Chinese electric vehicle maker BYD, the largest in the world, has announced a reduction in production capacity in response to slowing growth and increasing inventory.
BYD Cuts Shifts at Factories
According to sources familiar with the matter, BYD has scrapped all night shifts at no fewer than four factories. Production at some has dropped by a third of their maximum capacity. This decision follows shortfalls in sales that did not meet the company’s ambitious targets. Data from the China Association of Automobile Manufacturers shows BYD's year-on-year output growth slowed to just 13% in April and virtually zero in May, marking the weakest pace since February 2024.
Pricing Strategy and Its Implications
BYD's aggressive pricing strategy, which cut the entry-level model to just 55,800 yuan (around $7,800), sparked a broader sell-off among Chinese auto stocks and forced rivals to follow suit. However, dealers warn that steep discounts have eaten into margins and strained cash flow. A major dealership chain in Shandong province even shut down 20 outlets due to rising unsold inventories.
Long-term Plans and Export Strategy
Despite the slowdown, BYD remains bullish on its long-term outlook, continuing to roll out new budget-friendly models and invest in battery technology. This year, the company exported roughly 350,000 of its 1.76 million vehicles sold in the first five months, tapping markets in Southeast Asia, Europe, and Latin America. However, for now, it is choosing to focus on smarter growth rather than simply more volume.
The changes in BYD's strategy highlight the need to adapt to new market conditions, including growth slowdowns and inventory management. The company is directing its efforts towards improving financial performance and maintaining its leading position in the electric vehicle industry.
