Stock price drop for BYD following unexpected profit decline revelation

In the bustling world of electric vehicle (EV) manufacturing, Chinese giant BYD has seen a significant setback. The company's stock dropped nearly eight percent on Monday in Hong Kong, following a series of events that have shaken the industry.

The decline can be attributed to disappointing quarterly results for the second quarter of 2022. BYD itself acknowledged the challenges of "intensified price competition" and "excessive marketing" in its mid-year report. The ruthless price war in China, it seems, is the main reason for the waning earnings power of BYD.

Despite these hurdles, BYD's net profit for the first half of 2022 increased by nearly 14 percent to 15.5 billion yuan (around $201 billion). This growth was primarily due to the company's expansion into international markets. Over the past two years, BYD has significantly expanded its presence in Europe, with over 13,000 new registrations in July alone, marking a year-on-year growth of 225 percent.

The crucial question for BYD now is how quickly its lucrative overseas business can offset the profit losses from the price war in China. The name of the CEO leading this global expansion is not explicitly mentioned, but the BYD Partnerverband e.V., a dealer association in Germany for BYD, has Andreas Knipp as its first chairman of the board. However, this position is for the dealer association, not BYD itself.

Chinese authorities have also weighed in on the situation, warning about the consequences of this unfair competition. As Chinese manufacturers, led by BYD, increasingly focus on global expansion, the future of the EV market remains uncertain, with the balance between local and international competition yet to be determined.

The drop in BYD's stock has caused it to fall below the AKTIONÄR's stop-loss at 12 euros and has been stopped out. As the industry continues to evolve, it will be interesting to see how BYD navigates these challenges and positions itself for future success.