BYD Faces Steepest Profit Decline in Over Four Years

BYD, the Chinese electric vehicle manufacturer, has reported its most significant quarterly profit contraction in more than four years, sending shockwaves through investor circles. The company's third-quarter earnings plummeted by 32.6% to 7.8 billion yuan, while revenue declined for the first time in five years. This dual setback has pushed the company's shares to their lowest valuation in nine months.

The automaker's domestic market share has deteriorated substantially, falling to 14% in September compared to 18% during the same period last year. Rivals including Geely and Leapmotor are capturing increasing sales volumes with competitively priced models.

October delivery figures further confirm this downward trajectory, with BYD reporting a 12% decrease to 441,706 vehicles. This marks the second consecutive month of declining deliveries for the world's largest electric vehicle manufacturer—an alarming development for market observers.

Valuation Concerns Emerge

Despite these operational challenges, BYD shares continue to trade at a premium valuation. The stock's price-to-earnings ratio of 21.9 significantly exceeds the industry average of 9.6, creating a stark contrast with recent performance metrics:

• Share price decline of 12.1% over the past 90 days
• Current trading level of HK$100.6
• Fair value estimates ranging between HK$118.85 and HK$132.98

Market analysts are questioning whether this valuation premium remains justified given the deteriorating fundamentals.

Strategic Realignment Underway

In response to mounting competitive pressures, BYD has implemented significant strategic adjustments. The company has reduced its 2025 sales target by 16% to 4.6 million vehicles while simultaneously launching discount campaigns for models like the Qin Plus to maintain domestic market position.

Should investors sell immediately? Or is it worth buying BYD?

Amid these challenges, one bright spot emerges: exports of electric and plug-in hybrid vehicles are projected to double compared to 2024 levels. The United Kingdom has become BYD's largest overseas market outside China, accounting for 30% of the company's automotive sales in Western Europe.

Financial Health Shows Mixed Signals

BYD's financial metrics present a complex picture. While the company maintains moderate leverage with a debt-to-equity ratio of 0.13, its current ratio of 0.76 suggests potential liquidity constraints.

For the first nine months of the year, revenue reached 566.27 billion yuan, but net profit declined to 23.33 billion yuan. This divergence between revenue growth and profit contraction highlights the severe margin compression the company is experiencing.

Industry Headwinds Mount

The broader Chinese automotive sector faces structural challenges, with manufacturing facilities capable of producing 55.5 million vehicles annually but operating at less than half of this capacity.

Global trade barriers present additional complications, with Chinese electric vehicles confronting 100% tariffs in the United States and duties ranging from 17% to 38% in the European Union. As BYD navigates these turbulent conditions, investors are watching closely to see if the former industry leader can engineer a meaningful turnaround.