Data shows bearish trades against BYD Company Ltd. (1211. HK) are at a peak since highs experienced in September 2023. These short-selling trends stir up concern that it will impact the company’s sales growth.
BYD plagued by shorting as EV market competition spikes
According to Bloomberg, IHS Market information indicates short interest on BYD shares hovers around the 5.5% mark as of 1 January. Despite delivering more electric vehicles (EVs) than competitor Tesla Inc. (TSLA) in the last quarter of 2023, the put-call ratio reflects increasing cynicism in the ranks of options traders.
Regarded as a forerunner in Chinese EV circles, these indicators raise investor eyebrows about the prospects of this market. Reportedly, UOB Kay Hian predicted that China’s EV sales will drop to approximately 17% this year. Bloomberg quoted Andy Wong, a fund manager at LW Asset Management Advisors Ltd., who commented:
There are concerns over BYD’s growth momentum this year given 2023’s high base effect and weak consumer demand amid China’s challenging economic environment.
These challenges impact the BYD market performance, as evidenced by the 16% decline since mid-November last year. The global industry decrease was about 3% in comparison.
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Financial analysts opine that greater market competition is partly to blame for this BYD stock drop. This competition is ever-growing, and the company will have to compete with new capabilities from opponents, such as the recent innovation by the smartphone manufacturer Huawei Technologies Co.
Although BYD achieved its sales targets for 2023, experts doubt it will be able to sustain retail discounts given the growing industry competition. On the other hand, the drop in lithium prices and persistent demand may balance the supply and demand bottom lines.
