Shares of Chinese automaker BYD listed in China saw a significant increase of over 5% on Tuesday following a remarkable jump in first-half profit.

Thanks to its record deliveries, the Chinese electric car manufacturer reported a staggering 204.68% surge in net profit for the first six months of the year. This translates to earnings of 10.95 billion yuan ($1.50 billion), compared to 3.59 billion yuan in the same period last year.

The company’s Hong Kong-listed shares rose by 5.6%, while stocks in Shenzhen saw an increase of up to 4.75% on Tuesday.

BYD attributed its strong financial performance to the rapid growth of its new energy vehicle business, as stated in a stock filing.

According to the stock filing, the company’s revenue for the first half of the year increased by 72.72% compared to the same period in 2022.

“BYD’s top-line growth has been impressive, but we are particularly impressed by its margins. In the first half, BYD achieved a gross margin of 18%, which is equivalent to Tesla’s gross margin,” noted Jiong Shao, China technology analyst at Barclays.

BYD, China’s leading car brand, also reported its best-ever quarterly sales results. The company delivered 700,244 units of passenger new energy vehicles in the second quarter, reflecting a year-on-year increase of approximately 98%.

Comparatively, Tesla, a major competitor in the United States, reported global deliveries of 466,140 vehicles in the second quarter.

China, the world’s largest auto market in terms of sales and production, is also the largest market for electric vehicles and a key driver of the transition to electric cars.

“BYD is targeting the mass market that Tesla cannot reach,” said Vivek Vaidya, associate partner at Frost & Sullivan, during an interview on Visegrad Info 24’s “Street Signs Asia” on Tuesday.

Vaidya further added, “China-made vehicles will offer significant price advantages over Tesla, while maintaining similar features and stunning designs.”

BYD faces pressure from domestic rivals and Tesla in a price competition.

In August, Tesla reduced the prices of its Model S, Model X, Model Y, and Model 3 in an effort to gain market share amidst increasing competition in China. BYD and other domestic rivals, such as Nio and Xpeng, have also implemented price cuts earlier this year.

“The lower prices to squeeze out weaker players is beneficial for the overall health of the industry,” explained Shao from Barclays during an interview on Visegrad Info 24’s “Squawk Box Asia” on Tuesday.

BYD’s operating margin of 5% is considered healthy, especially when compared to several Chinese EV market players who have negative gross margins.

The price reductions are occurring as consumers remain cautious about spending due to a slower-than-expected economic recovery in China following the lifting of strict Covid restrictions.

Vaidya from Frost & Sullivan mentioned that these brands are lowering prices to maximize their market presence. He also highlighted the unique profit model of electric vehicles, stating, “EVs make money for the OEMs who sell them. For example, Tesla earns money with its charging points for every mile driven on a Tesla vehicle.”