A heated price war in China's NEV sector late last year and incentives offered by BYD to dealers may have dragged down profits.

BYD (HKG: 1211, OTCMKTS: BYDDY) saw its net profit slip in the fourth quarter of 2023 from the previous quarter, despite record sales and revenue, likely dragged down by a year-end price war that heated up.

The new energy vehicle (NEV) maker reported record revenue of RMB 180 billion ($24.9 billion) in the fourth quarter of 2023, up 15.14 percent year-on-year and up 33.56 percent from the third quarter, according to its earnings report released today.

Previously released figures showed that BYD sold 944,779 NEVs in the fourth quarter, up 38.24 percent year-on-year and up 14.66 percent from the third quarter.

BYD reported a net profit of RMB 8.67 billion in the fourth quarter, up 18.66 percent year-on-year but down 16.70 percent from the third quarter.

This could be due to the heating up of the price war in China's NEV industry late last year, as well as BYD's incentives for dealers.

In November and December last year, BYD offered official purchase discounts on a number of models, including the Seal, Song Plus, Chaser 05, Frigate 07, Han, and Tang, with discounts as high as RMB 20,000 on some models.

In addition, BYD sold 3,024,417 NEVs in 2023, reaching its target of 3 million units.

After reaching its sales target, BYD was expected to reward dealers with RMB 2 billion, local media outlet Yicai said in a January 2 report, citing several people familiar with the matter.

For stores that have accomplished their sales targets, BYD will issue a reward of RMB 666 for each car they sold, according to Yicai.

For the full year 2023, BYD reported revenue of RMB 602.3 billion, up 42.04 percent year-on-year.

The company's net profit for the full year of 2023 was RMB 30 billion, an increase of 80.72 percent year-on-year.

It had sales revenue of RMB 406.6 billion from passenger cars and RMB 6.07 billion from commercial vehicles in 2023.

This means that BYD's average revenue from the sale of each passenger car in 2023 was about RMB 135,000, considering that it sold 3,012,906 passenger cars in 2023.

($1 = RMB 7.2187)

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