China is the world’s single largest EV market, with over 5 million pure electric car registrations in 2023, but it’s not immune to the global EV sales slowdown. The many Chinese EV manufacturers that had previously been reporting consistent growth are now announcing a drop in their sales and revenue, and there’s a price war between local manufacturers that seem to be fighting for buyers.
The EV segment in China is still growing, but at lower rates than it did in 2023. The quarterly profit report posted by one of China’s most prominent EV players, BYD, made this apparent. It had a fantastic 2023 that saw its net profits increase over 80% year-over-year, and it concluded with it dethroning Tesla for the total number of EVs sold in the last quarter of the year.
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BYD is China's biggest plug-in vehicle manufacturer
About six out of 10 new plug-in vehicles sold in China in 2023 were BYDs giving the manufacturer about a 30% share of the EV and PHEV segment.
Projections show that BYD won’t do quite as well in 2024. It reported a net profit for Q1 that was 47% lower than Q4 2023. This resulted from selling almost 34% fewer plug-in vehicles (EVs and PHEVs combined) in Q1 of this year compared to the last quarter of 2023.
However, even though Q1 2024 sales were down in Q4 2023, compared to Q1 2023, they were up 13.4%.
BYD's slow start to the year was attributed to the Chinese New Year’s celebration and other factors that saw fewer people buying EVs. However, sales picked up in March when it sold almost 140,000 EVs, and they have stayed strong through April. Even though BYD is slowing down and experiencing increasing local competition, it still posted a net profit of 10.6% in the first quarter, while its revenue increased by 4%.
BYD was dethroned in Q1 2024 by Tesla, which regained its title as the world’s largest seller of EVs. Tesla isn’t the only manufacturer aggressively lowering its prices to attract buyers; BYD dropped the price of its plug-in models by 5 - 20% in February to help convince buyers not to go for a pure combustion vehicle and to undercut rival offerings.
After BYD announced its price cuts across many of its brands, which were kicked off by a 20% drop in the price of the Qin Plus DM-i plug-in hybrid, Tesla also slashed prices for Chinese-made Model 3s and Model Ys by over 5%, and this was followed by a price cut of 5.7% from Li Auto, which sells premium electrified vehicles.
According to a Goldman Sachs report quoted by the South China Morning Post, the price wars may continue through 2024, pushing the EV segment into negative profitability. The report states that because of an average 21,000 yuan (about $2,900 at current exchange rates) industrywide price drop for EVs (about 11% of their value on average), the overall profit from EVs has gone down from 2,100 yuan (roughly $290) to negative 1,600 yuan (around $220) since July 2023. However, it could still come out of the red by the end of the year.
