BYD’s Global Expansion Strategy Offers Path to Recovery

The Chinese electric vehicle titan BYD is navigating a critical transition phase. As competitive pressures intensify within its domestic market, the company is pursuing an aggressive international growth plan that could potentially revitalize its recent performance challenges.

A significant bright spot has emerged in BYD's European operations. During October, the company registered more than four times as many vehicles as Tesla in Germany, while achieving nearly seven times Tesla's registration numbers in the United Kingdom. The strategic deployment of plug-in hybrid models has provided an effective workaround for tariffs imposed on fully electric vehicles.

BYD intends to solidify its European presence through the introduction of its premium Denza brand and luxury Yangwang line. These offerings, positioned to compete with brands ranging from Volvo to Ferrari, will be marketed through dedicated retail stores.

Ambitious Overseas Sales Targets Revealed

According to a Citi research report based on management discussions, BYD has established ambitious international sales objectives. The company projects overseas vehicle sales reaching between 900,000 and 1 million units during 2025, with plans to dramatically increase this figure to 1.6 million vehicles by 2026.

Current geographic distribution of international sales shows balanced performance:

• Europe, North America, and ASEAN regions each account for approximately one-third of overseas deliveries
• European markets are demonstrating particularly robust growth momentum
• International sales represented about 20% of total vehicle volume in 2025, doubling the proportion recorded in 2024

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

Domestic Market Position Under Pressure

BYD's home market in China has become increasingly competitive. The company recently reduced its 2025 domestic sales target by 16% to 4.6 million vehicles following several months of declining sales performance. Rivals including Geely and Leapmotor have been gaining market share, particularly in the budget vehicle segment.

Market share data reveals a clear trend: BYD's portion of the Chinese EV market contracted to 14% in September, down from 18% during the same period the previous year. In response, the automaker implemented new discount initiatives for popular models such as the Qin Plus.

Profitability Metrics Face Headwinds

BYD's third-quarter 2025 financial results revealed the most significant profit decline the company has experienced in over four years. Net profit plummeted 32.6% to 7.8 billion yuan, while revenue decreased by 3.1% to 195 billion yuan—marking the first revenue contraction in more than five years.

Valuation Presents Divergent Perspectives

BYD shares currently trade at a price-to-earnings multiple of 21.9, substantially exceeding the industry average P/E ratio of 9.6. This valuation premium reflects investor expectations for continued growth, though some market analysts consider the premium excessive.

Contrasting this view, discounted cash flow modeling suggests the stock's fair value may be approximately 15% above current trading levels, indicating potential undervaluation when future cash flow projections are considered.