中 BYD Records 5% Decline in Annual Profit 'First Time in 4 Years Since 2021'

*This content was translated by AI.

China's largest electric vehicle maker BYD is sending shockwaves through the global automotive industry, posting its first annual profit decline in four years since 2021. The earnings announcement clearly reveals the backside of the slowing growth of the global electric vehicle market and intensifying price competition beyond just worsening corporate profitability. According to an earnings report released on the 27th local time, BYD's net profit fell about 5% year-on-year last year, suggesting that China's electric vehicle industry, which had been growing rapidly, is facing a major inflection point due to saturation of the domestic market, reduction of government subsidies, and bleeding competition with domestic and foreign competitors such as Tesla.

In particular, it is the aggressive price reduction policy that is blamed as the main cause of the decline in profits. BYD succeeded in increasing sales by cutting prices of major models one after another to achieve market share, but as a result, the margin rate per unit fell sharply. Companies are being pushed to the extreme option of price competition as consumers hesitate to buy expensive EVs due to rising household debt and concerns about a recession in China, which also poses a common threat to other Chinese start-up brands such as Xpeng and Li Auto.

In addition, raw material price volatility and uncertainty in the global supply chain are also analyzed as factors that worsened the profit structure. Despite the decline in lithium prices, a key material for batteries, the overall rise in manufacturing costs and logistics costs offset profits and put pressure on management. Moreover, rising Western protectionist barriers, such as the EU tightening anti-subsidy investigations into Chinese-made electric vehicles and considering additional tariffs, have also hampered BYD's strategy to expand overseas markets, a significant stumbling block to its original plan to break through sluggish domestic demand with exports.

Experts point out that even though BYD has the world's largest production capacity and strong vertical sequencing advantages of self-supply of batteries, it is time for a paradigm shift from quantitative to qualitative growth. Analysts say that it will not be easy to recover profitability in the future without cost reduction through technological innovation. In particular, as competitiveness in self-driving software and high-performance semiconductors is emerging as a key factor in determining future market leadership, related R&D investment is expanding significantly, but there are also concerns that the huge cost incurred in the process could further burden financial structures in the short term.

As a result, BYD's decline in performance symbolizes the entry into the "Death Valley" section, which represents a temporary stagnation in the golden age of electric vehicles, and the global automotive market is likely to be reorganized into a small number of large companies with financial power in the future. Companies' survival strategies to survive are expected to become fiercer. Industry sources say BYD will try to make a breakthrough by turning its eyes to emerging markets such as Southeast Asia and South America, but analysts say that only thorough cost management and brand high-end strategies can ensure sustainable growth, along with pessimistic predictions that it will be difficult to expect explosive profit growth for the time being as long as global high interest rates and consumption contraction continue.

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*This content was translated by AI.