BYD, a Chinese auto manufacturer, saw their profits surge to 10.95 billion yuan ($1.50 billion) during the first half of the year due to a record number of deliveries. This marked an increase of 204.68% compared to the 3.6 billion yuan gained in the same period last year. According to Vivek Vaidya, Associate Partner at Frost & Sullivan, who spoke on CNBC's "Street Signs Asia," Tuesday, BYD is targeting markets which Tesla cannot access.
BYD's stock rose sharply on Tuesday, with shares listed in China jumping more than 5%, following the automaker's announcement that it posted a 204.68% increase in net profit for the first half of the year. This amounts to 10.95 billion yuan ($1.50 billion) between January and June, compared to 3.59 billion yuan in the same period in 2022. Revenue during this time also increased 72.72%. According to Barclays' China technology analyst Jiong Shao, BYD's gross margin was 18% in the first half of the year - the same as Tesla's. Sales of BYD's passenger new energy vehicles in the second quarter amounted to 700,244 units, a 98% increase from the prior year, surpassing Tesla's global deliveries of 466,140 vehicles for the same period. As China is the world's largest auto market by sales and production, and is the largest EV market, there is a growing demand for electric vehicles. This is an area that BYD is targeting, as their vehicles offer similar features to Tesla's but at a significantly lower price. This was highlighted by Vivek Vaidya, associate partner at Frost & Sullivan, on CNBC's "Street Signs Asia" Tuesday.
BYD faces stiff competition from its domestic peers and Tesla, with the latter having reduced the prices of its Model S and Model X in August in a bid to gain market share in China. In the same month, Tesla also cut the prices of its Model Y and Model 3. BYD and its rivals such as Nio and Xpeng also lowered their prices earlier in the year. Shao from Barclays observed on Tuesday on CNBC's "Squawk Box Asia" that a fall in prices is beneficial for the industry.
Shao stated that BYD's operating margin of 5% was "pretty healthy" in comparison to the negative gross margin of other Chinese EV market players. This is further reinforced since people remain frugal due to the slowing economic conditions post Covid-19. Vaidya of Frost & Sullivan clarified that EVs make money for OEMs such as Tesla, leading to price cuts for them to get their products in the market.
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When running, Tesla has charging points which generate income for every mile driven. To achieve wider market presence, Vaidya said Tesla is indulging in discounts and price wars. Afterwards, revenue is expected to come in.
BYD Electronics, the electronics arm of the automobile manufacturer, has announced it is acquiring Jabil's mobile electronics manufacturing business in China for around $2.2 billion. BYD Electronics produces a range of products such as smartphones, tablet PCs, new-energy vehicles, robots and communications equipment.Concurrently, Xpeng disclosed its intent to purchase Didi's smart electric car development business in an exchange of shares valued at $744 million, with plans to launch an electric car next year under a new brand. Moreover, Xpeng is participating in a joint effort with Volkswagen to create two new EVs with advanced driver-assist software for the Chinese market, with an expected rollout of 2026. Volkswagen is investing $700 million and taking a 4.99% stake in Xpeng. - CNBC's Evelyn Cheng was a contributor to this report.
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