Inicio Financial BYD misses profit forecasts as Huawei challenge emerges

BYD misses profit forecasts as Huawei challenge emerges

A BYD Dolphin electric car was on display at the Bangkok International Motor Show
BYD’s net profit rose 81% in the 12 months to the end of December, following a more than 400% jump in annual net profit in 2022 © Bloomberg

BYD profits rose last year but fell short of expectations as Tesla’s main Chinese rival felt the brunt of intensifying competition and slowing sales growth.

The world’s biggest electric vehicle producer said net profit rose 81 per cent to Rmb30bn ($4.16bn) in the 12 months to the end of December, compared with analyst estimates of Rmb31bn, as the Warren Buffett-backed group battled increased competition, including from the recent arrival of Huawei in the car market.

BYD’s annual results, published after markets closed in China on Tuesday, follow a more than 400 per cent jump in annual net profit in 2022. 

The Shenzhen-based group, which is also one of the world’s biggest battery makers, has been one of the main beneficiaries of a bruising price war that punished European, Japanese and US carmakers.

Elon Musk’s decision to lower the price of Tesla vehicles in China in late 2022 sparked savage price cuts across the auto industry, leading to squeezed margins for both legacy multinational auto groups in China and tech-focused start-ups.  

BYD has for much of the past year cornered a market share of about one-third of sales of plug-in hybrid and battery-powered electric vehicles in China.

Revenue for 2023 was up 42 per cent to Rmb602.3bn on sales of just over 3mn vehicles — a slowdown in growth compared with the previous year. Exports rose 334 per cent to 243,000 cars. The group reported margins for its auto business of 23.02 per cent last year, 2.63 percentage points higher compared with the previous year.

However, data from the start of 2024 suggests BYD has lost some ground following Huawei’s entrance to the car market, coupled with strong sales in China of plug-in hybrid vehicles, or PHEVs. 

China counts pure battery EVs and plug-in hybrids as “new energy vehicles”. According to Automobility, a Shanghai consultancy, BYD’s share of new energy vehicle sales in China fell to 30.8 per cent in January and February, down from 35 per cent at the end of last year.

Of 1.2mn new energy vehicles sold in China in the first two months of the year, 467,000 were PHEVs, marking a 73 per cent jump on the same period a year earlier.

While BYD remains the dominant player in PHEVs, the company faces competition from Huawei’s Aito brand, whose M7 model is the fourth bestselling EV in China so far this year, behind two BYD models and Tesla’s Model Y. 

“This places huge pressure on BYD and Li Auto, the perennial leaders in the PHEV category, to defend their share,” said Automobility founder Bill Russo. 

Shenzhen-based Huawei’s arrival on the EV market has come just as US rival smartphone maker Apple has cancelled its efforts to build an electric car, instead pivoting research to artificial intelligence.

Huawei has been at the heart of US-China tensions for several years amid Washington’s belief that the company poses national security risks stemming from alleged state and military links. While the company has long had ambitions to enter the car market, some experts have previously questioned how it could succeed in the face of US sanctions.