BYD is unscathed in China’s electric-car wars

Art of war. BYD is driving China's electric-car battle from a position of strength. The world's largest EV maker is winning market share in the People's Republic, partly by undercutting rivals on prices: it is discounting over 100 model versions in 2024. The record annual earnings it reported on Tuesday suggest it is well-positioned to escalate the fight.

The fierce competition started around a year ago and $86 billion BYD is now selling some cars at as much as a fifth below their original price. Newer designs such as a recent update to the aptly named "Destroyer" are cheaper too. The depth and breadth of cuts are bigger than those offered by other automakers, research from Nomura shows.

Yet the top and bottom lines at the company run by Wang Chuanfu is holding up well. Revenue grew to 602 billion yuan ($83 billion) in 2023, up more than 40% from the previous year. Annual net profit margin grew one percentage point to 5%, though BYD did record its slowest quarterly profit growth in two years for the three months to December, reflecting the industry slowdown.

Local rivals are less well off. None boast the economies of scale or vertical integration that help BYD. Smaller electric-car upstarts such as Nio, Leapmotor and Xpeng  are still in the red, though they have managed to narrow their net losses in recent quarters.

BYD is pulling away from its domestic competitors and the company's performance is steadily catching up global peers. Its operating profit margin clocks in at around 6%, compared with more than 10% at Tesla and Toyota, the world's largest carmaker by sales, per Visible Alpha.

Yet China's demanding consumers are also developing a taste for new technology such as autonomous driving, where BYD doesn't boast such a strong lead. Meanwhile, policymakers in the European Union are scrutinising whether Chinese vehicle exports are benefiting unfairly from state subsidies. Sales outside of the People's Republic made up more than a quarter of the total at BYD last year and it wants to expand further overseas.

There are challenges ahead but China's top carmaker is in surprisingly good healt