BYD on Monday reported better-than-expected profits for the first half of 2022, buoyed by strong demand for its electric vehicles and a stable supply of much-needed car components when many peers are struggling with the economic slowdown and persistent supply-chain challenges. 

Despite these rosy figures, the auto major saw its stock price slide after Warren Buffett’s Berkshire Hathaway reduced its stake in the company.

Why it matters: Analysts have pushed for significantly higher stock prices, given BYD’s all-around strength in the EV operations and battery business.

  • Credit Suisse analyst Wang Bin on Tuesday retained his bullish thesis on BYD’s stock and raised the price target to HK$400 ($60) from HK$380, anticipating that sales in the third quarter could reach 480,000 vehicles with profits hitting a new record-breaking figure of RMB 5 billion.
  • Meanwhile, Chinese car expert Zhang Xiang said in a virtual conference that he sees  BYD as a “Huawei of autos” in the making, pointing to its diversified business model that covers consumer products, components, and various technologies.

Details: On Monday, BYD reported a record half-year profit of RMB 3.6 billion ($521 million), hitting the upper end of its forecasts released in July of between RMB 2.8 billion and RMB 3.6 billion, as well as surpassing last year’s total of RMB 3.04 billion.

  • Despite this, revenue in the six months ending in June missed estimates of RMB 166 billion, hitting RMB 150.6 billion instead, still up 65.7% over last year, according to figures compiled by Bloomberg.
  • The earnings were driven by success in BYD’s EV manufacturing and car-related businesses, which account for more than 72% of its total revenue. Revenue grew 130% to RMB 109.3 billion from a year earlier.
  • With its in-house supply of batteries and some of the microchips required for its vehicles, the Shenzhen automaker has been able to maintain production with relatively little disruption at a time when many of its competitors have been hit by multiple problems, including Covid restrictions and supply constraints, Zhang added.
  • Meanwhile, the automaker said its dual strategy of betting on both all-electrics and plug-in hybrids had offered consumers a vast selection, boosting sales and profitability.
  • BYD has identified a general concern among Chinese buyers about the lack of wide EVs charging infrastructure and then addressed their needs with mature plug-in hybrid technologies, Zhang told reporters during an online conference on Tuesday.
  • A wide portfolio of vehicles also allows BYD to target different consumer segments. For example, its DM-i series is designed to provide reliable and energy-efficient transportation to the working class, while its DM-p series targets the wealthier middle class with better performance, according to Zhang.
  • BYD stock nevertheless ended down 0.86% to HK$310.85 on Tuesday, before slumping 7.1% during Hong Kong morning trading on Wednesday. The sell-off came after Warren Buffett’s Berkshire Hathaway trimmed its holdings in BYD’s Hong Kong-listed shares from 20.49% to 19.92%, selling a near $47 million stake in the carmaker, Reuters reported on Tuesday.

Context: BYD’s market share in the Chinese EV market reached 24.7% for the first six months of this year, representing an increase of 7.5 percentage points from last year, thanks to strong delivery numbers.

  • The auto giant sold the equivalent of 24 gigawatt-hours (GWh) of batteries from January to June, taking an 11.8% share of the global EV battery market, according to figures compiled by SNE Research.
  • Some of its rivals are starting to catch up by deploying similar strategies. GAC and Nio plan to bring some battery manufacturing in-house, while both Xpeng Motors and Li Auto have promised to launch two new vehicle models in 2023 targeting different consumer segments.

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