Life atop China's car market starting to look shaky
SHANGHAI: Life at the top is proving complex for China's leading automaker, and there are fresh challenges on the horizon.
BYD Co's monthly sales have stagnated of late and with the summer months being a traditionally slower time for consumer purchases, that trajectory isn't expected to reverse any time soon.
Discounting is also now being looked sternly upon by Beijing, with China last week pledging to rein in 'irrational competition' in the electric vehicle (EV) sector, reflecting the authorities' wish to tackle the deflationary price wars that are threatening economic and industrial growth.
Some of BYD's international forays are also proving more challenging than expected, raising the question, is China's No 1 automaker on shaky ground?
The Shenzhen-based behemoth currently looks like it will undershoot its annual sales target for 2025, in what would be a rare miss after a multi-year bull run.
The number of electric and hybrid vehicles BYD needs to sell each month through December has hit 560,000 units, in excess of levels it could hope to achieve typically in a single month.
The most vehicles BYD has ever sold in a month was just shy of 515,000, in December last year.
Analysts are now doubting whether BYD can hit 5.5 million units in 2025. Consensus estimates continue to be downgraded.
Deutsche Bank AG earlier this month said it now expects five million in wholesales, or deliveries to dealers, for this year, comprising four million domestic units and one million overseas, while Morgan Stanley last month lowered its projection to 5.3 million, pointing to a smaller number of new models.
Bloomberg Intelligence's Joanne Chen said BYD would need to sacrifice some profit and maintain its hefty discounting in the second half if it wants to stay on track.
'Regulatory scrutiny will temper direct cuts to vehicle sticker prices but competition isn't going away and retail promotions are still needed to sustain sales momentum,' she said.
'New model rollouts and steady tech upgrades are also crucial.'
Bing Yuan, a fund manager at Edmond de Rothschild Asset Management, said many market watchers now realistically expect sales of around five million.
'My sense is that is the consensus,' she said.
Stripping out overseas and commercial sales, BYD's core car deliveries in China are shrinking.
In June, they slipped 8% year-on-year as vehicles from brands like Zhejiang Geely Holding Group Co, Xpeng Inc and Xiaomi Corp won over buyers.
HSBC Holdings Plc data showed that Geely was the largest gainer of market share in the first half, while BYD was among the biggest losers. — Bloomberg
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