BYD’s Hong Kong shares fall nearly 8% after quarterly profit drop

Hong Kong-listed shares of BYD slid nearly 8% Monday after the Chinese electric vehicle maker reported a sharp drop in quarterly profit amid an aggressive price war across its domestic industry.

The Tesla rival on Friday reported net profit of 6.36 billion yuan ($891 million) for the April-June quarter, down about 30% from a year earlier, according to data from LSEG.

The results came despite an expansion in overseas sales, which helped the company’s revenue grow 14% year over year to about 201 billion yuan.

BYD’s profitability has been harmed by the breakout of yet another discount war in China last quarter — something that has become a common occurrence in the space.

The company said in its mid-year earnings filing that “increased price competition and frequent occurrences of excessive marketing” in China’s EV space had ” exerted an adverse periodic impact on the development of the industry.”

Retail car prices in China have fallen by around 19% over the past two years to around 165,000 yuan ($22,900), according to a recent Nomura report, citing industry data from Autohome Research Institute.

Weary of unfair competition, Chinese authorities in May warned they would punish carmakers for fueling price cuts.

BYD’s net profit for the first half of the year reached 15.5 billion yuan, up nearly 14%. The company’s first-half revenue climbed about 23% to 371.3 billion yuan, with new energy vehicle sales hitting a record high.

Chinese automakers, including BYD, have been expanding into new markets globally amid intense domestic competition. BYD has led that charge, opening showrooms across Europe and launching its cars at competitive prices over the last two years.

In July, BYD recorded over 13,000 new registrations on the continent, up 225% annually, according to the European Automobile Manufacturers Association.