Navigating Headwinds: BYD’s Domestic Challenges and Global Ambitions

The Chinese electric vehicle giant BYD finds itself navigating a complex landscape of diverging trends. While international shipments are reaching unprecedented levels, pressure is mounting in its crucial home market, raising questions about the company's near-term trajectory.

The company's most recent financial report highlighted growing operational pressures. For the third quarter of 2025, BYD recorded its most significant profit decline in over four years. Net profit fell by 32.6% to 7.8 billion yuan. Revenue contracted by 3.1% to 195 billion yuan, marking the first quarterly sales drop the automaker has seen in more than five years.

Analysts point to a confluence of factors driving this earnings pressure:
* Unrelenting price competition within China, despite regulatory efforts to curb deep discounting
* A declining domestic market share, which fell to 14% in September from 18% a year earlier
* Intense margin compression in the mass-market and mid-price vehicle segments

A Sustained Domestic Sales Slump

November marked the third consecutive month of declining vehicle deliveries within China. The company delivered 480,186 units domestically, representing a year-on-year decrease of 5.3%. This downturn is particularly notable as the final quarter typically sees a demand surge due to the impending expiration of tax incentives for new energy vehicles.

To meet its revised annual target of 4.6 million vehicles, BYD must sell approximately 418,000 units in December. This target itself was reduced from an initial goal of 5.5 million units for 2025, a 16% downward revision.

The softening domestic demand is attributed to several key developments:
* Increased competition from rivals like Geely, which has refreshed its model lineup
* Market share gains by new entrants such as Xiaomi with models like the YU7
* Regulatory crackdowns on aggressive sales discounting practices
* Waning consumer interest in some of BYD's established models
* Market share erosion in both volume and premium segments

Quality Concerns Surface with Major Recall

Operational challenges were compounded by a quality issue involving a core model. Chinese regulators mandated a comprehensive software correction for nearly 90,000 units of the Qin Plus DM-i plug-in hybrid. The recall affects 88,981 vehicles manufactured between January 2021 and September 2023, a critical period for one of BYD's best-selling vehicles.

The oversight authority identified inconsistencies in the manufacturing of battery packs, which could lead to reduced power output or, in extreme cases, prevent the vehicle from operating in pure electric mode. The Qin Plus DM-i accounted for roughly 20% of BYD's total sales in October.

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

The company plans to address the issues via an over-the-air software update and will replace faulty battery packs free of charge. This incident brings the firm's quality control processes into focus as it continues to scale production.

Soaring Exports Provide a Counterbalance

In contrast to the domestic slowdown, BYD's international business is experiencing a boom. The automaker exported 131,935 vehicles in November alone, nearly quadrupling its year-ago export volume. Analysts at Morgan Stanley estimate the company is on track to ship approximately 1 million vehicles overseas in 2025.

International deliveries generally promise healthier margins, benefiting from competitive pricing and subsidy programs in markets like Europe. However, this expansion faces significant hurdles:
* Rising trade barriers in Europe and North America
* EU tariffs of up to 27% on Chinese-made electric vehicles
* Limited capacity to redirect volume from the saturated Chinese market

In response, BYD is accelerating localization efforts. The construction of plants in Hungary and Turkey aims to establish manufacturing footprints within and near the EU to circumvent tariff walls. S&P Global Mobility forecasts European sales of about 186,000 BYD vehicles this year, more than double the 83,000 units sold in 2024.

Intensifying Competition and Future Catalysts

BYD is ceding ground in the lower and middle-price brackets to competitors like Geely and Leapmotor, which are gaining in these exact categories. Simultaneously, Xiaomi is capturing significant consumer attention in China with its technology-focused models.

Despite the current pressures, some institutional analysts anticipate a volume recovery. Deutsche Bank projects BYD's sales could rise by around 20% next year to 5.6 million vehicles. This optimism is partly pinned on new model cycles from BYD's Denza and Equation Leopard brands. Furthermore, the company is preparing to unveil a new technology platform in early 2026.

The Broader Global EV Context

The fundamental growth trajectory of the worldwide electric vehicle market remains positive. According to Benchmark Mineral Intelligence, global EV sales increased by 21% in 2025. China leads, with 11.6 million EVs sold from January to November, followed by Europe with 3.8 million.

North America presents a different picture, where sales dipped by 1% to 1.7 million vehicles. This decline is linked to political uncertainty and the expiration of the previous $7,500 federal tax credit per electric car. For BYD, this underscores a reality: while momentum in the world's largest EV market remains strong, individual regions like North America are experiencing temporary deceleration.