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BYD’s strong Q1 amidst China EV price war

Chinese EV maker BYD posted higher profit in the three months to March despite the intensifying price war in China and a surge in investment in new technologies. The Warren Buffett-backed automaker’s net profit rose 11% year-on-year to 4.57 billion yuan ($US630.7 million) in the first quarter, it announced Monday night.

BYD’s rise in earnings contrasts with Tesla, which saw a slide to $US1.13 billion for the first quarter. BYD, though, produces batteries – it’s the second biggest globally after fellow Chinese giant CATL. The company also has a significant electronic component assembly operation whose customers include Apple.

Revenue rose 4.0% year-on-year to CNY124.94 billion ($US17.2 billion), despite price cuts throughout the quarter by carmakers including BYD and Tesla amid slowing demand. This led to first-quarter earnings being 47% lower than those in the fourth quarter, due to the impact of price cuts and other support for buyers.

Sales of BYD’s electric and hybrid vehicles rose 13% year-on-year to 626,263 units in the quarter. BYD also posted a 70% rise in research and development expenses, to CNY10.61 billion ($US1.45 billion), partly due to an increase in employee remuneration, it said.

BYD’s cash and cash equivalents reserves amounted to RMB 86.2 billion (around $US12 billion) at the end of the first quarter, up from RMB 54.9 billion in the same period last year.

The first-quarter results include the Chinese Lunar New Year holiday, which is typically a seasonal low point for vehicle sales. But that only applies to comparisons with the fourth quarter. The 13% rise from the year-ago quarter is a better measure of the performance but doesn’t obscure the rising pressures the company is under.

As for smaller Chinese NEV (new energy vehicle) makers, they may be feeling even more pressure in the current price war.