Shares in electric vehicle maker BYD slid on Monday after it reported quarterly profit fell for the first time in more than three years, with analysts saying its competitive advantage was being eroded by Chinese government efforts to stop a price war.
Net profit at the world's biggest EV producer tumbled 30% in the second quarter to 6.4 billion yuan ($895 million) from a year earlier, it reported. That followed a doubling of profit in the first quarter.
Its Hong Kong-listed shares closed 5.2% lower, after an 8% drop at the open, which was its biggest one-day percentage decline since May 26. Its Shenzhen-listed shares (002594.SZ) fell 3.8%.
BYD has grown its sales rapidly in recent years by leveraging its vertically integrated supply chain to fund aggressive price cuts and lead a years-long price war in China's auto sector.
But Chinese authorities, worried about the health of the sector, have ordered automakers to stop the price cuts.
Jefferies analysts said BYD's "surprising underperformance" stemmed from "a confluence of lackluster sales momentum and structural headwinds eroding its once-formidable competitive moat."
Their note published on Sunday said they were cutting their 2025-2027 earnings forecast for BYD to reflect this. "In short, BYD’s 'gravy train'—fueled by scale, cost cuts, and tech leadership — has lost speed. Until it regains momentum, underperformance looks likely."
Citi analysts said in a client note that BYD's net profit missed a consensus estimate of 7-9 billion yuan and their forecast of 10.3 billion yuan. They noted that price cuts made during the period had failed to improve sales sufficiently and that BYD had paid a 1 billion yuan special incentive to dealers during the period.
BYD is targeting global sales of 5.5 million cars this year, but as of end-July, it has sold just 2.49 million, equal to 45% of its goal. It is set to report August sales later on Monday.
($1 = 7.1529 Chinese yuan)
