Europe’s Evolving Trade Policy Presents Opportunity for BYD

Recent shifts in European trade discussions and fresh analysis from market researchers have brought Chinese automaker BYD back into the spotlight. The company has definitively surpassed Tesla in global sales of battery-electric vehicles, yet the valuation of its stock remains a point of contention. The key focus now is on the interplay between its European strategy, margin pressures in its domestic market, and the underlying value of its battery division.

A persistent theme in the analysis of BYD's equity is its market valuation. The research firm Bernstein recently reaffirmed its "Outperform" rating, arguing that the market is undervaluing the company. Their core thesis suggests a significant mispricing.

Analysts point out that investor attention is primarily fixed on BYD's automotive operations, largely overlooking the substantial worth of its battery manufacturing activities. Bernstein estimates that the battery business alone carries a value nearly equivalent to BYD's current total market capitalization. This perspective highlights a potential discrepancy, especially considering BYD's dual status as the world's largest EV manufacturer by volume and the second-largest global producer of batteries.

European Policy Shift Fuels Market Optimism

Brussels is currently considering a major policy adjustment: replacing existing tariffs on electric vehicle imports with a minimum price system. This potential overhaul of EU trade policy prompted BYD's Hong Kong-listed shares to surge by as much as 4.8% in a single trading session.

The implications for BYD are multifaceted:
* Enhanced Profitability: A minimum price regime could improve the margin profile of its exports to the region.
* Easier Market Access: Lowering existing trade barriers would facilitate a smoother and potentially faster expansion into the European market.
* Strategic Alignment: The policy change would provide tailwinds for the company's already aggressive international growth plans.

Consequently, Europe could become a crucial lever for BYD to offset some of the intense price competition it faces at home.

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

Solidifying Market Leadership with Hard Data

BYD officially overtook Tesla in 2025 to become the world's top seller of pure battery-electric vehicles. This leadership claim is backed by concrete delivery figures:
* The company sold approximately 2.26 million BEVs in 2025, representing a year-on-year increase of nearly 28%.
* In comparison, Tesla delivered about 1.64 million vehicles during the same period, a figure that marked a decline from its 2024 results.
* BYD's overseas sales showed significant momentum throughout the year, underscoring its export drive.

However, the data reveals a nuanced picture. While annual growth was robust, December sales contracted by 18.2% compared to the same month in the prior year, indicating a softening as the year closed.

Navigating Domestic Headwinds and Competition in 2026

Despite its commanding volume position, competitive pressures are intensifying. In China, technology giants like Huawei and Xiaomi are rapidly entering the EV arena, leveraging their established platforms and user ecosystems to capture market share swiftly.

Simultaneously, relentless price competition in the domestic market continues to squeeze automakers' margins, providing a strong impetus for BYD to accelerate its overseas expansion. Additional challenges loom for the coming year:
* Macroeconomic uncertainties within China that may suppress demand for new vehicles.
* The phase-out of domestic subsidies, which could dampen the overall growth rate in 2026.

For BYD, the path forward hinges on the successful execution of its export strategy—particularly in Europe—and whether the combined value of its international growth and its battery business can sufficiently counterbalance the mounting pressures in its home market.