BYD, the Chinese automaker backed by Warren Buffett, reported a record profit of RMB 16.6 billion ($2.4 billion) in 2022, which is more than five times greater than a year earlier. This significant year-over-year increase in profit is attributable to the strong sales of electric vehicles (EVs) by the company, despite challenges such as rising costs of battery materials and the pandemic-related economic slump. The company’s revenue increased to RMB 424 billion, which represents an almost 100% increase from RMB 216 billion in the previous fiscal year, thanks to BYD commanding around a third of the Chinese electric passenger car market in 2021.
The chairman of BYD, Wang Chuanfu, informed investors on Wednesday that he expects China’s passenger EV sales to increase by 59% to about 9 million units in 2022. Following this growth, the company is targeting a 40% market share. This bullish target comes as the Chinese government continues to introduce policies that favor the use of EVs, such as subsidies and incentives, as well as restrictive license policies for traditional internal combustion engine-powered vehicles.
The surge in demand for EVs has significantly benefited BYD as the company is one of the most prominent EV manufacturers in China. Additionally, the growing green energy sector has fueled the demand for EVs, especially as more countries aim to reduce their carbon footprints to comply with the Paris Climate Accords. As such, BYD has been expanding its operations beyond China, and it now has a presence in over 50 countries, with significant investments into Europe.
However, like every other EV manufacturer, BYD is grappling with the issue of securing an adequate supply of battery materials to meet the surge in demand. The prices of lithium and other critical elements have been skyrocketing, putting pressure on EV manufacturers to find new ways of sourcing the materials while keeping the prices low. Besides, the pandemic has disrupted global supply chains, exacerbating the material shortage problem.
Despite these challenges, BYD remains optimistic about its future prospects. The company plans to expand its portfolio to sell more EV models, especially in the lucrative luxury electric car segment. Additionally, it is investing significantly in research and development to improve energy density and battery life while cutting down on production costs, which could go a long way in enhancing the appeal of its electric cars to consumers.
In conclusion, it is clear that BYD’s strong financial performance in 2022 is attributable to the growing demand for EVs in China, and the company’s strategic positioning in the market. As EV adoption continues to surge globally, BYD is likely to maintain robust growth, provided it can address the issue of material shortages adequately.