The analysts attributed the approximately RMB 1,400 decline in BYD’s average profit per vehicle in the fourth quarter to strategic discounts and dealer incentives. BYD’s (OTCMKTS: BYDDF) 2023 financial results signaled a robust performance overall, but the quarterly net profit hinted at a decrease from the third quarter. Local analysts, delving into the earnings preview, shared insights into the factors behind this shift.
According to SDIC Securities analyst Xu Huixiong’s team, excluding contributions from BYD Electronic and considering the median value of the preview, BYD reported an average net profit per vehicle after non-recurring gains and losses of RMB 9,100 ($1,270) in the fourth quarter. This reflected a decrease of around RMB 1,400 compared to the third quarter of 2023.
SDIC Securities highlighted several reasons for this decline:
- Promotional discounts on BYD’s Ocean and Dynasty lineups during November and December, ranging from RMB 5,000 to RMB 10,000, significantly impacting per-vehicle profits.
- Higher marketing expenses in the fourth quarter to achieve the annual sales target of 3 million units, including incentives to stores meeting sales goals, amounting to RMB 666 per delivered vehicle.
- The drop in average net profit per vehicle was less significant than the incentives offered due to specific factors: shorter duration of incentives for Ocean and Dynasty series models, lower lithium carbonate prices in the fourth quarter, and strong sales performance of premium and export models.
BYD’s net profit for 2023, as per the earnings preview, is expected to be between RMB 29 billion and RMB 31 billion, marking a year-on-year increase of 74.46 percent to 86.49 percent. However, the fourth-quarter net profit is estimated to be between RMB 7.6 billion and RMB 9.6 billion, showing a slight decline from the third quarter.
SDIC Securities emphasized BYD’s strong overall performance in 2023, expecting continued high growth in 2024. The company’s progress in the premium market, with the Denza brand and upcoming flagship sedans, indicates positive momentum. New models, such as the Bao 3 and Bao 8, are poised to make breakthroughs in the off-road NEV market, while the Yangwang U9 and U7 will join the U8 in targeting the RMB 1 million luxury car market.
The team anticipates improved earnings due to the better profitability of premium models, predicting continued growth and high profitability for the BYD brand through scale advantages and contributions from overseas models with higher selling prices.
(Note: Exchange rate used: $1 = RMB 7.1761)
