Is the fierce market competition causing BYD's per-vehicle profit to hit bottom?

Why is BYD increasing overseas expansion against the trend when profits are declining?

Author | Zhou Zhiyu

BYD changed its strategy in 2025.

Over the past four years, this company’s profits rose from 3 billion to 40.3 billion, with four consecutive years of high growth, gross profit margin climbing from 12% to 19%, and cash on hand always exceeding interest-bearing debt.

In 2025, the old label was torn off.

Revenue growth slowed to its lowest in five years, and profits experienced their first decline in the new energy era. But in that year, BYD made its biggest gamble in history—capital expenditures nearly doubled compared to 2023, and total borrowing doubled.

This was not passive. From an industry perspective, in a year when domestic competition further intensified, BYD’s expansion speed reached a peak.

It can be said that BYD is betting the most when it feels the least comfortable. Just as the profit highlands in the domestic and overseas markets are opening up, BYD can only go against the trend.

Faced with two tough battles, BYD must give it all.

Challenger

BYD faces the most severe situation since the new energy era began domestically.

BYD’s revenue in Q4 2025 exceeded expectations, but this was mainly due to growth in BYD Electronics, while car sales revenue was basically flat. Meanwhile, sales volume declined year-over-year, meaning each vehicle was sold at a lower price. By the second half of the year, the domestic single-car price had dropped to 127k yuan, and gross profit margin fell to 17.2%—a figure that was 23.9% two years ago.

It’s not that BYD has weakened; its competitors have strengthened.

In 2024, BYD’s DM5.0 plug-in hybrid technology was almost unmatched in the market. By 2025, Geely’s雷神 hybrid 2.0 and Chery’s C-DM 6.0 were launched successively, narrowing the fuel consumption gap per 100 km to within 0.1L. The technological gap shifted from “a generation ahead” to “half a step behind.”

In BYD’s core price range of 100k to 200k yuan, competitors engaged in “close combat.” Geely’s Galaxy series, with its “high configuration + strong cost performance” strategy, nearly doubled in sales, and the new energy market share rebounded to 16.3% in February 2026, approaching BYD. Leapmotor, Changan, and Great Wall are also making efforts in their respective segments. Although BYD has tried to maintain its plug-in hybrid market share at around 36% by launching long-range versions, its dominance is no longer what it used to be.

The situation in pure electric vehicles is even more passive. In March 2025, BYD launched the Super e Platform, with a charging time of 5 minutes for 400 km of range—an impressive technical parameter. But this technology initially only covered models like Han L and Tang L priced above 200k yuan, leaving the mass-market below 150k yuan unaffected. The pure electric market share continues to be under pressure.

The “anti-involution” policy also restricts BYD’s traditional path of regaining market share through price competition—being the industry leader, its pricing strategy is under stricter scrutiny.

BYD has responded. The Qin Plus pure electric range doubled from 55 km to 128 km; the Fangcheng Leopard launched the Titanium 3 and Titanium 7 models, with Titanium 7 selling out immediately, reaching over 100,000 units by January 2026. But these moves are essentially “adding volume without raising prices,” using higher configuration costs to defend existing markets.

Q4 also has a passive factor. The new purchase tax policy in 2026 raised the plug-in hybrid and pure electric range threshold from 43 km to 100 km. BYD needs to clear inventory of old models through “significant end-of-line discounts + purchase tax subsidies,” and to meet the standards of Qin and Song series, it has forcibly increased BOM costs.

As a result, Q4 sales hit 1.34 million units, up 20.5% quarter-over-quarter, but gross profit margin fell to just over 16%. The market in Q3 once believed BYD had “emerged from the bottom of operations,” but this financial report shows that the scale effect in Q4 did not release profits—instead, price wars and passive configuration increases ate into margins.

Additionally, BYD’s high-end brand sales in Q4 jumped from 6% to 11%, almost entirely relying on the Titanium 7 version of Fangcheng Leopard starting at 179.8k yuan. Excluding Titanium 7 and Titanium 3, core high-end sales above 300k yuan still hover around 5%. The brand premium has yet to be established.

In this domestic battle, BYD’s defense is not easy.

Two Lines

Domestic pressure persists, but BYD has not chosen to shrink. On the contrary, it is investing heavily in two directions.

In the domestic market, it is a defensive battle, using technology to buy time.

On March 5, BYD announced the second-generation Blade Battery and megawatt-level fast-charging technology, focusing on decentralization. The 6C fast-charging system will be systematically applied to main models priced between 150k and 200k yuan, with plans to build 20k fast-charging stations by the end of 2026, offering one year of free fast-charging rights. This is BYD’s infrastructure investment to address the shortcomings of pure electric vehicles, directly targeting Geely and Xpeng’s deployment in the 800V lower-tier market.

This technology also attracts the attention of competitors. In recent discussions with multiple automaker executives on Wall Street Insights, one of the most concerned issues is the implementation of BYD’s fast-charging technology.

Intelligent driving is also accelerating. Total R&D investment for the year reached 63.4 billion yuan, with R&D capitalization jumping from 966 million to 127k yuan. The Tian Shen Eye system has been installed in over 2.56 million vehicles, and the first batch of L3 models was approved for road testing in December 2025. But the problem is, intelligent driving has not yet become a must-have for the public. The “Intelligent Driving Version” new cars face delays in feature deployment and rising BOM costs, which have not effectively translated into terminal sales.

Wall Street Insights learned that BYD plans to hold an intelligent driving launch event in April 2026, with industry expectations that it will unveil laser radar covering multiple price segments and new algorithms. This event will be a key validation point: whether the self-developed urban NOA algorithm can be extended to 100,000-yuan models will determine whether the domestic market can stop bleeding.

According to industry chain research, DM6.0’s feed-in fuel consumption is expected to bottom out at 1.8L, but the release is likely in the second half of the year—still too late to meet immediate needs.

Fast charging, intelligent driving, DM6.0—these three cards are played sequentially, but all have time gaps. The domestic battlefield has not yet reached the harvest period.

Overseas, BYD’s true confidence lies in its aggressive expansion while under domestic pressure.

Overseas vehicle revenue soared from 99.7 billion to 191.3 billion yuan, nearly doubling. Exports exceeded 1.05 million units. But the profit structure behind these numbers is the key.

In the second half of the year, the average overseas selling price was 186k yuan, compared to 127k yuan domestically—a difference of nearly 60k yuan. Overseas gross profit margin was 28.1%, versus 17.2% domestically—a gap of nearly 11 percentage points. The gross profit per overseas vehicle was 52k yuan, more than double the 22k yuan in China. After deducting expenses, the net profit per overseas vehicle remained above 20k yuan.

The overseas market has gradually become BYD’s main profit source moving forward.

If the 2026 export target of 1.5 to 1.6 million units is achieved, with an overseas net profit of 20k yuan per vehicle, overseas will contribute 30-32 billion yuan in net profit—accounting for nearly two-thirds of vehicle sales profit. BYD is transforming into a company that makes money primarily overseas.

Therefore, a significant part of the 140.2 billion yuan capital expenditure is directed overseas. The Hungary factory is expected to start production in Q2 2026, with an annual capacity of 150k units. The Brazil factory plans to expand to 300,000 units. The Thailand factory is operational, and the Cambodia factory is under construction. Eight roll-on/roll-off ships are in operation. Overseas non-current assets increased from 15.3 billion to 31.8 billion yuan. European stores are planned to double from 1,000 to 2,000. By the end of 2026, local production capacity overseas is expected to surpass 510k units.

BYD is rapidly building its global production capacity and supplier network. Localization means changes in cost structure—local labor, compliance, depreciation during ramp-up—all of which will push up per-vehicle costs. How sustainable the 28.1% overseas gross profit margin can be remains to be seen.

Domestically, BYD is fighting for time through technological investment; overseas, it is locking in profits through capacity expansion. Both lines are spending money, but one is defensive, and the other offensive.

Second Half

The result of both lines burning money simultaneously is reflected in BYD’s current financial report.

The full-year net profit attributable to parent company was 32.6 billion yuan, down 19% year-over-year. Gross profit margin dropped from 19.44% to 17.74%. Operating cash flow was halved from 133.5 billion to 59.1 billion yuan, while capital expenditures soared from 92.5 billion to 140.2 billion yuan. Total borrowings doubled to 113.4 billion yuan. New bank loans in the year totaled 134 billion yuan, corporate bonds issued were 20 billion yuan, perpetual bonds increased by about 3.9 billion yuan, and Hong Kong stock issuance raised about 40 billion yuan—all four financing tools were used simultaneously.

In 2024, every 1 yuan of capital expenditure generated 8.4 yuan of revenue; in 2025, this decreased to 5.7 yuan. Investment efficiency is declining, while investment intensity is increasing.

But BYD’s gamble is not for 2025—it’s for after 2026.

Domestic growth in 2026 is unlikely to be significant. Considering the impact of halving the purchase tax and the government subsidy policy tilting toward mid-to-high-end models above 167k yuan—this is unfavorable for BYD’s main price range of 100k to 150,000 yuan.

With domestic defense in place, BYD’s profits in 2026 will likely rely heavily on overseas markets. In January and February 2026, overseas sales accounted for 51%, surpassing domestic sales.

On the domestic front, validation points are tightly scheduled. The release of intelligent driving technology, DM6.0, and the fast-charging network expanding to 20k stations—all require time and money. The effects of these three cards will only be visible in the financial reports by the third quarter.

Overseas, the core issue is whether capacity ramp-up can outpace the narrowing of gross profit margins. The Hungary factory’s Q2 start, Brazil’s expansion, and local manufacturing will inevitably push the gross profit margin below 28.1%. If it can stay above 22%, with 1.5 million overseas sales, it could sustain profits of around 30 billion yuan, providing a buffer against domestic pressure.

As these key nodes approach this year, the specific numbers reflected in the financial reports will determine whether the market interprets 2025 as a “capacity building year” or a “profit turning point.”

In 2023, BYD’s volume, price, and profit all surged, with everything going smoothly. In 2025, BYD is fighting on multiple fronts, making its biggest gamble in history.

This is the answer given by Wang Chuanfu. Whether the answer is correct, we’ll see in 2026.