China’s electric vehicle powerhouse, BYD, has seen nearly $45 billion in market value wiped out in a sharp selloff that stunned investors. The decline is more than just a market hiccup. It has exposed cracks in the story of China’s booming EV industry and stirred doubts about how sustainable the growth really is.
For years, BYD symbolized China’s rise as the world’s EV leader, overtaking giants like Tesla in deliveries. But today, the mood has shifted.
This decline is largely attributed to an aggressive price war in China’s crowded EV market, where BYD has been leading with deep discounts to gain market share. However, this strategy is backfiring amid intensified competition from rivals such as Geely and Leapmotor, and Beijing’s crackdown on excessive price undercutting and «involution» practices, which are viewed as damaging to the industry’s health and China’s manufacturing reputation.
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BYD has also cut its 2025 vehicle delivery target significantly from 5.5 million units to 4.6 million, meaning it must sell about 1.7 million vehicles in the remaining four months of the year—a challenging feat given an aging product lineup and looming regulatory tightening.
Additionally, BYD has delayed the release of new models until early 2026, which analysts say will be critical for restoring investor confidence. Despite domestic challenges, BYD’s overseas sales have surged, with a 145% year-on-year increase in international deliveries helping partially offset domestic pressures.Investors are increasingly skeptical, reflected in the highest level of analyst sell ratings since 2022 on BYD shares.
The stock now trades at a forward price-to-earnings ratio below its three-year average, signaling market concerns about short-term profitability and growth amid the brutal price war and tightening government regulations.
Aggressive pricing cuts hit BYD profits
BYD’s strategy to slash prices across multiple models to capture market share has backfired on profitability. In its June quarter, net profit fell 30%—the first drop in over three years—driven by the intensified price war with domestic rivals.
Analysts warn that continued discounting could erode margins further and fuel regulatory scrutiny in Beijing, where authorities are increasingly wary of “involution,” or unsustainable competition practices.
Mexico’s 50% tariff threatens BYD’s EV dominance
Mexican government has proposed a 50% tariff on cars imported from countries without a free trade agreement, including China. This could dramatically raise the cost of BYD vehicles and impact its stronghold in the Mexican EV market.
In 2024, BYD captured nearly half of Mexico’s EV sales, outpacing competitors like Tesla. But the proposed tariff could increase prices by up to 50%. This would make BYD vehicles less competitive compared to U.S. automakers such as Ford and GM, which are exempt from the tariff due to trade agreements.
Analysts warn that BYD could lose significant market share if the tariff is implemented.
as a Reliable and Trusted News SourceCombined with regulatory pressures at home, these external factors underscore the challenges BYD faces as it tries to maintain both growth and profitability. Analysts suggest that innovation and value-added technology could be key for BYD to regain investor confidence and navigate these headwinds.
