BYD’s Competitive Advantage Is Facing Challenges

Chinese new energy vehicle maker BYD, whose sales have increased significantly in the past year, is facing challenges. The sluggish demand for new energy vehicles and the sharp drop in prices of lithium carbonate sources have caused the battery market to shift towards a buyer’s market gradually. According to a report by Chinese media outlet DMS, BYD’s cost advantage has been affected.

In March 2023, BYD sold 206,100 new energy passenger cars, an increase of 97.52% year-on-year and an increase of 7.53% month-on-month. Among them, the sales of plug-in hybrid vehicles (DM) were 103,419 units with a month-on-month growth rate of 2.37%. The sales of pure electric vehicles were 102,670 units with a month-on-month growth rate of 13.27%.

SEE ALSO: BYD Launches 2023 Version of E2 Model

It is worth mentioning that BYD was reported to have set an expected sales target to reach 4 million vehicles by 2023. At an internal performance meeting held on March 29, Wang Chuanfu, Chairman and CEO of BYD, said that China’s total sales volume for new energy vehicles would be around 8.5 million to 9 million in 2023. Wang said it was “a sure thing” that BYD’s sales would reach 3 million units. If things would go better than expected then BYD could possibly double last year’s sales figure, reaching 3.6 million units.

BYD needs to sell 300,000 vehicles per month if it wants to reach an annual sales target of 3.6 million. However, as of March, the company’s sales volume is still far from reaching this goal.

In March of this year, BYD experienced a trend of differentiation in its mid-to-high-end product sales. The Denza D9, which is priced above 400,000 yuan ($58,199.59), sold ten thousand units while the mid-range models such as the BYD Song series and BYD Seal saw declines compared to previous months. Specifically, the Song series sold 40,510 units in March which represents a month-on-month decrease of 22.69%. Similarly, Seal sold 6,000 units in March which is also a month-on-month decrease of 22.62%.

The auto industry in China is currently facing a fierce price war, which has been instigated by new energy vehicle companies like Tesla and joint venture automakers. This price war mainly affects vehicles priced between 150,000 to 250,000 yuan, such as BYD Song and Seal. In the previous month, BYD also provided limited-time discounts on its Song PLUS DM-i and Seal models with a discount of 6000 yuan and 8000 yuan respectively.

In addition to the competitors, BYD has been adversely affected by the drop in lithium carbonate prices for battery raw materials.

In 2022, when lithium carbonate prices soared, the supply of batteries was insufficient, and car companies could only accept higher battery prices. The major advantage for BYD is that it can produce its own batteries at lower costs than other automakers, launching more cost-effective models.

Since the beginning of this year, due to sluggish demand in the new energy vehicles market and continuous decline in lithium carbonate prices, the average spot price for battery-grade lithium carbonate was 224,000 yuan per ton on April 4 according to Shanghai Steel Union data. This represents an accumulated price decline of about 57% from the beginning of this year compared with last November’s historical high quotation which fell by about 62%.