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TIME TO RECHARGE

A drop in demand for fossil-fuel cars has hurt the world’s biggest EV maker

A worker stands behind a car manufactured at a BYD assembly line in Shenzhen, China May 25, 2016. REUTERS/Bobby Yip - SR1EC5S0IXY0M
Reuters/Bobby Yip
Need a boost.
By Echo Huang
Published Last updated This article is more than 2 years old.

China’s electric car giant BYD is the country’s top-selling electric vehicle manufacturer—its sales in China doubled last year. And last month it sold close to 29,000 (pdf) electric vehicles, a nearly 300% increase from a year before. But its profit numbers aren’t so pretty.

BYD reported that net profit for 2018 dropped 31.4% to 2.8 billion yuan (pdf, $417 million) from a year earlier, according to preliminary numbers it announced late Wednesday (Feb. 26). The decline came despite revenue growth of more than 22%. The drop, in line with company forecasts, comes as the Warren Buffet-backed manufacturer faces pressure on all three of the businesses it relies on—automobiles, solar power, and mobile phones—as China’s economy slows. The final numbers for the year will come at the end of March.

BYD had a good year if you look at its sales figures alone. In December, it said it had sold 247,811 “new energy vehicles” (pdf, unaudited numbers)—a figure that includes both battery and hybrid vehicles, and passenger cars as well as other types. That would be more than double the 110,000 such vehicles (pdf, p. 8) it reported selling in 2017. The company said yesterday that it had topped global sales for a fourth year running (Tesla’s 2018 numbers suggest they’re nearly tied).

That’s in line with a growing NEV market in China, which last year for the first time saw over a million sales, or more than half the world’s total.

But despite being the world’s largest NEV maker, BYD has been hurt by the decline in China’s demand for fossil fuel vehicles, which it still relies on heavily—it sold 245,000 fuel vehicles (link in Chinese, pdf, p.12) in 2017, almost twice the number of NEVs in the same period. BYD said that the slowing demand for conventional cars had increased competition in that sector, hurting profitability, according to the preliminary financial report.

BYD isn’t getting a helping hand from its handset components and assembly either, which make up more than 40% (link in Chinese, pdf. p.15) of its revenue. The firm said “orders and profits were both under greater pressure than before” because of weak demand and intensified competition.

Meanwhile the photovoltaic business, which makes up less than 10% of its revenues as of 2017, saw losses because of changes in policy and impairment costs, it said in the filing.

BYD’s been looking for ways to diversify its business—it plans to spin off its battery business, and will make a public offering of it as early as 2022 (paywall). It’s also pushing a project called SkyRail, a monorail public transport system, at home and abroad. Yet critics are wary of how well these plans will serve BYD—rival carmakers might be wary of revealing details of their car designs if they source batteries from BYD. Meanwhile, regulatory hurdles at home are stalling BYD’s progress on monorails.

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