In the first quarter of 2024, BYD's net profit was CNY4.57 billion (approx. US$630 million), a year-on-year increase of 10.6%, but a significant decrease of 47.3% compared to the fourth quarter of 2023. This highlighted that profitability was impacted by slowing demand for EVs and intense price competition. Market analysis suggests that while the penetration and sales of EVs are growing, it has come with a decrease in profits.
DIGITIMES Research's analysis indicates that BYD's operating profit in 1Q24 decreased by 54.5% compared to the previous quarter, leading to a 47.3% decline in net profit.
Source: BYD, compiled by DIGITIMES, May 2024
In 1Q24, the managing and administrative expenses percentage in BYD's overall revenue increased to 8.46%, up 2.26% from 6.2% in 4Q23. The primary reasons are promotional activities and overseas expansion. R&D expenses also slightly increased to 8.49%, up 0.36% from the previous quarter, in line with BYD's announcement at the start of 2024 that it's focusing on smart development.
Bloomberg's report analyzed that slowing growth, the influx of newcomers, and the price war initiated by Tesla in 2023 have intensified competition pressure in the Chinese EV market. BYD's industry-first price reduction measures for EV models aimed at the general consumer market have led to continuous growth in sales volume and market share but have also clearly sacrificed profits.
Driven by the price cuts, BYD's sales in March 2024 reached around 300,000 vehicles, showing a rebound from February's sluggish sales. A nearly 11% year-on-year increase in net profit marks BYD's lowest growth rate since 2022, and its revenue growth rate in 1Q24 also hit a four-year low, increasing by only 3.9% year-on-year to CNY124.94 billion, falling below market expectations.
Although the price competition in low-cost models has hurt BYD's profitability in 1Q24, the sales growth in high-end models and expansion into overseas markets remain key drivers for future growth momentum. Market analyses stated that BYD's strategy is to utilize its general consumer EV products in the Chinese market to maintain capacity utilization and operating leverage while relying on high-end models and exports to overseas markets to maintain profits.
High-end models exported overseas to offset profit losses
BYD has been expanding its lineup of luxury vehicles, including the introduction of the Denza Z9GT luxury model at Auto China 2023 in Beijing, which is BYD's third luxury model. It highly emphasized its technological adoption, such as a two-second 0-100 km/h acceleration.
Bloomberg reported that to understand how BYD dominates the global EV market, one only needs to observe how quickly BYD can transition from concept to mass production. According to BYD Chief Designer Wolfgang Egger, products such as the Tang Z9GT only take 24 months to develop from concept to mass production.
This 24-month schedule from concept to mass production is much faster than major Western manufacturers. For example, Mercedes-Benz previously required 58 months to develop a new model, but they have shortened this to 50 months for the E-Class. Markus Schaefer, the CTO of Mercedes-Benz, stated that their goal is to get closer to 41 months in the future.
In February 2024, BYD introduced the Yangwang U9, a battery-electric sports car with a price tag of over US$200,000. It aims to compete with Ferrari and Lamborghini.
BYD aims to sell 500,000 EVs in overseas markets by 2024, doubling sales in overseas markets by 2025. BYD also plans to build its first European car manufacturing plant in Hungary.
