China's car giant Byd drives profits as sales climb
Lead Maintained Its Has In China Volkswagen Over Byd
China’s biggest-selling car brand withstood a raging price war that engulfed the country this year, with Byd posting second-quarter profit that surged 145% and sending its shares climbing.
Net income more than doubled to 6.8bn yuan (€863m) after the company sold a record number of plug-in hybrid and fully electric vehicles during the three months ended in June. While fierce competition in China led to the slowest revenue growth in more than a year, Byd still generated 140bn yuan (€17.8bn) in quarterly sales. The company’s Hong Kong-listed shares climbed as much as 6.5%.
Byd's robust financial performance will help as it navigates another period of discounting in the world’s biggest car market, where its preferred strategy is cutting prices on newly released models. Over the weekend, Byd unveiled a slightly cheaper range of 2023 Tang vehicles.
The Shenzhen-based company’s strong sales has helped it maintain its lead over Volkswagen as China’s best-selling car brand this year, after it leapfrogged the German auto giant in the first quarter.
Byd sold 700,000 clean cars during the second quarter, beating the previous high of 683,400 in the final three months of 2022. It notched 156.3bn yuan in revenue during the earlier period and benefitted from a record gross margin of 19%. Byd’s margin in the second quarter was 18.7%. Total passenger electric car sales hit 1.5m so far in 2023, through July.
Analysts Joanna Chen and Steve Man at Bloomberg Intelligence said vehicle shipments appear on track to meet management’s target of 3m units this year, and possibly surpass expectations for 3.5m next year, powered by strong domestic demand and rising exports. Better economies of scale and a deep vertical integration help offset pricing pressure, contributing to margin stability, they said.
Byd's performance was exceptional considering the sector-wide price war, China’s weakening economy and electric vehicle subsidy changes, Citigroup’s Jeff Chung said.
Known for selling affordable cars to the masses, the carmaker has made progress in broadening its appeal. It unveiled two luxury electric brands, Yangwang and Fang Cheng Bao.
It also pushed two cheaper models, the Seagull and Dolphin, to undercut its peers.
- Bloomberg