 yuan per share failed to reassure investors who are focusing on more operationally oriented metrics.
“It’s a loss of profit,” said Hsin-Yao Ng, chief investment officer at abrdn. “At least in my opinion, the concern may be that profits per vehicle are falling, which reflects poorly on the intensity of competition in the sector.”
Price war
The automaker launched a second round of price war in China this year, dropping much of its lineup as it seeks to persuade drivers to switch from gasoline cars to electric vehicles using the marketing slogan: “A new era of electricity is coming.” cheaper than oil.”
Data from Chinese auto portal 16888.com analyzed by Bloomberg News shows BYD has slashed prices on more than 100 existing model versions since December and relaunched another 70 models at lower prices. The cheapest model, the Seagull hatchback, now costs 69,800 yuan, or less than $10,000.
The automaker is also entering the luxury market with the launch of its most expensive vehicle last month, a high-performance electric car priced at 1.68 million yuan. supercar Comparison with the status symbols offered by competitors such as the Ferrari NV and Lamborghini.
As competitors ranging from upstarts such as Li Auto Inc. to established players such as Geely Automobile Holdings Ltd.’s electric vehicle brand Zeekr launch new models to better compete with BYD, the industry faces a second year of slowing growth. The China Passenger Car Association expects supplies The number of electric vehicles and hybrids will grow by 25% this year, up from 36% in 2023 and 96% in 2022.