BYD’s second quarter ended a five-quarter run of falling profit. The half-year behind it contains the more durable fact: for the first time, the company earned more revenue outside China than inside it.
Affected#
Nobody’s car directly. It is here because of what it says about where the money comes from. European dealers, parts networks and software support are funded from a business that is now majority-overseas, which is a steadier base than a domestic price war.
The less comfortable half is that revenue fell for the fourth quarter running. Profit rose because margins did, and the margins came from exports — so the recovery depends on export volume continuing, not on anything improving at home.
Confirmed#
| Q2 net profit | 8.2 bn yuan, about $1.22 bn, up 30 % |
| Q2 revenue | 194.6 bn yuan, down 3.2 % |
| Consecutive quarters of falling revenue | four |
| Q1 net profit, for contrast | 4.08 bn yuan, down 55 % |
| H1 revenue | 344.8 bn yuan, down 7.1 % |
| H1 revenue earned overseas | 181.3 bn yuan, 53 % of the total |
| H1 revenue from Greater China | down 31 % |
| H1 gross margin, overseas business | 22 %, against 18.85 % for the group |
The profit increase is the first in five quarters. Q1 had fallen 55 per cent, which BYD and its analysts attributed to repeated price cuts against Xiaomi and Geely.
On volume rather than revenue: overseas sales in the first half were 792,256 vehicles, up 70.65 per cent, or 43.81 per cent of new-energy sales. Through August the overseas total is 1,162,260, up 85.72 per cent, with a record 189,466 in August alone — the month covered in BYD’s quarter-million-BEV month.
Unconfirmed#
- Whether the quarter beat expectations or missed them. Quartz reports that Morgan Stanley, UBS, Citi, Deutsche Bank and CMBI had collectively modelled a profit gain of roughly 48 per cent, which 30 per cent falls well short of. SCMP reports the same result as surpassing a consensus of 8 billion yuan. Both statements can be true of different consensus figures; we have seen neither set of estimates, and neither framing should be read as the verdict.
- Whether the export margin holds. Twenty-two per cent overseas against 18.85 per cent for the group is the whole of the profit story. It is a first-half figure, reported by BYD, earned in markets where BYD is not yet competing on price the way it does at home.
- What “overseas” contains. No split between Europe, South-East Asia and Latin America is published at revenue level, so how much of the 181.3 billion yuan is European is not known from this.
- The share price. BYD’s Hong Kong line gained 26 per cent over the quarter to late August, adding close to $20 billion in market value on the strength of this story. That is a market judgement that exports will keep growing, not evidence that they will.