Higher Earnings Growth for BYD and Li Auto Amid Competitive EV Market

Stronger Earnings Show Resilience in a Competitive EV Market

BYD and Li Auto have reported impressive second-quarter earnings growth, solidifying their positions as the only profitable electric vehicle (EV) manufacturers in mainland China. Despite facing a harsh discount war that has pressured gross margins, both companies have adapted well.

BYD's Performance and Market Challenges

Shenzhen-based BYD, the world's largest EV builder, earned 9.1 billion yuan (US$1.28 billion) for the three months ending in June, an increase of 98.4% from the first quarter and 32.8% year on year. However, its gross margin narrowed by 3.2 percentage points to 18.7% due to significant price cuts aimed at boosting market share.

Li Auto's Earnings Surge

Beijing-headquartered Li Auto reported a profit jump of 86.2% to 1.1 billion yuan, barely exceeding analyst expectations. Its gross margin also faced pressure, narrowing by 1.1 percentage points to 19.5% as the company engaged in competitive pricing. Li Auto anticipates delivering between 145,000 and 155,000 units in the upcoming quarter, reflecting strong demand.

• EV penetration in China rose to 45% in Q2.
• BYD aims to maintain leadership with aggressive pricing strategies.
• Li Auto also forecasts robust growth despite market challenges.

The ongoing discount war and rising competition present distinct challenges for Chinese EV manufacturers. As EV adoption increases, maintaining profitability will be crucial for these companies.