(Bloomberg) -- In China’s highly competitive electric vehicle market, even a small earnings miss is conspicuous news as BYD found out Wednesday. 

It missed 2023 earnings estimate by less than a 1 billion yuan ($138 million), raising questions over whether China’s largest EV maker can sustain strong profit growth while fending off an intense price war. Its stock fell even though it almost tripled the final dividend payout.

BYD shares declined as much as 7.4% in Hong Kong, the most since August, after the earnings report. The lackluster performance stands in contrast to the immediate surge in the shares of its smaller competitors — such as Li Auto Inc. and Zhejiang Leapmotor Technology Co. — that exceeded earnings expectations. While many of them still struggle to turn profitable in their EV business, they have generally grown margins and narrowed losses. 

 

Even BYD’s declaration of 3.1 yuan per-share dividend couldn’t assuage investors, who are focusing on more operationally-centered metrics.  

“It’s the earnings miss,” said Xin-Yao Ng, director of investment at abrdn. “In my view at least, the concern might be around lower profits per car, which reads poorly for competitive intensity in the sector.” 

READ: BYD Reports 2023 Profit That Falls Short of Analyst Estimates

BYD’s profit per vehicle likely declined by 25% sequentially in the fourth quarter, Morgan Stanley analysts including Tim Hsiao wrote in a report Tuesday. Its average vehicle selling price also likely fell for a fourth quarter in a row as mass market brand discounts more than offset exports and premium products, they said.

Despite BYD’s higher sales for premium models and growing production scale, the company’s management struck a more cautious tone at a Wednesday briefings call when discussing unit profit of vehicles, given intense price competition, the Morgan Stanley analysts noted in a separate report. 

“We think this implies BYD will maintain an aggressive pricing strategy to defend its market share,” they wrote in the Wednesday report. 

BYD is also confident of achieving 20% volume growth on year and steady profit in 2024, the analysts added.

(Updates with share moves and analysts’ comments)

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