"Fallen After Just 1 Year of Becoming 'World No. 1'?"... 'Tesla Killer' BYD, 30% of Profits Vanished Due to 'This'
"China's BYD, which surpassed 'Tesla' to become the world's number one EV company. A 'red light' has been turned on in their unstoppable growth."
They recorded an 'earnings shock' with a 30% evaporation of Q2 net profit and even a decline in Q3 sales. The reason why BYD, which seemed like an 'invincible armada', is shaking, lies squarely with the 'Chinese government'.
'30% Profit Evaporation'... What Happened?
BYD's recently announced earnings delivered a big shock to the market.
- Q2 Net Profit: 30% decrease year-on-year (first quarterly profit decrease in 3 years)
- Q3 Sales: First year-on-year decrease since 2020
Ultimately, BYD significantly lowered its sales target for the year by a whopping 900,000 units, from 5.5 million to 4.6 million.
The 'Regulatory Iron Fist' of the 'Chinese Government'
What shook 'Tesla Killer' BYD was none other than the Chinese government's regulations.
- 1. Price Discount Restrictions:
"The government put a halt to BYD's aggressive 'price war' strategy, which was its strongest weapon."
- 2. Shorter Payment Terms for Suppliers:
"By enforcing a 'within 60 days' payment term for suppliers, down from an average of 275 days, the government placed significant pressure on BYD's cash flow."
'Hope' is the 'Overseas Market'... But 'Tariff Barrier' is a Variable
Now, BYD's hope lies in the 'overseas market'. Indeed, in September, UK sales surged by 880% year-on-year, emerging as the largest overseas market.
However, major markets such as Europe and Mexico are showing signs of imposing regulations and raising tariff barriers against 'low-cost Chinese EVs', suggesting that conquering overseas markets will not be easy.
Aftermath of the 'Chicken Game'
BYD's crisis is a symbolic event showing that the 'chicken game' in the overheated Chinese EV market is coming to an end.
With its overwhelming growth in the 'home market' halted, the whole world is watching to see if BYD can maintain its 'world number one' position in the challenging 'global market'.
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