BYD posts first profit drop in over three years amid price wars

BYD faces rare profit stumble

For the first time in three and a half years, BYD reported a decline in quarterly profit. Net profit dropped 29.9% year-on-year to 6.4 billion yuan ($894 million), even though revenue rose 14% to 200.9 billion yuan.

This sudden reversal stands out because BYD had posted rapid growth earlier in 2025, including a 100% profit jump in the first quarter. The setback underscores how rising competition and shifting government policies are forcing even market leaders to slow down.

Price wars cut deep in China

Chinese regulators urged automakers to stop slashing prices in ways that hurt profit margins. BYD and rivals escalated discounts (including May campaigns); soon after, officials warned the industry to avoid ‘rat-race competition’ that harms supply chains and the ‘Made in China’ reputation.

According to Bloomberg, officials stated that “rat-race competition” could harm supply chains and the global reputation of “Made in China.” While meant to attract customers, such heavy price reductions left BYD and rivals earning far less on each car sold.

Stock value shaken by results

Investors reacted quickly after BYD’s earnings release, pushing its stock down as much as 8% in Hong Kong before some recovery. The first decline in more than three years caught markets off guard.

Margins also narrowed, with gross profit slipping to 18% from 18.8% in 2024. Although still higher than many rivals like Geely and Chery, this change revealed the impact of discounting on the bottom line.

China sales keep falling

BYD’s sales in its home market slid for the fourth month straight in August. Deliveries in China fell 14.3% year-on-year to 292,813 units, hurting results since nearly 80% of BYD’s sales come from there.

This weakness contrasts with global sales, which still showed growth. Soft demand in China, the world’s largest auto market, creates far greater challenges than declines in smaller regions.

Overseas markets drive growth

International markets provided a bright spot for BYD in 2025. Bloomberg reported that overseas revenue jumped 50% in the first half to 135.4 billion yuan, excluding Hong Kong, Macau, and Taiwan.

Brazil emerged as the company’s biggest overseas success, accounting for about one-third of all international sales. Expansion also continued in Australia, Singapore, and parts of Europe, where BYD gained traction with new dealerships.

Ambitious targets under strain

BYD aimed to sell 5.5 million vehicles globally this year. By the end of August, Business Recorder noted it had sold 52.1% of that target, suggesting the company is falling behind pace.

Analysts have lowered expectations, with some predicting 4.9 to 5.1 million in total sales for 2025. Hitting below target would mark a rare miss for a brand that has consistently set and achieved bold goals.

Production slows its momentum

August production reached 353,090 vehicles, a 3.78% decline compared with last year, according to Reuters. This marked the second straight month of lower output.

Reuters also reported that BYD cut shifts and delayed new production lines at some Chinese plants. The slowdown shows how balancing supply with demand has become critical in a cooling market.

Hybrids lose ground to EVs

Since April, BYD has produced and sold more electric vehicles than plug-in hybrids. In August, EV sales jumped 34.4% year-on-year, while PHEV sales continued a steady slide.

This shift reflects BYD’s product strategy and market demand; China’s NEV incentives continue to support both BEVs and PHEVs through 2027. It also highlights BYD’s longer-term strategy to lean on electric-only models as global demand increases.

Growing capital deficit issues

BYD’s working capital deficit expanded sharply in 2025. It rose to 122.7 billion yuan at the end of June, up from 95.8 billion yuan just three months earlier.

This measure shows the gap between short-term assets and liabilities, leaving BYD with less flexibility. The trend has drawn attention because a growing deficit can stress daily operations if sales keep slowing.

Supplier payments speed up

As part of a regulatory push, BYD agreed to pay suppliers within 60 days instead of long delays, Bloomberg reported. Just two years ago, data showed the company took an average of 275 days to pay.

The shift helps smaller suppliers survive, but it increases cash outflows for BYD. With profitability already under pressure, faster payments limit financial wiggle room in a competitive environment.

Spending big on technology

Research and development costs surged more than 50% year-on-year. BYD is investing heavily in core areas like battery innovation, vehicle intelligence, and electrification.

This push could secure its lead in new-energy vehicles over time. Still, higher spending in the short term squeezes margins further at a moment when profits are already declining.

Borrowing levels climb higher

BYD’s debt load is also growing. Borrowings jumped to 39.1 billion yuan by mid-2025, up from 28.6 billion yuan at the end of last year.

These higher borrowings show the cost of fueling expansion during a period of profit pressure. Balancing debt repayment with continued investments is likely to remain a challenge going forward.

Analysts cut forecasts

Market experts have lowered expectations for BYD’s full-year results. A Third Bridge analyst told Reuters that the 5.5 million sales target now looks “pessimistic.”

China Merchants Bank International cut its forecast by 5%, predicting around 4.9 million units in 2025. That suggests even leading producers are being forced to scale back expectations.

Building abroad for the future

According to Bloomberg, BYD’s interim report said it is planning and building new factories overseas to prepare for rising demand. This strategy reflects a shift toward higher-margin markets outside China.

By investing abroad, BYD hopes to reduce reliance on the crowded Chinese market. The move also positions the company closer to customers in Europe, Australia, and Latin America.

Competition leaves scars

According to Bloomberg, Sanford C. Bernstein called BYD’s shrinking margins the “scars of competition.” Their report noted that promotions failed to lift sales volumes as much as expected.

Although Bernstein kept an “outperform” rating on BYD, they trimmed the target stock price to HK$130. The cut shows how competitive pressures are eroding even bullish views on the company.

BYD unveils 3,000-hp electric supercar with extreme performance specs. Keep an eye on these moves if you want to see how BYD aims to stay ahead in both innovation and global expansion.

Long-term growth outlook

Despite near-term setbacks, analysts remain optimistic about BYD’s global growth. Bernstein now forecasts sales of about 5.1 million vehicles in 2025, short of the target but still a massive number.

They also predict overseas shipments could reach 1 million units, well above earlier guidance of 800,000. Calling BYD their “top outperform pick,” analysts argue the company remains positioned for long-term success.

BYD, partnering with Finnish distributor Veho to upgrade its local sales network. Fans should watch closely as the brand deepens its global footprint.

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This slideshow was made with AI assistance and human editing.