BYD leads China’s electrified vehicle market with new plug-in hybrid technology

The carmaker’s shares have defied heavy losses in EV stocks around the world to gain more than six per cent in Hong Kong this year thanks to the introduction of the fifth generation of its plug-in hybrid drive system in May. Those of its smaller competitors Li Auto Inc., Xpeng Inc. and Nio Inc. have all tumbled at least 45 per cent amid concern over slowing EV demand and a persistent price war.

The gulf is set to keep growing, market watchers say. BYD’s latest plug-in hybrid platform allows vehicles to travel non-stop for more than 2,000 kilometers — the distance between Singapore and Bangkok — without recharging or refueling, and was introduced in two models that sell for under 100,000 yuan (approximately, ₹11.5 lakh). Plug-in hybrids occupy the middle ground between traditional gas-powered vehicles and full EVs, and is being touted as a potential area for future growth as sales of pure EVs become saturated.

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“We are particularly optimistic about BYD’s plug-in hybrid electric vehicle potential and overseas expansion opportunity, especially given the slowing global EV transition,” said Bing Yuan, a fund manager at Edmond de Rothschild Asset Management in Paris. “It might expand its market share lead and achieve faster growth for PHEVs compared to pure EVs, while also capturing more share from traditional internal-combustion-engine vehicles.”

Record sales

BYD sold nearly one million fully electric and hybrid cars in the second quarter, a record based on data compiled by Bloomberg. In June alone, its plug-in hybrid sales jumped 58 per cent from a year earlier to more than 195,000, surpassing those of its battery-only cars.

The Shenzhen-based company has been developing its plug-in hybrid platform, known as DM-i, for around 20 years. The fourth generation of the technology introduced in 2021 helped it become China’s bestselling car brand last year.

“Sales of plug-in hybrids are growing faster than for battery-only EVs due to more aggressive rollouts and fewer tariff disruptions,” Joanna Chen, an analyst at Bloomberg Intelligence in Hong Kong, wrote in a research note July 1. That also helps mitigate margin pressures from fierce price competition, she said.

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The two BYD models featuring the latest technology, the Seal 06 DM-i and Qin L DM-i, have a starting price of 99,800 yuan (approximately ₹11.4 lakh), showcasing BYD’s ability to keep down costs. The two vehicles have received more than 120,000 orders since being introduced in late May, according to Citigroup Inc.

BYD’s overseas growth potential is another key point boosting investor confidence. The auto maker has been ramping up efforts to make a breakthrough in Europe, including making a marketing push at the current European Football Championship, and opening a new flagship showroom on the Champs-Elysees in Paris last month.

The carmaker is betting that higher-margin exports will help cushion the impact on its profits from the long-term price war in China. BYD has a goal of selling 500,000 vehicles outside China this year, and doubling that in 2025.

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The firm has been relatively insulated from the European Union’s preliminary tariff increases as it was given a lower-than-average tariff rate by EU regulators last month. The export growth outlook for its plug-in hybrids was unaffected as the additional levies are only being imposed on pure electric vehicles.

“We see BYD as being differentiated from Chinese peers and quite well-positioned” thanks to its strong export proposition, said Xin-Yao Ng, director of investment at abrdn Asia Ltd. in Singapore. “With the EU overhang removed, all eyes will remain on competition in China and its impact on profitability.”

First Published Date: 04 Jul 2024, 07:01 AM IST