Short Sellers Gang Up on China’s EV Leader

Short sellers have raised their positions on BYD, China’s—and the world’s—largest manufacturer of electric vehicles amid expectations of weakening sales.

BYD recently dethroned Tesla from the top spot among global EV sellers after it closed the final quarter of 2023 with higher sales than the U.S. major. It sold more than 526,000 cars in the last three months of the year, while Tesla delivered a little over 484,500.

BYD, which is backed by Warren Buffett, can boast a 60% sales increase for 2023, with total sales—hybrids and EVs—at more than 3 million cars, but this year projected sales are only seen rising by a much more modest 23%. The reason for the more modest expectations: intensified competition on the domestic market.

“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,” one fund manager told Bloomberg.

Short positions on BYD’s stock have gone up to 5.5% of the company’s total free float in Hong Kong, Bloomberg reports, adding that the ratio between put and call options on the stock has been climbing over the past four weeks, reinforcing the perception of growing pessimism about the company’s performance this year.

This pessimism is mostly driven by expectations of an economic slowdown in China which, if it materializes, would inevitably affect EV sales. Another big reason for the expected weaker performance of BYD and the EV sector as a whole is cut-throat competition.

It has been a mark of the Chinese EV industry for a while and it is only getting worse. This year alone, carmakers in the country plan to introduce as many as 158 new models, of which 80% EVs, per HSBC. The industry is, therefore, looking to conquer foreign markets as the domestic one gets saturated. Expanding abroad, however, could be tough due to things like brand recognition and loyalty, which may have added fuel to traders’ pessimism.

By Charles Kennedy for Oilprice.com

More Top Reads From Oilprice.com:

• The 11 States Leading America’s Oil Production Boom
• What Will Influence Oil Prices in 2024?
• U.S. Product Inventory Builds Overshadow Large Crude Draw