From Fortune:

Investors are disappointed to learn that BYD’s record sales, driven by a fierce price war in China, won’t result in substantial profits. Despite this, BYD still outsold Tesla in battery-electric vehicles.

Shares of Chinese EV automaker BYD have declined by 4.7% due to the company’s predicted net income drop for 2023. The Hang Seng index also fell by 2.4% following the announcement.

BYD forecasts a net profit of 29 billion to 31 billion yuan ($4.1 billion to $4.4 billion) for 2023. Although representing an 86.5% increase from the previous year, this figure fell slightly short of analyst predictions.

Recent record-breaking sales did not result in higher profits for BYD. Its margins could be under pressure from an intense price war in China, despite exceeding the company’s sales target for the year.

BYD reported a significant improvement in profitability despite the increasingly fierce competition in the industry and rapid growth in overseas sales volume. The company’s shares are down 45% from their peak in July 2022.

Prices of BYD models in China have dropped as the automaker races to meet its full-year sales target, putting pressure on margins. This intense price war could last two to three years according to manager Yunfei Li.

BYD is expanding to markets outside of China, including Japan, Southeast Asia, and Europe, which may face slower growth. Regulatory scrutiny will be a factor in these markets, with the company being targeted by the European Commission’s anti-subsidy probe.



Read more: BYD’s victory over Tesla may have come at the cost of lower profits