TMTPost -- China’s top electric vehicle (EV) maker BYD Co. Ltd. fails to keep its top and bottom line intact amid heated price war in China, but gross margin still set record thanks to falling battery costs.
Credit：BYD
BYD recorded highest ever quarterly gross margin of 21.88% in the quarter ended January 31, increasing 4 percentage points from a year earlier and 0.66 points from three months ago, according to a filling with Hong Kong Stock Exchange (HKEX). The margin was impressive given massive price cuts and a 70.1% year-over-year (YoY) increase in research & development (R&D) that quarter. The record margin highlighted the price drop of lithium carbonate, an industrial chemical that is mainly used in lithium-ion batteries. As of December 31 2023, the average price of battery-grade lithium carbonate in China slumped 80.38% from beginning of the year to RMB103,000 per ton. BYD’s operating cost slid 1.11% YoY to RMB97.6 billion, representing a 44.5% quarter-over-quarter (QoQ) decrease.
BYD’s profit and revenue slowed down significantly in the first quarter. Net income rose to RMB4.57 billion (US$631.08 million) with a 10.62% YoY increase, the weakest quarterly profit growth for the Shenzhen-based company since 2020. Revenue grew at its lowest pace in nearly four years, up 3.97% YoY to RMB124.9 billion. That fell short of the Wall Street forecast of RMB132.53 billion. Compared with the previous quarter, net income and revenue shed 47.3% and 30%, respectively. The cooling growth underscored even major EV maker like BYD was hit by the cutthroat price competition and slowing demand.
BYD announced at the beginning fo this month that it sold 302,459new energy vehicles (NEVs), including battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs), in March, increasing 46.06% year-over-year (YoY). The sales more than doubled from a month ago with a 147.29% month-over-month (MoM), representing a major comeback compared with February, when the Shenzhen-based company’s NEV sales crashed 39.3% MoM and 36.8% YoY. March is the first month for BYD to return to monthly sales of more than 300,000 units to the year date, though still below its recent record of over 341,000 units set in last December. Sales over the first quarter of 2024 totaled 626,263 NEVs with a 13.44% YoY growth.
BYD seemed to gain traction from low-pricing strategy through its new Honor edition of many models launched since February. It slashed prices on the latest versions of its lineup by 5%-20% from earlier iterations since that month. BYD’s average revenue per vehicle declined 16.9% YoY to RMB141,000 in the first quarter, while average profit per vehicle fell nearly 6% to RMB6,300. BYD’s profitability was hit by promotions, which primarily target cheapest versions of its Dynasty and Ocean series. And BYD’s average price of vehicle further was further dragged lower as it mainly cut prices on PHEVs priced at around RMB100,000, which were about RMB20,000 cheaper than its BEV variants of the same model.
BYD ‘s top and bottom line, in spite of slowdown, still outperformed its arch-rival Tesla, Inc. Tesla last week said its net income tumbled 55% YoY to US$1.13 billion in the first quarter,and revenue reported US$21.3 billion with a YoY drop of 9%. Tha is the biggest quarterly decline since 2012, even deeper than Tesla’s last decline in 2020 when its production was disrupted due to the Covid-10 pandemic.
At a meeting with investors late March, BYD chairman and CEO Wang Chuanfu said that his company aims to increase its sale by more than 20% on the top of sales volume last year, which represents the annual sales target of more than 3.6 million units this year. The annual target Wang revealed suggested BYD expects sales would significantly slow down in the coming year, and its expectation is less aggressive than analysts who generally anticipated BYD would sell around 4 million vehicles in the year 2024, up about 17.3% from last year.
Wang predicted a decisive battle will break out in the automotive industry the next three years, just like previous battles in sectors of the home appliance, the solar energy and the mobile phone. The leader was reported to tell investors that the NEV industry had entered a "knockout round" with a battle in scale, cost and technology to be played out from 2024 to 2026. he believes scale is the most critical for any player who can survive. As to BYD itself, Wang said profit margin on vehicles would fall this year as the price war intensifies, but the company would ensure profitability remains stable by improving sales.