BYD under pressure: production cuts and large discounts shake the market

BYD under pressure: production cuts and large discounts shake the market

BYD, a leading Chinese electric vehicle manufacturer, is currently facing a complex set of challenges impacting its production capacity and expansion plans. Reports of cut production and delays in expanding existing plants have raised concerns among investors and analysts about future demand. While some sources confirm stable demand also abroad, there are concerns that the discounts, which amount to up to 34 percent on 22 models, could depress sales volumes. On June 6, Chief Executive Wang Chuanfu expressed optimistic views on the full year, despite existing price pressures, such as the shareholder reported.

In addition, various production reduction measures represent a response to excess inventory. BYD has canceled night shifts in at least four plants, which means a reduction of a third of capacity. This decision is part of a plan aimed at reducing excess inventory and minimizing margin pressure. Some plans for new production lines have also been postponed. Despite these challenges, BYD remains committed to its ambitious 30 percent growth target for 2025, meaning the company aims to offer a total of 5.5 million vehicles worldwide, according to a report by High engine is presented.

Market environment and competitive pressure

The situation on the home market represents a significant challenge for BYD, as it accounts for around 80 percent of sales and is characterized by an intensely competitive environment. As a result of the high inventory levels of 3.21 months, which are above the industry average, it was necessary to reintroduce discounts for dealers and set a cap on inventory levels. A person familiar with the situation assured that production capacity is stable and sales development remains solid, which could support the company's results despite market conditions.

Despite current market developments and internal challenges, BYD plans to intensify its international expansion. Production of electric vehicles is scheduled to begin in Szeged, Hungary, by the end of 2025, and a new European headquarters with a research and development center will be built in Budapest. BYD has also expanded its fleet to include six of its own car transport ships in order to increase export capacities from China. These steps show that the company remains committed to its international growth goal despite internal adjustments and a tight market.

In summary, the situation at BYD is complicated. While internal efficiency measures and market adjustments are necessary, the long-term prospects due to planned international expansion and existing brand strength could put the company in a better position than currently assumed.