Chinese electric vehicle (EV) giant BYD has reported a significant slowdown in its financial performance for the first quarter of 2024, revealing the impact of ongoing price wars and cooling demand in the world's largest auto market. The company's latest earnings illustrate a challenging period marked by a steep drop in quarterly profit growth and a reduction in revenue compared to previous quarters.

BYD, a leading competitor to Tesla, disclosed a first-quarter net profit of 4.57 billion yuan ($631.08 million), a 10.6% increase year-on-year, but a sharp 47% decline from the fourth quarter of 2023. Revenue grew by a modest 4% to 124.94 billion yuan, the slowest pace in nearly four years, according to the company's filing with the stock market.

The downturn in revenue and profits is attributed partly to a decline in vehicle sales during a seasonally slow period that includes the Chinese Lunar New Year holiday. First-quarter vehicle sales fell dramatically, with new energy vehicle (NEV) sales down 33.71% from the fourth quarter of 2023. The sales of passenger battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) also saw declines of 42.99% and 22.09% respectively from the previous quarter.

Despite these challenges, BYD is actively seeking to revitalize its brand and capture more of the upscale market. At the recent Beijing auto show, BYD unveiled the U7, a new ultra-luxury model under its premium Yangwang brand, and showcased the first sedan from its Denza brand, signaling a strategic shift to target higher-end segments.

This move comes amid an intense price war in China, which has seen BYD and over 40 other brands slashing prices to attract cautious consumers amid a sputtering economic recovery. Discounts on the latest versions of BYD's lineup have ranged from 5% to 20% since February, as the company battles to maintain its market share.

Goldman Sachs has noted the challenging environment, forecasting lower unit profits for new energy vehicles in China this year and suggesting that the industry's profitability could turn negative if price cuts continue.

To counteract these market pressures, BYD is aiming for a 20% jump in annual sales in 2024 from its record-breaking performance last year. This ambitious target is set against a backdrop of increasing competition from local EV upstarts, who are also betting big on an all-electric future.

In a noteworthy interaction at the Beijing auto show, BYD founder Wang Chuanfu met with Xiaomi founder Lei Jun, who recently launched Xiaomi's first car, the SU7. Lei vowed to step up cooperation with BYD, a move that could signal broader collaborations in the technology and automotive sectors.