The sharp drop in BYD shares indicates deepening investor concern about the profitability of China's electric vehicle sector, as weakening domestic demand is accompanied by a sharp increase in production costs, Bloomberg reports.
BYD shares listed on the Hong Kong Stock Exchange fell again this week after the release of disappointing sales data, continuing a decline that has reduced the company's market value by more than $60 billion since May and attracted other players in the already volatile Chinese stock market. Although investors had expected a slowdown in growth after the subsidy cuts, the rate of deterioration in demand came as a surprise to many. Morgan Stanley notes that most local automakers expect sales in the first quarter to fall by 30-40% compared with December.
Data for January showed that BYD's domestic shipments had halved compared to the same period last year, while XPeng reported a drop of more than 30%. Margin pressures are increasing as lithium prices have more than doubled in three months, copper and aluminum costs have skyrocketed, and a shortage of chips is driving up component prices, even as automakers continue to run large-scale advertising campaigns.
