Net income in the three months through March surged 411% from a year earlier to 4.13 billion yuan ($597-million), the Shenzhen-based automaker said in a statement on Thursday. Operating revenue rose 80% to 120.2 billion yuan, while its gross margin was 17.9%, up about 5.5 percentage points.

BYD’s shares rose 1.1% in Hong Kong on Friday morning, taking their advance this year to 24%.

BYD’s margins should continue to grow this year, helped by its Denza and U8 models, Citigroup Inc. analysts Jeff Chung and Beatrice Lam said, while Morgan Stanley’s Tim Hsiao and Cindy Huang said the results showed resilience amid industry headwinds. The company’s vertically-integrated business model helped shore up profitability, they said. 

What Bloomberg Intelligence says:

BYD’s strong 1Q results confirm our view that cheaper batteries and greater benefits of scale are contributing to margin stability, despite tougher competition after waning subsidies and rivals’ price cuts. New model launches have kept demand robust and inventory tight.

– Steve Man and Joanna Chen, BI auto analysts

Sales of BYD’s passenger electric vehicles almost doubled to 550,000 globally in the quarter. While the company has been intensifying its push overseas, prioritizing Europe, Latin America and markets around Asia, about 440,000 of its sales in the period were in China, amounting to roughly 40% of all EV sales in the world’s biggest auto market. 

Volkswagen was the best-selling brand among automakers in China since at least 2008, when data from the China Automotive Technology and Research Center became available. Volkswagen sold 427,247 vehicles under its brand in the country in the first quarter, with EVs accounting for only 6%.

BYD, whose biggest investor is Warren Buffett’s Berkshire Hathaway Inc., aims to deliver 3 million to 3.7 million EVs this year, according to Bloomberg Intelligence, having sold 1.86 million in 2022, more than the previous four years combined. 

Growth is likely to stem from a range of new models that BYD unveiled at this month’s Shanghai auto show, covering both ends of the price spectrum — from the 73,800 yuan Seagull hatchback to the 1.1 million yuan Yangwang U8 luxury sports utility vehicle.

Despite rising raw material costs and spending on new factories and research and development, as well as being the seasonally slowest quarter, BYD posted its third-highest net income on record, said Jack Shea, founder and chief financial officer of Shenzhen-based fund Snow Bull Capital, which has a stake in the EV maker. 

“We expect to see its margin grow as these new factories ramp up across China, its ASP increase with new models coming to market, and raw material prices stabilizing later this year,” Shea told Bloomberg News. BM/DM