© Anindito Mukherjee/Bloomberg
The taillight of a BYD Co. Atto 3 electric vehicle displayed at the India Auto Expo 2023 in Noida, Uttar Pradesh, India, on Friday, Jan. 13, 2023.
Price wars have consequences.
Tesla (ticker: TSLA) price cuts are rippling across the Chinese electric vehicle industry, impacting profits at BYD (1211.Hong Kong). Still, the company suffering most from Tesla‘s cuts is Tesla.
Thursday evening local time, BYD reported a 43% quarterly drop in profit as the market leader appeared to feel the impact of the continuing price war.
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First-quarter profit from the EV maker soared 400% to 4.13 billion yuan ($596.5 million) compared with the same period in 2022, but retreated from the fourth-quarter net profit of 7.3 billion yuan, a record high. Sales surged 80% to 120.17 billion yuan on a year-over-year basis.
Operating profit margins in the quarter came in at about 4%, down from 6% in the fourth quarter of 2022, but up from about 2% reported in the first quarter of the prior year.
Year-over-year improvement stands out versus Tesla, which has cut prices for its vehicles in China several times this year, as well as in other markets, in a bid to stimulate demand. Tesla price cuts have drawn responses from competitors and BYD has reduced prices on some of its models, according to local media.
Tesla’s operating profit margin in the first quarter came in at about 11%, down from about 16% in the fourth quarter and 19% in the first quarter of 2022. Tesla’s average price per vehicle sold (which is a proxy taken by dividing automotive sales by deliveries) came in at $47,000—down about $7,000, or about 13%.
BYD’s average sale price (which is a proxy based on total revenue) came in at about $31,000, down 10% year over year.
BYD stock was up 1.4% in overseas trading. U.S.-listed American depositary receipts, or ADRs, aren’t trading in the premarket yet. S&P 500 and Dow Jones Industrial Average futures were both down about 0.4%.
The stock rising after earnings also stands out versus Tesla, shares of which dropped about 10% after Q1 profit margins (reported April 19) missed Wall Street estimates. Tesla stock was down about 1% in premarket trading after rising 4.2% Thursday.
Warren Buffett’s Berkshire Hathaway, which is a BYD investor, has reduced its stake on at least 10 occasions since August last year.
Write to Callum Keown at callum.keown@barrons.com