BYD's Profits Take a Downturn Amidst Fierce Market Competition

BYD, short for Build Your Dreams, has been a beacon of growth in the Chinese electric vehicle market. However, their latest financial report revealed a decline in quarterly profits to 6.4 billion yuan (approximately 767 million euros), marking a significant 29.9% drop compared to the same period last year. Despite this, the company's revenue rose by 14% to 200.9 billion yuan (around 24 billion euros), highlighting the intense price war in China's automotive market. Following the announcement, BYD's stock value dropped over six percent, as reported by Reuters. Experts suggest that this profit-revenue disparity signals a challenging market environment, where aggressive price cuts are eroding profitability.

The first quarter of the year had been promising for BYD, with robust growth boosting their half-year earnings by 13.8% and revenue by 23.3%. The company, which sells nearly 80% of its vehicles in China, aims to sell 5.5 million cars this year. By July, sales had reached 2.49 million, fulfilling 45% of their target. However, analysts from Nomura have revised their expectations, predicting sales of 5 to 5.2 million cars. The domestic market has seen three consecutive months of declining sales, accompanied by reduced production volumes.

BYD's strategy of aggressive price cuts has drawn criticism from competitors. Wei Jianjun, founder of Great Wall, compared BYD to 'the Evergrande of the auto industry,' referencing the real estate company that expanded on borrowed money and later struggled to repay debts. Chery's director, Yin Tongyue, likened BYD's pricing tactics to 'drinking poison to quench thirst.' Despite these challenges, BYD is expanding its reach by exporting electric and plug-in hybrid vehicles to Europe.

In Finland, BYD is making strides with a new partnership with Veho, known for Mercedes-Benz. This collaboration aims to boost sales through zero-interest financing deals, though additional fees apply. From January to August, 274 BYD cars were newly registered in Finland, marking a 30% decrease compared to the previous year. However, August showed signs of recovery with 67 new registrations, increasing the monthly market share to 1.3%. BYD has taken over its import operations in Finland from the Norwegian company RSA, indicating a strategic shift in its European operations.