The race to gain a dominant hand in the Chinese Electric Vehicle (EV) market has become far more competitive in recent months, than ever before forcing BYD stock to fall by 4%. BYD Autos claimed that the competition will continue to increase for at least the next three years, and that’s why it wanted to collaborate with Tesla.
China-based battery and electric vehicle maker, BYD Autos has made commendable growth in the last couple of years, with total vehicle production capacity surpassing Tesla.
This has not only led the automaker to snatch the crown of the largest EV maker from Tesla but has also helped it to improve its financial standing. BYD announced on Monday that it is expecting a net profit to rise by 86.5% in the year 2023, led by a cut in costs and increased sales.
BYD in a statement filed at Shenzhen stock exchange announced that its net revenue for the previous year will remain within the range of 29 billion ($4.04 billion) to 31 billion yuan ($4.32 billion), an increase of almost 75% to 86.5% from a year earlier.
Though the growth comes with a much slower pace than witnessed prior to this, when the automaker’s bottom line grew by a massive 446% in 2022.
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Fierce competition in the EV market
BYD said that, “despite a fierce competition in the industry, the company has achieved significant improvement in profitability and demonstrated strong resilience.”
These results were achieved due to several factors including its cost control ability in the supply systems, economies of scale, and rapid growth in overseas markets. In comparison its rival, Tesla reported a 19.4% growth in its net profit in the previous year to $15 billion.
Fierce competition has been unleashed in the world’s largest EV market for the past two years, resulting in the lowest-ever prices of electric vehicles globally, as per the branding and public relations manager at BYD.
“I think this is an inevitable process, but it may take another two to three years, however in the end, many brands that aren’t able to compete in the market will be eliminated.” He said in Mandarin, translated by CNBC.
Li claims BYD will be one of those companies that will survive and thrive in this competitive EV market, though its stock witnessed an initial fall after the profit announcement, due to its strategy of targeting different consumer segments with different pricing plans via multiple sub-brands, or their cost controls in the supply system.
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BYD overtaking Tesla
In the last quarter of 2023, BYD snatched the largest EV company tag from Tesla as it achieved the most number of vehicle sales, delivering 526,409 cars, slightly more than Tesla’s 484,507 vehicles.
For the entire year, the company sold nearly 3.02 million electric vehicles, an increase of 61.9%.
If we look at the categorization, BYD sells most of its cars in the mass market category. It launched a high-end brand called Yangwang, whose SUV sells at 1 million yuan ($141,000).
Whereas, its premium electric sedan sells in a similar price range as Tesla’s cars – in the range of 200,000 yuan ($28,000).
Talking about Tesla, Li said, “Tesla being a very respected player in the industry, has played an important role in the rapid growth of electric cars across the globe.”
He further noted that “this market is very large. It’s not that we must surpass them or they must surpass us. Instead, BYD and Tesla together, or more new energy vehicle brands together, we need to think about how to increase the new energy vehicle ‘cake.’”
($1 = 7.1780 Chinese yuan renminbi)
