BYD Co Ltd BYDDY (OTC BYDDF), the Chinese electric vehicle (EV) leader, has reportedly cut back on production at its Chinese facilities due to concerns over profitability, slowing sales, and rising inventory levels.
What Happened: BYD has reduced shifts at some of its Chinese factories and halted plans to install new production lines, Reuters reported. This move indicates a potential slowdown in BYD’s rapid sales growth, which had previously allowed it to surpass Tesla Inc. TSLA as the world’s largest EV manufacturer.
As per the report, the company has canceled night shifts and decreased production at some factories by at least a third of their capacity. It has also put a hold on plans to set up new production lines. These measures have been implemented at a minimum of four factories, according to sources who requested anonymity.
Despite offering significant price reductions in China, BYD is still grappling with increasing inventory levels. This has led to a slowdown in the company’s sales growth, with production growth dropping to 13% and 0.2% year-on-year in April and May, respectively.
BYD, which sold 4.27 million cars last year, primarily in China, aims to achieve a nearly 30% increase in sales to 5.5 million this year.
Why It Matters: BYD’s decision to slow down production comes after the company faced criticism for triggering a price war in the Chinese EV market after offloading with its aggressive discounts. This led to a significant drop in BYD’s stock, which fell over 5% on the Hong Kong exchange, following a 15% plunge, as reported by Benzinga on June 2.
Despite these setbacks, BYD managed to overtake Tesla in global EV sales for the first time in 2024, according to the International Council on Clean Transportation.
The recent production slowdown at BYD’s Chinese facilities may indicate a potential shift in the company’s momentum.
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