Chinese electric carmaker BYD is expected to face a tough time ahead.
BYD outperformed Tesla last year and is set to show a massive increase in earnings as companies of BYD’s scale benefit from exceptional economies of scale in an immature industry.
In 2022 alone, the $108 billion-worth group tripled its production and sales of pure electric and hybrid cars, culminating in nearly 2 million sales.
However, according to research from Bernstein, the Chinese auto industry is set to add enough China-manufacturing capacity to make an additional 6.5 million vehicles per year by 2025. Most of these will be battery-powered, and while BYD accounts for over half of the total number of cars, the country’s new production line will sure to outstrip demand growth between now and then.
A recent slump in spending due to rising costs has also had the carmaker wary of overcapacity. Competition is also growing as brands launch new models and vie to differentiate themselves from competitors with technology such as assisted-driving software.
Despite the challenges ahead, BYD’s advantages in battery technology, affordable pricing, and semiconductor production should help the giant car weather the oncoming storm.
