News

Can BYD maintain its market share as Chinese EV market faces price wars?

In the most recent round of China's electric vehicle pricing war, BYD Co. gained an advantage over rivals; nevertheless, it now has to demonstrate that it can sustain the impact on profits.The largest EV manufacturer in China deviated from its custom of not releasing guidance prior to its results announcement, which is scheduled for later this Monday. This month's spike in the stock's volatility skew to its highest level since October 2022 suggests that investors are becoming more and more interested in downside protection.The largest EV market in the world, China, is under increased pressure due to slowing growth, a wave of new rivals, and offers introduced by Tesla Inc. last year. Investors will be closely monitoring BYD's results remarks to see whether the company intends to take any bold actions following this year's effort to lower mass-market model prices before competitors.BYD "has taken the first shot, taking market share from cars with internal combustion engines," according to EFG Asset Management HK Ltd. fund manager Daisy Li. "EV penetration is increasing along with sales, but profits are declining as a result."With the aid of the price cuts, BYD sold over 300,000 cars in March, recovering from a notable decline in the previous month. This has aided the stock, which has decreased less than 1% in Hong Kong this year despite a worldwide index of EV manufacturers seeing a fall of more than 15%.If the results fall short of expectations, the resilience might make the shares susceptible to selling pressure. For the traditionally sluggish first quarter, BYD is predicted to report revenue growth of 10%, which would be the company's lowest in the previous four years. The predicted gross profit margin would drop from 21.2% in the fourth quarter to 19.6%.Though its profitability has probably suffered due to the lower model prices, traders will be keeping an eye on BYD's rise in higher-end models and international sales as possible bright spots.Bing Yuan, a fund manager at Edmond de Rothschild Asset Management, stated, "We think BYD's strategy is to take advantage of domestic mass products to sustain production utilisation and operating advantage and balance profit margins with premium products and exports."BYD has been adding high-end models to its portfolio. One such model is the Denza Z9GT, which debuted at the Auto China show and features a shooting-brake-inspired design with a strong tech focus. It debuted its Yangwang U9 supercar, which costs more than $200,000, in February to compete with models from Lamborghini and Ferrari NV.The business hopes to sell 500,000 cars outside of China this year, and by 2025, that number will have doubled. In Hungary, it also intends to construct its first auto manufacturing in Europe.Robert Mumford, a portfolio manager at GAM Hong Kong Ltd., stated, "Exports coming from a low base are expected to show strong growth — this will remain a key supporting factor for BYD's revenue growth and likely margin."