Shares of Chinese electric vehicle maker BYD fell by up to 8% on Monday. The decline followed weak quarterly earnings, dragged down by an escalating price war in the domestic car market.
Profits slide under heavy pressure
On Friday, BYD reported that net profit dropped to 6.4bn yuan ($900m; £660m) between April and June. The figure represented a 30% fall from the same period last year. The company admitted that fierce price competition among Chinese EV makers has hurt the sector.
Rivals fuel a crowded market
The Shenzhen-based group competes against local rivals Nio and XPeng, as well as US carmaker Tesla. Each has slashed prices to attract buyers. BYD’s shares opened lower in Hong Kong on Monday but recovered slightly later in the session.
The company described competition as reaching “fever pitch”. It also pointed to excessive marketing practices as a disruptive force. EV firms have been offering subsidies to dealers and zero-interest loans to customers, tightening profit margins further.
Government urges restraint
Authorities in Beijing have warned automakers to curb discounts, citing risks to the broader economy. Industry data shows average car prices in China have dropped by about 19% in two years. They now stand near 165,000 yuan ($23,100; £17,100).
Despite strong demand abroad, BYD’s results fell below expectations. Analysts had forecast a modest profit increase but instead saw a sharp decline.
Ambitious targets in doubt
The company set a goal of 5.5 million global sales for this year. By July’s end, however, only 2.49 million had been sold. Industrial policy expert Prof Laura Wu from Nanyang Technological University in Singapore called the results “surprising”. She said even the sector’s top player is exposed to the dangers of a cut-throat price war.
Wu noted that the stock’s fall signalled investor disappointment. She added that Beijing struggles to cool the market after policies encouraged too many entrants. While price cuts benefit consumers, Wu warned of long-term oversupply risks.
Analysts see a temporary pause
Investment manager Judith MacKenzie of Downing Fund Managers said the setback should not be overplayed. She argued that BYD’s rapid rise meant a slowdown was inevitable.
The company has already become the world’s biggest EV maker, overtaking Tesla in revenue during 2024. Its rise has been fuelled by strong demand for hybrids in China, Asia, and Europe.
