The Chinese electric vehicle manufacturer BYD, supported by Warren Buffett, recorded a 24% increase in revenue in the third quarter of 2024, reaching 201 billion RMB (28.2 billion USD). This surpassed the US rival Tesla, which reported revenue of 25.2 billion USD in the same period. BYD sold a record-breaking 1.1 million vehicles in this quarter, driven by a new round of government subsidies for electric vehicles in China.

Despite strong sales growth, BYD had to accept a decline in gross margin from 22.1% last year to 21.9%. However, net profit increased by 11.5% to 11.6 billion RMB. This margin reduction is due to intense price competition in the domestic market, which is impacting the company's profitability. Instead of direct discounts, BYD has recently introduced longer-range models with more advanced features at lower prices to strengthen its market leadership.

The ongoing price war situation in China affects not only BYD but also puts pressure on other domestic and foreign car manufacturers. For example, Volkswagen warned that the operating profit from its Chinese joint ventures could drop to the lower end of the forecast at 1.6 billion euros by the end of the year, instead of the expected 2 billion euros.

Thanks to a high level of vertical integration, which includes the production of batteries and computer chips, BYD remains significantly ahead with a gross margin of 21.9% compared to Tesla (17%) and Chinese competitors Zeekr (14.2%) and Xpeng (6.4%). Nonetheless, analysts view international expansion as a critical growth driver but face challenges from rising Western protectionism.

The European Union imposed additional 17% tariffs on imports of BYD's battery-powered vehicles on Tuesday, in addition to the existing 10%. Although BYD recently opened a factory in Thailand – the first outside China – foreign sales in September accounted for only 7.9% of total sales, compared to 9.8% the previous year. "BYD's export prospects are unlikely to improve in the short term," stated Citi analysts in a report.

Analysts emphasize that BYD's global expansion is hampered by local operational requirements, political changes, and geopolitical risks. Despite these hurdles, BYD remains well-positioned to benefit from its strong market position and technological advantages.

The ongoing challenges in China and the new EU tariffs continue to pressure BYD, as the company strives to further expand its international presence. The BYD stock, traded on the Hong Kong stock exchange, fell by 0.7% ahead of the results.