Market bloodbath: Has BYD's per-car profit bottomed out?

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Author | Zhou Zhiyu

BYD changed its strategy in 2025.

Over the past four years, the company's profits soared from 3 billion to 40.3 billion, maintaining high growth for four consecutive years. Its gross margin climbed from 12% to 19%, and its cash on hand has always exceeded its interest-bearing liabilities.

In 2025, the old labels were torn off.

Revenue growth fell to its lowest in five years, and profits dropped for the first time in the new energy era. But in this year, BYD made its biggest historical bet—capital spending nearly doubled compared to 2023, and total borrowing also doubled.

This was not passive. From an industry perspective, as domestic competition grew white-hot this year, BYD’s expansion speed reached a peak.

It can be said that BYD placed its biggest bet at its most uncomfortable moment. As it defended its domestic market and just began to tap into overseas high-profit territories, BYD could only move forward against the tide.

Facing two tough battles, BYD must go all out.

Challengers

BYD encountered its toughest situation in the new energy era domestically.

BYD’s fourth quarter 2025 revenue exceeded expectations, mainly due to BYD Electronics’ growth; car sales revenues were flat. Meanwhile, sales volume declined year-on-year, meaning each car sold for less. In the second half, the average domestic car price dropped to 127,000 yuan, and gross margin fell to 17.2%—two years ago, it was 23.9%.

It’s not that BYD got weaker, but its rivals became stronger.

In 2024, BYD’s DM5.0 plug-in hybrid technology faced almost no competition. By 2025, Geely’s Leishen Electric Hybrid 2.0 and Chery’s C-DM 6.0 both launched, shrinking the gap in power-consumption per 100 km to within 0.1L. The tech gap changed from “a generation ahead” to “half a step away.”

In BYD’s core 100,000–200,000 yuan price range, competitors launched “close combat.” Geely Galaxy, with its “high spec + strong value” strategy, nearly doubled sales; its new energy market share rebounded to 16.3% in February 2026, approaching BYD. Leapmotor, Changan, and Great Wall also pushed hard in their segments. Though BYD maintained a 36% share in plug-in hybrids via long-range models, its dominance is no longer as before.

Pure electric is even more passive. BYD launched its Super e Platform in March 2025—5 minutes of charging gives 400km range, technical specs are solid. But initially this tech only covered models above 200,000 yuan like Han L and Tang L; the under-150,000-yuan volume market wasn’t benefitting. Pure electric market share remained under pressure.

“Anti-price war” policies further limited BYD’s traditional price-cutting path—as an industry leader, its pricing strategy faces stricter scrutiny.

BYD hasn’t failed to respond. Qin Plus pure electric range doubled from 55km to 128km. Fangchengbao expanded from high-end off-road launching Titanium 3 and Titanium 7; Titanium 7 exploded in sales, exceeding 100,000 units in January 2026. But these efforts are essentially “adding features without raising price,” using higher configuration costs to defend existing markets.

Q4 added a passive factor. In 2026, the new vehicle tax policy raised plug-in hybrid electric range threshold from 43km to 100km; BYD had to “steep terminal discounts + tax subsidies” to clear older models, and to make Qin and Song series compliant it raised BOM costs by force.

Result: Q4 sales climbed to 1.34 million units, up 20.5% quarter-on-quarter, but gross margin dropped just above 16%. The market thought BYD had “bottomed out” in Q3, but this report shows scale effects in Q4 didn’t release profit—instead, price war and forced upgrades wiped it out.

Additionally, BYD’s Q4 high-end brand sales share jumped from 6% to 11%, almost entirely driven by Fangchengbao Titanium 7 starting at 179,800 yuan. Excluding Titanium 7 and 3, core high-end over 300,000 yuan still hovered at 5%. Brand premium has not been established.

BYD’s defense in the domestic battle has not been easy.

Two Lines

Despite domestic pressure, BYD did not choose to shrink. On the contrary, it doubled down in two directions.

The domestic market is a defending battle; it uses technology to buy time.

The second-generation blade battery and megawatt flash charging released on March 5 are all about trickling down. The 6C-level flash charging system will cover mainstream models at 150,000–200,000 yuan, with plans to build 20,000 fast charge stations by end 2026, and one year of free flash charging rights. This is BYD investing in infrastructure to fix its pure electric shortcomings, directly targeting Geely and XPeng’s 800V mass market layouts.

Competitors are also concerned. In recent Wallstreetcn talks with auto executives, one of the hottest topics was BYD’s flash charging tech rollout.

Smart driving is also accelerating. Total R&D investment reached 63.4 billion, R&D capitalization jumped from 966 million to 5.463 billion. “God’s Eye” system was installed on over 2.56 million vehicles, first batch of L3 vehicles were approved for pilot road use in December 2025. But smart driving is not yet a mass-market must-have. “Smart drive” new cars, constrained by delays and rising BOM costs, didn’t effectively convert to terminal sales.

Wallstreetcn learned BYD will hold a smart driving launch in April 2026, with industry expecting laser radar across multiple price bands and new algorithms. This will be a key test: whether BYD’s self-developed urban NOA can trickle down to 100,000-yuan cars, determining whether the domestic base can be stabilized.

DM6.0, according to supply chain research, may bring minimum power-consumption down to 1.8L, but likely launches in the second half — “distant water cannot quench immediate thirst.”

Flash charging, smart driving, DM6.0: three cards, all with a time lag. The domestic trench warfare is not yet harvest season.

Overseas is BYD’s real confidence for bold expansion amid domestic pressure.

Car overseas revenue shot from 99.7 billion to 191.3 billion, nearly doubled. Exports broke 1.05 million units. But profit structure behind the numbers matters most.

Second half, overseas car average price was 186,000 yuan versus 127,000 yuan at home — a gap of nearly 60,000. Overseas gross margin 28.1%, domestic 17.2%, nearly 11 points higher. Overseas gross profit 52,000 yuan per car—2.4 times the 22,000 at home. After all expenses, overseas net profit per car is over 20,000 yuan.

Overseas markets are now becoming BYD’s core profit source.

If 2026’s 1.5–1.6 million export target is met, counting 20,000 in net profit per exported car, overseas will contribute 30-32 billion net profit—nearly two-thirds of all car profits. BYD is turning into a company making money overseas.

So a significant part of the 140.2 billion in capital spending went abroad. The Hungary factory is expected to start in Q2 2026, with annual capacity of 150,000. Brazil factory plans to expand to 300,000. Thailand factory started operation, Cambodia factory broke ground. Eight car carrier ships launched. Overseas non-current assets jumped from 15.3 billion to 31.8 billion. European shops planned to double from 1,000 to 2,000. By the end of 2026, overseas localized capacity is expected to exceed 510,000.

BYD is rapidly building global manufacturing and supply chains. Local manufacturing shifts cost structure—local labor, compliance, and depreciation during scale-up all push up unit cost. If 28.1% overseas gross margin can be maintained is yet to be seen.

Domestically, BYD uses tech investment to gain time; overseas, it uses capacity investment to lock in profit. Both lines burn cash—one defensive, one offensive.

Second Half

The result of burning both lines at once is BYD’s latest financial report.

Full-year net profit attributable to shareholders was 32.6 billion, down 19% year-on-year. Gross margin fell from 19.44% to 17.74%. Operating cash flow halved from 133.5 billion to 59.1 billion, while capital spending soared from 92.5 billion to 140.2 billion. Total borrowing doubled to 113.4 billion. New bank loans for the year totaled 134 billion, corporate bonds 20 billion, perpetual bonds up 3.9 billion, Hong Kong equity raising about 40 billion—four financing tools used at once.

In 2024, each 1 yuan of capital spending yielded 8.4 yuan in revenue; in 2025, only 5.7 yuan. Investment efficiency fell, intensity rose.

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

Big domestic growth is unlikely in 2026. Considering the halved vehicle tax and the national subsidy tilting to cars above 167,000 yuan—unfavorable for BYD’s main 100,000–150,000 yuan segment.

With domestic defense, BYD will likely depend on overseas profits in 2026. By January-February 2026, overseas sales ratio already hit 51%, overtaking domestic.

Domestically, validation points are tightly scheduled: smart driving tech launch, DM6.0 launch, and flash charging network’s rollout to 20,000 stations—all need time and money. The effect of these three moves will only show up in financials by Q3 at the earliest.

Overseas, the core question is: can capacity speed outpace gross margin contraction? Hungary factory launches Q2, Brazil expands capacity, and after local manufacturing, gross margin will fall from 28.1%. If it stays above 22%, 1.5 million overseas sales will secure 30 billion profit, cushioning domestic pressure.

As these key points approach throughout the year, the numbers in future reports will decide whether 2025 is read as a "year of capacity construction" or a "profit inflection point".

In 2023, BYD saw both sales and prices rise, profits explode, everything smooth. In 2025, BYD is fighting on multiple fronts, making its biggest historical bet.

This is Wang Chuanfu's answer. Whether it’s right—see you in 2026.

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