BYD and Chinese state-owned carmaker GAC reported strong growth in revenue and profits in the third quarter, further expanding their lead among Chinese peers. Other Chinese automakers — state-owned SAIC, and Huawei partners Seres and Changan — have reported mixed results with slowing growth or stagnated earnings. Rising material costs and intense competition are among the factors contributing to the companies’ woes.

Why it matters: BYD reported significantly stronger profitability than its peers with a gross margin of 22.75% in the third quarter, followed by Changan’s 17.4%, SAIC’s 9.6%, and GAC’s 4.6%, while Huawei-backed Seres is still losing money.

  • BYD and GAC are showing their advantages as their EV models consistently top sales chart. Other automakers’ disappointing third-quarter results came against the backdrop of soaring lithium prices, an ongoing price war between major automakers, and the looming phase-out of EV purchase subsidies by the government by year-end. Experts anticipate that many automakers will reduce prices in exchange for market share, which could further impact their profitability in the short term.
  • The spot prices of lithium carbonate in China exceeded the RMB 500,000 ($68,776) threshold on Sept. 13, a nearly 80% increase from the beginning of this year, according to figures from the metal research institute Shanghai Metals Market.

BYD: The Shenzhen-based manufacturer reached an average of around RMB 10,000 profit per unit sold from July to September, a significant increase from RMB 6,400 in the previous quarter, according to estimates from Jefferies Financial Group. Net profits reached RMB 5.7 billion, a gain of 350% from the same quarter in 2021.

  • Analysts listed both an increase in average selling price and better economy of scale as contributing factors. Yet, BYD’s profitability is still much weaker than rival Tesla’s, which made $3.3 billion in net income in the same quarter.
  • Shares of BYD jumped 6% in Hong Kong on Monday after the EV giant on Friday posted sales of RMB 117 billion ($16.1 billion) for the third quarter, up 116% from the same period in the previous year. 

GAC: State-owned GAC also reported strong third-quarter results, with revenue up 51.6% year-on-year to RMB 31.5 billion and profit growth of 144%. Toyota’s Chinese partner is aiming for a delivery target of 250,000 Aion-branded EVs this year and has sold around 182,000 units as of September.  

SAIC: On the opposite end of the spectrum was SAIC, which has seen its stock price fall 30% since 2022. Sales from China’s biggest automaker grew 12.9% year-on-year to RMB 205.2 billion in the third quarter, but profit fell 18.4% annually to RMB 5.74 billion.

  • The results also revealed that SAIC’s manufacturing partner Volkswagen is under big pressure as it struggles to catch up with pure-player EV makers. The German automaker saw the overall market share of its venture SAIC-VW slide to 5.8% from 8.2% two years ago.

Huawei partners: Results from Huawei’s EV partners were also less impressive. Seres saw losses widen 57.3% from a year earlier in the third quarter to RMB 947 million, partly due to rising costs of raw materials, having recorded a sharp growth in sales of its Aito-branded EVs.

  • Changan’s revenue rose 28.4% but profits fell 17.5% in the quarter. Avatr, the automaker’s EV subsidiary, will begin selling vehicles via Huawei’s retail stores as early as December, China Securities Journal reported Friday, citing a company spokesperson.

Context: Early this year, more than a dozen Chinese automakers raised EV prices to offset the rising cost of electronic components and battery materials used in vehicles. However, Tesla went the other way by slashing as much as 9% of its car prices last week, with Huawei-backed Seres quickly following suit. Analysts from China Merchants Bank International expected general car sales to slow into 2023 in China, while EV makers are also facing growing competition given a challenging macro environment, according to an Oct. 24 report by Reuters.

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