BYD’s Profit Plunge Exposes the Cost of a Two-Front War

The world’s largest electric-vehicle maker is telling two very different stories right now, and investors are struggling to decide which one to believe. BYD’s shares jumped nearly 5% in Hong Kong on a broad market rally, yet the company’s latest quarterly numbers paint a far grimmer picture than the stock price suggests.

First-quarter net profit tumbled 55.4% year-on-year to just 4.09 billion yuan, the steepest earnings decline since 2020. Revenue also contracted sharply. The margin on each vehicle sold has been cut in half: analysts estimate BYD earned roughly 8,800 yuan per car a year ago, but that figure has now shrunk to less than 4,400 yuan.

The root cause is a brutal price war at home. Rivals like Xiaomi and Geely have forced BYD into constant discounting, while Beijing’s decision to slash EV tax breaks this year has compounded the pain. Plug-in hybrids with short electric ranges lost their subsidies entirely, a devastating blow given that segment traditionally accounts for the bulk of BYD’s domestic sales. Inland deliveries of those models collapsed 62% in the first quarter.

The result: domestic sales have now fallen for eight consecutive months. April saw BYD deliver 314,100 EVs and plug-in hybrids in China, down 15.7% from a year earlier. The cumulative January-April figure of just over one million vehicles represents a 26.4% decline. BYD’s market share in China has slipped to 7.1%, trailing both Volkswagen and Geely, while smaller domestic rivals Leapmotor and Zeekr posted record monthly sales in April.

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Pushing Back on Price

BYD is fighting back, but cautiously. From May 1, the company raised the price of its “God’s Eye B” driver-assistance system from 9,900 to 12,000 yuan — a 21% increase that the company attributes to soaring memory-chip costs. The move is small in absolute terms but signals a strategic shift: BYD wants to extract more revenue per vehicle rather than continue bleeding in the price war. New models featuring ultra-fast charging and the second-generation Blade battery are also rolling out.

The Export Lifeline

The foreign market tells a completely different story. April exports hit an all-time high of 135,098 units, up more than 70% year-on-year. Cumulative exports from January to April reached roughly 456,000 vehicles, a nearly 60% jump. In the first quarter alone, overseas sales climbed 56% to over 321,000 cars. Management insists the 2026 target of 1.5 million export vehicles remains achievable.

Europe is central to that push. Pre-production has already begun at BYD’s factory in Szeged, Hungary, which will eventually have capacity for 300,000 vehicles annually — a move designed to sidestep steep EU tariffs on Chinese-made EVs. But the expansion has attracted unwanted scrutiny. BYD became the first Chinese company to be raised in the European Parliament over alleged labour violations, following an investigation into working conditions at the Szeged site. A contractor named in the report, AIM Construction Hungary, belongs to the Jinjiang Construction Group — the same firm implicated in a 2024 scandal at BYD’s Brazil plant, where authorities described conditions “akin to slavery.” BYD has declined to comment.

The Hidden Cost of Growth

The aggressive global push and domestic price war are leaving deep scars on the balance sheet. Short-term liabilities soared 72% in the first quarter to a record 66.3 billion yuan. Morningstar notes that BYD has swung from a net-cash position to a net-debt position — a worrying shift for a company that prides itself on financial discipline.

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Analyst views are sharply divided. Goldman Sachs maintains a “Buy” rating with a HK$134 price target, arguing the first quarter of 2026 marked the trough and that a gradual recovery lies ahead. Daiwa also keeps a “Buy” call with a HK$130 target, citing strong export momentum. But BNP Paribas is far more bearish, rating the stock “Underperform” with a HK$87 target — the lowest on the Street following the earnings release. The consensus among 25 analysts sits at HK$124.

The stock recently traded around HK$99, a far cry from its mid-2025 peak above HK$465. Whether the export boom can offset the structural collapse at home will become clearer when half-year results are published. For now, BYD is fighting a two-front war — and the home front is bleeding badly.

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