Quick overview

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BYD, listed in Hong Kong, dropped nearly 8% on Monday after the Chinese electric vehicle manufacturer announced a sharp decline in quarterly profit amid intense pricing competition in its home market.

Tesla rival reported a net profit of 6.36 billion yuan ($891 million) for the April-June quarter on Friday, which was roughly 30% less than the same period last year. The company’s revenue increased 14 percent year over year to approximately 201 billion yuan, despite a rise in overseas sales.

The start of yet another discount war in China last quarter, a common occurrence in the industry, hurt BYD’s profitability. “Increased price competition and frequent occurrences of excessive marketing” in China’s EV space have “performed an adverse periodic impact on the development of the industry,” the company stated in its mid-year earnings filing.

Retail car prices have fallen by about 19 percent over the past two years to around 165,000 yuan ($22,900) in China, according to a recent Nomura report citing industry data from Autohome Research Institute.

Chinese authorities, frustrated with unfair competition, threatened to penalize automakers in May for encouraging price cuts. In the first half of the year, BYD’s net profit rose nearly 14% to 150.5 billion yuan.

Chinese automakers like BYD have been expanding into new international markets. Over the past two years, BYD has led that effort by opening showrooms across Europe and offering its vehicles at affordable prices. The European Automobile Manufacturers Association reports that BYD recorded over 13,000 new registrations in Europe in July, a 225 percent increase from the previous year.