The offer of discounts was one of the main impulses on the path taken by BYD to displace Tesla in the fourth quarter of 2023 and reach the top in global sales volume of electric cars. Now, however, this practice is starting to take its toll on the company’s balance sheet.
On Tuesday, March 26, when releasing its results for the fourth quarter and the year 2023, the Chinese manufacturer reported, between October and December, a net profit of 8.67 billion yuan (almost R$6 billion) , equivalent to an increase of 18.6% over the same period, one year earlier.
Despite the jump, this was the smallest growth in the last line of BYD’s balance sheet since the first quarter of 2022. The amount also represented a decline compared to the profit of 10.4 billion yuan (around R$7.2 billion ) reported in the third quarter of last year.
In the consolidated result for 2023, the increase in the indicator was 80.7%, to 30.4 billion yuan (just over R$21 billion), a record for the company. The figure came, however, slightly below analysts’ projections, which pointed to 30.9 billion yuan (R$21.4 billion).
According to agency calculations Reutersthis slowdown follows a strategy in which, throughout 2023, the company reduced prices, by an average of 17%, of 13 models that represent 93% of its total sales in China.
This same approach gained an even faster pace in 2024, with discounts that, in some cases, reached 21.6%. This week, for example, BYD set the starting price for a new version of the Seal, its electric sedan, 5.3% below its predecessor model.
In this context, other rivals, Chinese or not, followed the same path. Among them, Tesla itself and players such as Geely, Aion, Xpeng and Leapmotor. However, the price reductions practiced by these manufacturers are well below BYD’s equation.
“The latest round of price cuts would inevitably result in a hit to margins,” said John Zeng, head of China market forecasting at British consultancy GlobalData, in an interview with Reuters.
He highlighted, however, that this effect could be largely offset by BYD’s strong cost control and the growth of its exports at higher prices, with an estimated volume of 300,000 to 400,000 units this year.
In 2023, BYD sold a total of 3.02 million electric and hybrid cars, and in the fourth quarter alone, 526 thousand branded electric vehicles were sold, surpassing the 484.5 thousand sold by Tesla in the period.
Even with this point of attention on its balance sheet, BYD shares ended the trading day on the Shenzhen stock exchange, in China, with an increase of 2.52%. During the year, the shares accumulated an appreciation of 10.9%. The company is valued at 615.2 billion yuan.
