BYD eyes overseas growth amid record sales and price wars in the EV markets

Amid high expectations for impressive sales figures from Chinese automaker BYD Co., the company now faces the challenge of presenting a compelling narrative of its international expansion to drive the next phase of its stock rally, outperforming its competitors.

In China’s electric-vehicle market, recognized as the global leader, the company is on track to surpass Tesla Inc. in quarterly revenue for the first time. The upcoming earnings report from BYD on October 30 will be closely monitored, especially considering the challenging profitability landscape due to persistent price competitions within the industry.

Market analysts emphasize that the expansion of the company’s sales beyond China plays a pivotal role in driving additional growth in the Hong Kong-listed shares, which have soared by 66% since hitting a low point in February. Despite the promising prospects for exports, the outlook is overshadowed by trade conflicts. To address this challenge, BYD is strategically ramping up localized manufacturing initiatives.

Kevin Net, who oversees Asian equities at Financiere de L Echiquier, emphasized that exporting will be the primary factor driving the company’s growth, potentially making a significant impact starting as early as next year.

Bloomberg’s data revealed that BYD achieved a groundbreaking milestone by selling over 1.1 million new energy vehicles for passengers in the quarter ending in September. Analysts project that the company, headquartered in Shenzhen and focusing on automotive and battery production, will reach record-breaking sales of $28.8 billion, surpassing Tesla’s reported $25.2 billion revenue.

Market analysts suggest that the robust domestic demand, driven by Chinese government incentives for replacing older vehicles, is surpassing initial forecasts. This trend is anticipated to continue gaining momentum in the ongoing quarter, Bloomberg Intelligence reports. Additionally, BYD is reaping the rewards of competitive pricing strategies and advancements in its plug-in hybrid technology, according to industry experts.

Amidst protectionist headwinds and a slowdown in electric vehicle (EV) adoption, uncertainty looms on the global horizon. Recent moves by the European Union to slap tariffs of up to 45% on Chinese electric vehicles, coupled with sluggish EV sales in various regions due to cost issues and changing consumer tastes, further cloud the international economic landscape.

BYD may face hurdles in achieving its anticipated goal of surpassing 450,000 units in international sales this year, considering its cumulative figure for the initial nine months stands at approximately 300,000 units, as indicated by data compiled by Bloomberg. Moreover, the proportion of exports to BYD’s monthly sales declined to 7.3% in September from a high of 13.1% recorded in April.

The company is persistently broadening its reach into fresh markets and has achieved success in attracting customers with its more affordable product lines. Simultaneously, it is proactively tackling trade apprehensions by establishing manufacturing facilities in 10 different nations across three continents.

In a recent report, Nomura Holdings Inc. analyst Joel Ying expressed optimism about BYD’s prospects for continued expansion in international markets despite the obstacles faced. He anticipates that the company’s strategies abroad will solidify its growth trajectory in the medium to long term.

Morgan Stanley analysts, Tim Hsiao among them, mentioned in a recent note that BYD is establishing manufacturing facilities in strategic areas across Asean and Latin America. Highlighting Brazil, Thailand, and Israel as the primary foreign sales markets for the company, fueled by the increasing demand for EVs and favorable trade relations with China.

According to data from S&P Global Inc., despite BYD’s stock rise, traders have lowered their pessimistic positions, cutting short interest from a peak of 7.7% earlier this year to just 0.8% this week. Additionally, the expense of safeguarding against stock drops in the options market has decreased.

Shuyan Feng, deputy general manager for investment management at Huatai Asset Management (Hong Kong), highlighted BYD as the premier auto stock in China for investors implementing a buy-and-hold approach.

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