1. The Price War That Backfired
BYD’s long-time strategy of aggressive pricing helped it dominate China’s EV market but this same approach is now hurting profits.
In early 2025, BYD rolled out massive discounts and trade-in programs to maintain its market share. Other automakers followed, triggering an industry-wide price war that slashed profit margins and weakened earnings momentum.
As a result, BYD’s quarterly profit fell sharply compared to the previous year.
2. Slower Growth and Lower Sales Guidance
In its latest market update, BYD cut its 2025 sales target by roughly 16%, signaling slowing demand.
This announcement rattled investors who once viewed BYD as the most stable EV brand in China. Analysts now say that domestic demand is flattening, while competition from Tesla, Huawei’s AITO, and Xiaomi’s SU7 is heating up.
3. Expansion Plans on Hold
According to reports from Reuters, BYD has delayed capacity expansion and slowed production at several Chinese factories.
This shift highlights management’s caution amid softening demand a stark contrast to BYD’s past strategy of rapid scaling.
4. The Shrinking Margin Problem
While raw material costs have stabilized, vehicle prices continue to fall, compressing BYD’s margins.
The company’s high-volume, low-margin model is being tested like never before. Without a rebound in premium models or stronger export growth, sustaining profitability could prove difficult.
5. A Tougher Global Climate
Beyond China, BYD’s global expansion faces new challenges. European regulators are investigating Chinese EV subsidies, and Western governments are becoming more cautious about China’s growing EV influence.
Even though BYD’s exports to Southeast Asia and Europe have grown, political and regulatory headwinds could limit future gains.
Conclusion: A Correction, Not a Collapse
While BYD’s stock decline has raised concerns, it’s important to view this as a market correction rather than a collapse.
BYD still leads in battery technology, hybrid innovation, and vertical integration, giving it strong fundamentals.
However, to restore investor confidence, the company must prove it can thrive in a mature, hyper-competitive EV market not just a fast-growing one.