China’s EV price war: BYD, Li Auto sell more with thinner margins, as discounts intensify

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China’s only profitable EV builders rebound from poor first-quarter performance, with BYD’s second-quarter earnings nearly doubling

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Workers assemble an EV inside a BYD factory in Rayong, Thailand, on July 4, 2024. Photo: Reuters

Daniel Renin Shanghai

Published: 9:04pm, 28 Aug 2024Updated: 9:48am, 29 Aug 2024

BYD and Li Auto, the only two profitable electric vehicle (EV) makers in mainland China, have returned to the fast track with higher second-quarter earnings, despite a price war that is eating into margins even as it lures more drivers to join the growing ranks of EV owners.

Shenzhen-based BYD, the world’s largest EV builder, earned 9.1 billion yuan (US$1.28 billion) for the three months ending June, up 98.4 per cent from the first quarter and 32.8 per cent year on year. First-half profit of 13.6 billion yuan fell short of a consensus analyst forecast of 17.9 billion yuan in a Bloomberg survey.

Beijing-headquartered Li Auto said its second-quarter profit jumped 86.2 per cent from the previous three months to 1.1 billion yuan, barely exceeding a forecast of 1.06 billion yuan in a Bloomberg survey. In the preceding three months, its profit plunged 90 per cent from the previous quarter to 591 million yuan.

“Top players have shown their resilience after getting off to a slow start this year,” said Ding Haifeng, a consultant at Integrity, a Shanghai-based financial advisory firm.

BYD’s second-quarter performance was its second-best, behind a 10.4 billion yuan profit in the third quarter of 2023. In the January-to-March period, BYD reported a 47.3 per cent quarter-on-quarter decline in profit to 4.6 billion yuan.

BYD did not provide second-quarter 2024 numbers directly; the figures above were derived by comparing its first-half figures and its first-quarter results, published in April in Hong Kong stock exchange filings.

In the second quarter, the EV penetration rate on the mainland surged to 45 per cent, from 31 per cent between January and March. The rate has since surpassed 50 per cent in July as major EV assemblers slashed prices.