In the price war, the leading player BYD also struggled to avoid a decline in gross profit margin, dropping from around 28% in Q1 to around 22.4% in Q2. However, thanks to the control of operating expenses, the expense ratio decreased by 5 percentage points on a month-on-month basis, leading to a 29% increase in net profit per vehicle to around 8,600 yuan, which is basically in line with expectations.
However, as the price war continues and with BYD's investments, the per-vehicle depreciation cost is expected to continue to rise, to some extent hindering profit release.
One way to increase gross profit margin is through high-end transformation, which has always been one of BYD's pain points. In Q2, Tang sales volume returned to over 10,000 units per month, but sales of the Song Pro and Qin Pro declined month-on-month. Recently, the Song Pro reduced its price by 50,000 yuan while cooperating with Huawei on intelligent driving, reflecting the company's eagerness to seek breakthroughs. However, given the company's strong foundation and more room for trial and error, the possibility of transformation is greater.
At the same time, increasing the proportion of overseas sales is another method. In Q2, BYD's overseas sales volume reached 105,000 units, slightly higher than the 98,000 units in Q1, but the overall sales proportion decreased from 15.7% to 10.7%.
At the end of July, there were reports that BYD was planning to enter the Canadian market, but a few days ago, Canada announced a 100% tariff increase. Although the plan is likely to be put on hold, BYD has already entered 77 countries and regions, and has built factories in Thailand, Brazil, and Hungary.
In the future, with the gradual commissioning of new overseas production capacity, the pace of going global will accelerate. Perhaps the focus next year will be on when the company's overseas sales volume reaches 1 million units and who gains market share.
In addition, benefiting from its parent company, in the first half of the year, BYD Electronic's automotive business grew by 27% year-on-year to 7.76 billion, while the consumer electronics business grew by 54% to 63.3 billion, driven by the recovery in electronics and new acquisitions, leading to a 40% increase in total revenue, with Q2 revenue growing by 41% year-on-year and 15% month-on-month.
However, the profit level performance is not very good, remaining flat year-on-year in the first half of the year, with a gross profit margin of 6.8% in Q2, flat month-on-month, a decrease year-on-year, and a net profit of 900 million, a 49% increase month-on-month, and a 14% decrease year-on-year.
This is partly due to the significant increase in financing and depreciation costs, which increased by 425% and 210% year-on-year in the first half of the year, respectively. On the other hand, it is also due to the completion of the acquisition at the end of last year, which requires time to digest.
However, there should be better improvements in the second half of the year, especially in Q3. The high base in Q3 of last year, coupled with the peak season for the newly acquired exterior business, may lead to good earnings in that quarter, with the potential for better synergies in the future

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Under the pressure of price wars, BYD's gross profit margin has dropped to 22.4%, but the net profit per vehicle has increased by 29% to 8,600 yuan, meeting expectations. The company aims to improve profitability through high-end products and expanding overseas markets, with a slight increase in Q2 overseas sales volume. BYD Electronic's revenue in the first half of the year increased by 40%, mainly driven by the automotive and consumer electronics businesses, but the profit situation is not ideal, with a 14% year-on-year decrease in net profit. Improvement is expected in the second half of the year

- BYD, amidst a price war, saw a decline in gross profit margin from around 28% in Q1 to about 22.4% in Q2. Despite this, effective cost control led to a 5-percentage-point decrease in expenses, resulting in a 29% increase in net profit per vehicle to around 8,600 RMB, aligning with expectations. To boost margins, a shift towards high-end products is crucial, an ongoing challenge for BYD. The company's overseas sales slightly grew in Q2, but the overall contribution decreased, signaling potential hurdles like increased costs and market uncertainties.

Hong Kong Stock Review: BYD and BYD Electronic