SHANGHAI: After getting a jump on competitors in the latest round of China’s electric vehicle (EV) price war, BYD Co now faces a key test of proving that it can withstand the impact on profits.

China’s biggest EV maker broke with its usual practice of not providing guidance ahead of its earnings report.

The stock’s volatility skew this month jumped to the highest since October 2022, indicating increased investor demand for downside protection.

Slowing growth, a rush of new competitors and discounts initiated by Tesla Inc last year have ramped up pressure in the Chinese EV market, the world’s largest.

Investors will be scrutinising BYD’s results comments for plans for further aggressive steps after a move to cut prices on mass-market models ahead of peers this year scored success.

“BYD has fired off the first shot, taking market share from internal combustion engine cars,” said Daisy Li, a fund manager at EFG Asset Management Hong Kong Ltd.

“EV penetration is rising and sales are growing, but that’s coming with lower profits.”

Helped by the price reductions, BYD sold about 300,000 vehicles in March, rebounding from a pronounced weakness seen in the prior month.

That helped the stock, which is down less than 1% in Hong Kong this year, while a gauge of global EV makers has declined more than 15%.

The resilience may leave the shares vulnerable to selling pressure if the results disappoint.

The Chineses EV maker is expected to post sales growth of 10% for the seasonally slow first quarter, which would be its lowest in four years.

Gross profit margin is estimated to decline to 19.6% compared with 21.2% in the fourth quarter.

 - Bloomberg