BYD Co. is leading China’s electric vehicle stocks with a new plug-in hybrid drive system, while competitors such as Li Auto Inc., Xpeng Inc. and Nio Inc. also rank second on the list.
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A big gap has formed in China’s electric vehicle stocks, as BYD has outperformed everyone else thanks to its latest technology.
The carmaker’s shares have bucked a sharp decline in EV stocks worldwide to gain more than 6 per cent in Hong Kong this year, thanks to the introduction of the fifth generation of its plug-in hybrid drive system in May. Shares of its smaller rivals Li Auto Inc, Xpeng Inc and Nio Inc have tumbled at least 45 per cent amid concerns about sluggish EV demand and a persistent price war.
Market watchers say the gap will only continue to grow. 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 less than 100,000 yuan (about 1,000,000 yuan). Plug-in hybrid vehicles occupy a middle ground between conventional gas-powered vehicles and full EVs, and are seen as a potential area for future growth as pure EV sales become saturated.
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“We are particularly optimistic about BYD’s plug-in hybrid electric vehicle potential and the opportunity to expand overseas, especially given the slow pace of the global EV transition,” said Bing Yuan, a fund manager at Edmond de Rothschild Asset Management in Paris. “It can expand its market share and achieve faster growth for PHEVs than pure EVs, while also gaining more share from traditional internal combustion engine vehicles.”
Record sales
B.Y.D. Nearly a million fully electric and hybrid cars were sold in the second quarter, according to data compiled by Bloomberg. In June alone, its plug-in hybrid sales rose 58 percent from a year earlier to more than 195,000, outpacing its battery-only cars.
The Shenzhen-based company has been developing a plug-in hybrid platform known as DM-i for nearly 20 years. The fourth generation of the technology, introduced in 2021, helped it become China’s best-selling car brand last year.
“Plug-in hybrid sales are growing faster than battery-only EVs due to a more aggressive rollout and fewer tariff disruptions,” Joanna Chen, an analyst at Bloomberg Intelligence in Hong Kong, wrote in a research note on July 1. This also helps mitigate margin pressure from fierce price competition, she added.
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Two BYD models equipped with the latest technology, the Seal 06 DM-i and the Qin El DM-i, have a starting price of 99,800 yuan (about 1,000 yuan more). The price (₹ 11.4 lakh) reflects BYD’s ability to keep costs low. Both vehicles have received more than 120,000 orders since they were introduced in late May, according to Citigroup Inc.
BYD’s overseas growth potential is another key point boosting investor confidence. The automaker has been stepping up efforts to find success in Europe, including a marketing push at the ongoing European Football Championship and opening a new flagship showroom on the Champs-Elysees in Paris last month.
The carmaker hopes high-margin exports will help mitigate the impact on its profits from a long-term price war in China. BYD aims to sell 500,000 vehicles outside China this year and double that by 2025.
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The firm has been relatively safe from the EU’s initial tariff hike as it was granted a lower-than-average tariff rate by EU regulators last month. The export growth outlook for its plug-in hybrids remains unaffected as the additional duty is being imposed only on pure electric vehicles.
“We see BYD as differentiated and very well positioned from its Chinese competitors” because of its strong export proposition, said Shin-Yao Ng, investment director at Aberdeen Asia Ltd. in Singapore. “Once the EU pressure is lifted, all eyes will be on its impact on competitiveness and profitability in China.”
First Publication Date: July 04, 2024, 07:01 AM IST