As the net profit and sales of BYD, the world's No. 1 electric-vehicle company, declined, its share price fell to the lowest level in nine months. A government crackdown in China has made it harder to engage in the discounting that had been a key growth driver, and despite massive research and development (R&D) investment, the company is failing to clearly show a technological edge.
According to the Hong Kong Stock Exchange on the 5th, BYD shares closed the previous day at 97.45 Hong Kong dollars (about 18,000 won), down 37.2% from the record high of 155.07 Hong Kong dollars set on May 23. The stock has been sliding sharply since it said on the 30th of last month that third-quarter revenue and net profit fell 3.05% and 32.6%, respectively, from a year earlier.
BYD's weak results largely stem from struggles in China's domestic market. BYD's third-quarter sales of electric and hybrid vehicles totaled 1.15 million units, down 1.8% from a year earlier. Geely Automobile and Changan Automobile, which are closely chasing BYD, saw sales rise 96% and 84%, respectively, during the period. China Haitun Investment Research Institute said, "BYD's market share hit a record high of 36% in the second quarter of last year and has been declining," adding, "In the third quarter of this year, market share was 27.4%, down 3.6 percentage points from the previous quarter."
Behind BYD's loss of momentum is China's crackdown on discounting. Since early 2023, BYD has led the price war and maintained more aggressive discounts than rivals. As recently as May this year, it said it would discount 22 electric and hybrid models by up to 34%, but soon after, the Ministry of Industry and Information Technology, through state media, said it would "firmly maintain a fair and orderly market environment," putting the brakes on BYD's move.
The Chinese government's step-by-step phaseout of electric-vehicle subsidies is also a factor constraining BYD's growth. BYD sells only eco-friendly vehicles, while Geely Automobile and Changan Automobile also sell internal combustion engine vehicles.
BYD is continuing industry-leading R&D investment to secure technological competitiveness, but results have been limited. In March, BYD unveiled its "5-minute charging" technology, but it is applied only selectively to premium models priced above 200,000 yuan (about 40.36 million won), and dedicated charging infrastructure is not yet fully in place, offering little help to sales.
BYD is seeking a breakthrough in overseas markets. Europe and Latin America are BYD's main stages. Thanks to rising demand in these regions, third-quarter overseas sales jumped 160% from a year earlier. Recently, the company has also been targeting Japan, rolling out the mini electric car "Lako," a Japan-only model, and the hybrid model "BYD Sealion 6 DM-i." Morgan Stanley said overseas performance, new models due next year, and pricing policy trends are likely to affect BYD's results.