Chinese auto giant BYD, the world's largest electric car manufacturer, reported its first quarterly profit decline in three and a half years. According to Reuters, net profit for the second quarter was 6.4 billion yuan, which is nearly 30% less than the same period last year.
Why is the profit declining?
The decline is due to several main factors. The most significant of them is the fierce price war in the Chinese market. It puts strong pressure on the profitability of the entire industry. Another reason is government regulation, which obliges manufacturers to pay their suppliers faster.
Difficulties in the Chinese market
BYD generates almost 80% of its sales in China. The company's domestic sales have fallen for the third consecutive month. Production also fell for the first time in 17 months.
Despite BYD's ambitious goal of selling 5.5 million vehicles a year, the company has sold just 2.49 million in the first seven months, just 45% of its annual plan. Analysts are already expressing pessimism about achieving the set targets.