The profit for BYD increased by 446% to 16.6 billion yuan, or $2.4 billion, exceeding the company’s initial net earnings forecast that it had previously provided in January. In 2021, BYD reported 3 billion yuan, equivalent to 436 million dollars, in profit. The top EV producer in China said that it sold a significant number of vehicles in the past calendar year, which increased business earnings.
BYD, owned in part by Warren Buffet, is one of the companies best positioned to benefit from China’s expanding electric vehicle industry. After winning domestically, the company is now aiming to compete on the world stage with the likes of Tesla, the largest electric vehicle producer.
In 2022, BYD’s EVs and PHEVs sales numbered 1.86 million, one-half of which were BEVs alone. This accounts for approximately one-third of the total sales of Chinese nontraditional energy automobiles. Tesla, on the other hand, sold 1.31 million electric vehicle during the same year.
BYD wants to grow internationally, particularly in the United States as well as in Europe. Moreover, it plans to introduce two newly minted brands of high-end electric vehicles in the year, reversing course from the cost-effective products that have essentially contributed to its quick expansion.
The new high-end electric vehicles will support BYD’s continued revenue growth. However, a price competition that has been raging in China as a result of Tesla making price reductions towards its domestically produced models is anticipated to compress margins.
Near the end of last year, Tesla drastically reduced pricing for its vehicles in China in an effort to undercut local rivals. A second price cut on automobiles made at its factory based in Shanghai was announced in January 2023. As a result, Tesla vehicles produced locally are nearly 50% less costly than those sold in America and remain 14% cheaper year-over-year.
According to a Bloomberg story, at least 30 local and international manufacturers of electric vehicles were compelled to lower their costs in order to match the Tesla price cuts. Whereas Ford’s Mustang Mach-E is currently one-third less expensive compared to its price in the United States, certain manufacturers in China, such as Nio and Xpeng, gave discounts of up to 70,000 yuan, equivalent to $10,000.
In reaction, the Chinese Vehicle Manufacturers Association demanded a halt to the sales and warned that care must be taken to put a stop to such activities from degenerating into pricing wars in its report published by the state media in China. This call may be too little, too late, however, given that different EV makers are gearing up for a price war. It may now be up to startups such as Atlis Motor Vehicles Inc. (NASDAQ: AMV) to find suitable ways to remain competitive in the years to come.
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