BYD follows Tesla and lowers prices

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Cut the prices of its vehicles in the first quarter, now comes the electric vehicle leader in China BYD and cuts prices in the second quarter.

Citi analyst Jeff Chong noted that BYD has lowered prices on its hybrid vehicles. This is the second cut in the “last 210 hours,” Chung wrote. About a week ago, BYD also lowered the prices for its Seal electric vehicle. The download, which varies depending on the version, ranges from about 3% to 10%. The price of the car now starts at about 28 thousand dollars. The price of Tesla’s Model 3 in its basic version is sold in China for about 34 thousand dollars.

Price cuts can often signal trouble in the market, but in the current case there doesn’t seem to be a problem with demand. Sales for the current year, which include electric and hybrid vehicles, increased by 43% compared to last year to 2.1 million units. When sales of electric vehicles alone increased by 29% to 1.5 million vehicles and sales of hybrid vehicles increased by 100% to 600 thousand vehicles. These numbers are probably a bit inflated. Chung wrote that the automakers likely included some early May sales in the April numbers. He also said that he expects a strong year for EV sales in China, with an increase in vehicle sales of about 30% compared to last year.

It is possible that BYD is trying to adapt to Tesla’s price reductions, when the latter reduced the prices of its vehicles 6 times in the world. Price cuts that probably achieved their goal, it managed to increase its market share in China in the first quarter and increased sales by almost 30% compared to last year. The price cuts also reveal the risks when using them as a tool to gain market share. When everyone lowers prices, market shares don’t change much and everyone is worse off because they earn less. Except for the consumers.

BYD and Tesla are the only two electric vehicle manufacturers that consistently generate profits and their price cuts put pressure on the other electric vehicle manufacturers. While the other companies are a little more complex to lower prices.

Tesla recently published its reports for the first quarter of 2023 according to which its revenues amounted to 23.33 billion dollars while the market analysts’ expectation was for revenues of 23.35 billion dollars. The company reported an adjusted profit of 85 cents per share while the expectation was for an adjusted profit of 86 cents per share. The big miss was in the free cash flow which was only 400 million, far below the expected 2.23 billion dollars.