Chinese EV giant BYD has recently followed the lead of its American counterpart, Tesla, by lowering prices to garner market share. 

On Friday, the company reported the results of its price war campaign, showing its first-ever drop in quarterly profits. 

Tesla, once the dominant player in the EV market, has been facing a demand problem for 18 months that has only been exacerbated by Musk’s foray into politics.

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The company delivered just 384,122 vehicles in the second quarter, a 13.5% year-over-year decline that missed analyst estimates by about 3,000 units.

Last year, Tesla experienced its first annual sales decline since 2011 after reporting a 1.1% drop in overall deliveries to 1.79 million from 1.81 million the year prior, the AP reported, citing data from analytics firm Global Data.

The company offered steep discounts to boost sales, leading the average sales price to fall to a little more than $41,000, its lowest level since 2020.

Tesla is also losing its grip on China, its most important foreign market

China’s EV industry has shifted into overdrive. The Chinese government has been pushing its citizens to adopt green technology using cash, tax, and other incentives to get them to purchase EVs and hybrids.

Tesla has been marketing in China using the made-in-China mantra, but data shows that production at its China plant is slowing.

Tesla made 58,459 Model 3 and Model Y vehicles at Gigafactory Shanghai in April, a 6% year-over-year decline. This came as demand fell, with delivery data also declining in recent weeks.

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In late May, BYD, Tesla’s biggest rival in China, launched a new round of price cuts of up to 53,000 yuan (about $7,300) across 22 models.

The move sent shock waves throughout the industry, as smaller rivals will have trouble keeping up with the discounts the much-larger BYD can offer. 

The move was so drastic that the China Association of Automobile Manufacturers (CAAM) and the Ministry of Industry and Information Technology had to issue public warnings about “disorderly price wars.”

BYD controls 32% of China’s new energy vehicle market, compared to Tesla’s 6.1% market share.

BYD reports first decline in quarterly profit in nearly four years

BYD reported quarterly financial results this week, showing a profit that declined year over year for the first time in three-and-a-half years. 

BYD, the world’s largest EV producer, reported a second-quarter net profit of 6.4 billion yuan ($894.74 million), down 29.9% from a year ago. This is a stark change from the previous quarter, when the company reported a 100.04% increase in quarterly profit. 

Revenue in the second quarter rose 14% to 200.9 billion yuan as volume increased, but lower prices ate into profits. 

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• Tesla’s biggest rival slashes prices but faces major pushback

Thanks to the strong first quarter, BYD’s first half profit is still up nearly 14% year over year, while revenue is up 23.3%. 

Despite the pricing blitz, BYD, which gets 80% of its sales from China, reported a decline in China vehicle sales for the third straight month in July as production declined for the first time in 17 months, Reuters reported. 

BYD has said it wants to sell 5.5 million vehicles this year, but it has only sold 2.49 million through the first seven months of the year. 

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