BYD's $60 billion loss points to a deepening crisis in China's electric car market
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.