Chinese automaker BYD reported an estimated profit between RMB 2.8 billion to RMB 3.6 billion ($410 million to $530 million) in the first half of 2022 on Thursday, with the potential to beat last year’s total profit of RMB 3.04 billion. The results pushed the company’s share prices up 3.89% on the Hong Kong stock exchange on Friday.

Why it matters: The performance of BYD contrasted sharply with many other traditional Chinese automakers, which reported significant drops in profit, reflecting BYD’s ability to navigate the ongoing supply-chain challenges and an economic downturn. 

Details: BYD’s estimated figures of net profit in the first half more than doubled from last year’s RMB 1.17 billion. The company attributed these numbers to strong electric vehicle sales, according to a Thursday statement (in Chinese).

  • The estimate suggests that the company could post a better-than-expected profit of at least RMB 1.99 billion for the second quarter of this year, analysts at Goldman Sachs said in a note, as the investment bank maintained BYD on its Conviction Buy list, Chinese media outlet Sina Finance reported Friday.
  • Basic earnings per share would be between RMB 0.96 to RMB1.24, compared with RMB 0.41 for the same period last year. BYD may further improve its margins in the near future as raw material prices decline from recent highs, state-owned media agency Yicai reported Friday, citing a company representative.
  • On Thursday, BYD peers JAC Group and BluePark New Energy Technology, BAIC’s electric unit, expected net losses of the first half to be around RMB 700 million and at least RMB 1.8 billion, respectively. The automakers blamed these lackluster numbers on Covid lockdowns, auto chip shortages, and surging battery prices.
  • Huawei’s manufacturing partner Chongqing Sokon Industry Group posted an estimated loss of between RMB 1.6 to RMB1.76 billion for the first six months of this year, compared with RMB 481 million for the same period in 2021, as the company ramps up its EV development efforts.

Context: This rally by Shenzhen-based BYD put its market value at about $133.2 billion on Friday, maintaining its position as the world‘s third-biggest automaker during the month, although some analysts now view it as greatly overvalued.

  • BYD’s market valuation is over-optimistic, GF Securities analysts wrote in a July 7 report, adding that the company’s in-house supply chain could lower its operational efficiency while ensuring the supply of key components.
  • The brokerage also worries about the future profitability of BYD’s EV battery business, as its efforts to challenge CATL could lower its prices to gain market share, financial media outlet Caixin reported (in Chinese).
  • The Warren Buffett-backed automaker posted a record sales volume of 641,350 EVs for the first half of 2022. It also sold the equivalent of 19 gigawatt-hours (GWh) of batteries as of May this year, closely following second-placed LG Energy Solution but falling far behind first-placed CATL, according to figures from Seoul-based SNE Research.

Jill Shen

Jill Shen is Shanghai-based technology reporter. She covers Chinese mobility, autonomous vehicles, and electric cars. Connect with her via e-mail: jill.shen@technode.com or Twitter: @yushan_shen