The Harsh Reality for Electric Vehicle Leaders
Electric vehicles (EVs) are often seen as the future of transportation, but the recent financial results from BYD Co. prove that even the industry’s strongest players are not immune to the brutal realities of price competition. In Q2 2025, BYD shocked investors by reporting a 30% plunge in quarterly profits — its first decline in over three years. The company’s stock tumbled by as much as 8% in Hong Kong before slightly recovering, underscoring investor concern over profitability in an increasingly cutthroat market.
While BYD remains the world’s top EV seller, its earnings slump shows that aggressive discounting, rising costs, and fierce competition from Tesla, Geely, and China’s BYD rival, Chery, are reshaping the industry.
BYD’s Financial Struggles in Q2 2025
BYD reported net income of 6.36 billion yuan ($892 million) for the quarter ending June 30, falling short of analyst expectations. Despite strong 50% growth in overseas sales, profit margins weakened sharply. Gross margin contracted to 18% from 18.8%, reflecting the heavy impact of discounts and higher material costs.
Ironically, BYD has been one of the main drivers of the EV price war it now blames for reduced profitability. Since 2023, the automaker has led multiple rounds of price cuts, forcing the government to step in and warn that excessive discounting could harm supply-chain security and tarnish the “Made in China” reputation globally.
Global Expansion Still Driving Growth
Despite profit pressures, BYD’s international expansion continues to accelerate. The automaker is making significant inroads in Brazil, Australia, Singapore, and parts of Europe, with Brazil alone accounting for nearly one-third of overseas sales.
In the first half of 2025, overseas revenue surged to 135.4 billion yuan, a 50% increase compared to the previous year. Analysts at Sanford C. Bernstein noted that despite these international gains, BYD’s profitability was still dragged down by discounts and rising R&D investments in core EV technologies.
Heavy Spending on Innovation and Technology
Research and development costs soared by more than 50% year-on-year, signaling BYD’s aggressive push into batteries, driver-assistance systems, and AI-powered vehicle intelligence. This long-term investment strategy, while costly, reflects BYD’s ambition to maintain its dominance in the new energy vehicle (NEV) sector.
At the same time, BYD’s borrowings rose from 28.6 billion yuan to 39.1 billion yuan, and rising material costs — including its advanced “God’s Eye” driver-assistance system — further pressured margins.
Government Push for Faster Payments
One critical adjustment for BYD is compliance with Beijing’s crackdown on delayed supplier payments. Once notorious for stretching payment cycles to an average of 275 days, BYD is now expected to settle within 60 days, reducing working capital flexibility but improving supply chain health.
Accounting consultancy GMT Research estimated that BYD’s true net debt could be closer to 323 billion yuan if hidden supply-chain financing is accounted for — far higher than its reported 27.7 billion yuan.
How BYD Compares Against Tesla and Geely (Q2 2025 Snapshot)
| Company | Q2 2025 Sales (Units) | Q2 2025 Net Profit (Billion USD) | Gross Margin (%) | Overseas Sales Growth (%) | Stock Performance YTD (%) |
|---|---|---|---|---|---|
| BYD | 1,100,000 | 0.892 | 18.0 | 50 | -8% |
| Tesla | 444,000 | 1.480 | 18.2 | 12 | -13% |
| Geely | 350,000 | 0.420 | 14.5 | 8 | +5% |
Analysis:
- BYD still leads in unit sales globally but lags Tesla in profitability.
- Tesla maintains slightly higher margins despite slower overseas growth.
- Geely shows resilience with modest profitability and positive stock momentum.
Future Outlook: Can BYD Rebound?
Bloomberg Intelligence analysts believe BYD’s margins could stabilize in the second half of 2025, though still below last year’s levels. Anticipated EV demand ahead of China’s new vehicle tax hike in Q4 may help sales, with forecasts pointing to 5 million annual units sold in 2025 — slightly below its 5.5 million target.
Looking forward, BYD’s overseas business is emerging as its biggest growth engine, with Bernstein predicting the automaker will surpass 1 million overseas sales units this year, far exceeding its 800,000-unit guidance.\
Final Thoughts: Lessons from BYD’s Profit Plunge
BYD’s recent struggles highlight a fundamental truth of the EV industry: scale alone doesn’t guarantee profitability. Even market leaders face risks from relentless price wars, rising innovation costs, and government policy shifts.
However, with robust overseas expansion, growing global brand recognition, and strategic investments in next-gen EV technologies, BYD remains well-positioned for the long term. The challenge is balancing short-term profitability with the long-term race for EV dominance against Tesla, Geely, and rising Chinese peers.