Market bloodbath: Has BYD's per-vehicle profit hit the bottom?

Author | Zhou Zhiyu

BYD changed its playbook in 2025.

Over the past four years, the company’s profits grew from 3 billion to 40.3 billion, delivering high growth for four straight years. Its gross margin climbed from 12% to 19%, and the cash it held has always been greater than its interest-bearing liabilities.

In 2025, the old labels were torn off.

Revenue growth slowed to the lowest level in five years, and profits saw the first decline in the new energy era. But in that same year, BYD placed its biggest bet in history—capital expenditures nearly doubled compared with 2023, and total borrowings doubled.

This is not passive. From an industry perspective, as competition in China grew even more intense in that year, BYD’s expansion pace hit a high point.

It could be said that BYD put up its biggest chips at the most uncomfortable time. Just as its profit strongholds in both the domestic market defense and overseas expansion had only just begun to open up, BYD could only press forward against the tide.

Facing two tough battles, BYD had to go all in.

Challenger

In China, BYD ran into the most severe situation since the new energy era began.

In Q4 2025, BYD’s revenue beat expectations, but this was mainly due to growth at BYD Electronics, while car sales revenue was basically flat. At the same time, unit sales declined year over year, meaning each car was sold for a lower price. By the second half, the average domestic selling price per car had fallen to 127,000 yuan, and the gross margin had dropped to 17.2%—two years earlier, the figure was 23.9%.

BYD isn’t getting weaker—its rivals are getting stronger.

In 2024, BYD’s DM 5.0 plug-in hybrid technology had almost no competitors in the market. But by 2025, Geely’s Raytheon Electric Hybrid 2.0 and Chery’s C-DM 6.0 were rolled out in sequence. The difference in kWh/100 km—or rather, in grid-charging-off (fed-from-the-grid) fuel consumption—narrowed to within 0.1 L. The technological gap shifted from “a generation ahead” to “a half step away.”

In BYD’s most core 100,000–200,000 yuan price band, competitors launched a close-quarters fight. Thanks to a strategy of “high specs + strong value for money,” Geely’s Galaxy lineup saw sales nearly double. Its new energy market share rebounded to 16.3% in February 2026, putting pressure on BYD. Leapmotor, Changan, and Great Wall also pushed hard in their respective segments. Although BYD kept plug-in hybrid market share at around 36% by launching long-range variants, its dominance is no longer what it used to be.

The situation in pure electric is even more passive. In March 2025, BYD introduced the Super e platform—charging for 5 minutes gives a range of 400 km, and the technical parameters are solid. However, in the early stages this technology only covered models priced above 200,000 yuan such as the Han L and Tang L; the volume market below 150,000 yuan did not benefit. The pure electric market share has also continued to face pressure.

The “anti-involution” policy also restricted BYD’s traditional path to regain share through pricing—as an industry leader, its pricing strategy faces even stricter scrutiny.

BYD hasn’t had no response. Qin Plus pure electric range doubled from 55 km to 128 km. Fangchengbao went from high-end off-road positioning and lowered itself with the Ti 3 and Ti 7; as soon as the Ti 7 launched, it took off, and by January 2026 the cumulative sales broke 100,000 units. But at their core, these moves are “more features, not higher prices”—using higher configuration cost to defend existing market share.

There’s another passive factor in Q4. In the 2026 vehicle purchase tax new policy, the threshold for plug-in hybrid and pure electric range raised from 43 km to 100 km. BYD needs to clear inventory of soon-to-be phased-out older models with “significant terminal discounts + purchase tax coverage,” while also forcibly raising BOM costs to ensure the Qin and Song series meet the targets.

As a result, Q4 sales surged to 1.34 million units, up 20.5% month over month, but the gross margin fell to just above 16%. At one point in the third quarter, the market believed BYD had “come out of the operational bottom,” but this earnings report shows that in Q4 the scale effect did not translate into profit. Instead, it was swallowed up by the price war and the added passive configurations.

In addition, the share of sales from BYD’s high-end brands in Q4 jumped from 6% to 11%, relying almost entirely on Fangchengbao’s Ti 7, which starts at 179,800 yuan. Excluding the Ti 7 and Ti 3, the share of core high-end sales above 300,000 yuan still hovers around 5%. Brand pricing power hasn’t been established yet.

This domestic battle is not easy for BYD to defend.

Two lines

The domestic side is under pressure, but BYD didn’t choose to shrink. On the contrary, it added fuel in two directions at the same time.

Domestically, it’s a fortress-defense battle, and it uses technology to buy time.

The second-generation Blade Battery and the megawatt-class flash charging technology released on March 5 are essentially about “scaling down for broader rollout.” The 6C-level flash charging system is systematically covering the 150,000–200,000 yuan mainstream models, with a plan to build 20,000 flash-charging stations by the end of 2026, and includes a one-year free flash-charging benefit. This is BYD investing in infrastructure to make up for the early-stage shortcoming of pure electric, directly targeting how Geely and XPeng are positioning themselves in the 800V down-market.

Rivals are also quite concerned about this technology. In recent conversations between Wall Street China and multiple auto-company executives, one of their biggest concerns is the rollout progress of BYD’s flash-charging technology.

Intelligent driving is also accelerating. Full-year R&D total spending was 63.4 billion, and R&D capitalization rose from 966 million to 5.463 billion. TianShen Zhi Yan has been installed in more than 2.56 million vehicles, and the first batch of L3 models received approval for road testing in December 2025. But the problem is that intelligent driving hasn’t yet become mass demand. “Intelligent driving versions” of new cars are constrained by delays in feature deployment and rising BOM costs, and have not effectively converted into end-customer sales.

Wall Street China has learned that BYD will hold an intelligent-driving launch event in April 2026. Industry expectations are that it will unveil including laser radar covering multiple price tiers, as well as new algorithms. This event will also be a key validation point: whether the company’s self-developed urban NOA algorithm can scale down to 100,000-yuan-level models will determine whether BYD’s domestic base can stop the bleeding.

As for DM 6.0, according to supply-chain research on fed-from-the-grid fuel consumption, it has the potential to bottom out at 1.8 L. But the release date may be in the second half—so it won’t solve the immediate problem.

Flash charging, intelligent driving, and DM 6.0—three cards played in sequence, but each comes with a timing gap. BYD’s domestic position battle hasn’t reached the harvest period yet.

Overseas is BYD’s real confidence for aggressive expansion even while facing pressure at home.

Automotive revenue overseas surged from 99.7 billion to 191.3 billion—nearly doubling. Exports broke through 1.05 million units. But more important than the numbers is the profit structure behind them.

In the second half, the average selling price per car overseas is 186,000 yuan, versus 127,000 yuan domestically—about a 59,000 yuan gap. Overseas gross margin is 28.1%, while domestic is 17.2%—a difference of nearly 11 percentage points. Overseas gross profit per car is 52,000 yuan, 2.4 times the domestic 22,000 yuan. After deducting various expenses, net profit per car overseas remains stable at more than 20,000 yuan.

Overseas markets are gradually becoming BYD’s core source of next profits.

If the company’s 2026 export target of 1.5–1.6 million units is achieved, using net profit per car of 20,000 yuan as a benchmark, overseas would contribute 30–32 billion yuan in net profit—nearly two-thirds of the car-sales profit. BYD is turning into a company that makes money mainly overseas.

So a sizable portion of the 140.2 billion in capital expenditures is being poured into overseas. The Hungary plant is expected to start production in Q2 2026, with planned annual capacity of 150,000 units. The Brazil plant has plans to expand capacity to 300,000 units. The Thailand plant is set to start production, and the Cambodia plant has been laid the groundwork. Eight roll-on/roll-off cargo ships have been put into operation. Overseas non-current assets rose from 15.3 billion to 31.8 billion. The number of European stores is planned to double from 1,000 to 2,000. By the end of 2026, overseas localized production capacity is expected to exceed 510,000 units.

BYD is trying to quickly build global production capacity and a supplier ecosystem. Localized manufacturing means changes in the cost structure—local labor, regulatory compliance, and depreciation during capacity ramp-up will all push up cost per car. How much gross margin of 28.1% can be maintained remains to be seen.

Domestically, BYD uses technology investment to buy time; overseas, it uses capacity investment to lock in profits. Both lines are burning money, but one is defense and the other is offense.

Second half

The result of both lines burning at the same time is BYD’s current earnings report.

Full-year net profit attributable to shareholders was 32.6 billion yuan, down 19% year over year. Gross margin fell from 19.44% to 17.74%. Operating cash flow was slashed from 133.5 billion to 59.1 billion, while capital expenditures surged from 92.5 billion to 140.2 billion. Total borrowings doubled to 113.4 billion. During the year, new bank borrowings totaled 134 billion, corporate bond issuance was 20 billion, net perpetual bond increase was about 3.9 billion, and fund-raising from issuing shares in Hong Kong equities was about 40 billion—four financing instruments used at the same time.

In 2024, every 1 yuan of capital expenditure generated 8.4 yuan of revenue, but in 2025 that fell to 5.7 yuan. Investment efficiency is declining while investment intensity is rising.

But BYD isn’t betting on 2025—it’s betting on after 2026.

There isn’t much possibility of big growth in China in 2026. Considering the impact of the halving of the vehicle purchase tax, as well as government subsidy policies tilting toward models priced above 167,000 yuan—which is unfavorable to BYD’s absolute main price bands of 100,000–150,000 yuan.

With BYD defending domestically, its 2026 profits will most likely have to be carried by overseas. In January–February 2026, the overseas sales share already surged to 51%, surpassing domestic.

Domestically, validation milestones are scheduled very densely. The release of intelligent-driving technology, the release of DM 6.0, and flash-charging network rollout from planning to 20,000 stations all require time and money. The impact of these three cards will be visible in the financial statements at the earliest in the third quarter.

Overseas, the core issue is only one: whether the speed of capacity ramp-up can outrun the pace at which gross margin narrows. With Hungary starting production in Q2 and Brazil expanding capacity, once localized manufacturing advances, gross margin of 28.1% will inevitably move downward. If it can be held at above 22%, then overseas sales of 1.5 million units would be enough to support profits in the 30 billion range, cushioning domestic pressure.

As these key milestones come into play throughout this year, the specific figures reflected in the earnings report—and they will also determine whether the market reads 2025 as a “capacity construction year” or a “profit inflection point.”

In 2023, BYD saw sales and pricing rise together, with profits exploding—everything went smoothly. In 2025, BYD fought on multiple fronts and placed the biggest bet in its history.

This is the answer Wang Chuanfu has provided. Whether the answer is right or not—will be seen in 2026.

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