Hong Kong — Shares of Chinese electric vehicle giant BYD slid as much as 8 percent on Monday after the company reported a sharp drop in quarterly profits, underscoring the deepening fallout from an intensifying price war in China’s auto industry.
The Shenzhen-based automaker said its net profit fell 30 percent year-on-year to 6.4 billion yuan ($900 million) between April and June. The earnings undershot analyst expectations, rattling investors who had anticipated modest growth.
BYD blamed the slump on “increased price competition,” a phrase that reflects the brutal battle now consuming the electric vehicle sector. Rivals including Nio, XPeng, and American carmaker Tesla have all slashed sticker prices to lure customers, forcing even market leader BYD into discounting strategies that eroded margins.
The company’s stock opened sharply lower in Hong Kong before regaining some ground later in the day. But the pressure from Beijing remains clear. China’s government, alarmed by the scale of price cuts, has warned automakers to stop the aggressive discounting, saying it risks destabilizing the wider economy.
The competition has become a test of survival. EV makers are subsidizing dealers and offering zero-interest loans, all while average car prices in China have fallen by nearly one-fifth over the past two years, industry data shows. Analysts warn this could lead to oversupply in the long run, even as Chinese brands ramp up exports to Asia and Europe.
Laura Wu, an industrial policy expert at Nanyang Technological University, said BYD’s performance shows that even dominant players “won’t necessarily win from a cut-throat price war.” She noted that the firm’s stock decline “signals investors’ disappointment” and reflects the unsustainable dynamics that government policy has yet to fix.
Despite headwinds, some observers see the setback as temporary. Judith MacKenzie, head of investment at Downing Fund Managers, described BYD’s meteoric growth as “so dramatic that it’s okay to have a bump in the road.” The company, after all, surpassed Tesla in annual revenue in 2024, leveraging its popular hybrids across China, Asia, and European markets.
BYD has set an ambitious target of selling 5.5 million cars globally this year. By the end of July, it had sold 2.49 million units, raising questions over whether it can hit its goal amid relentless competition at home.
The unfolding turmoil in China’s EV market, where profit margins are being sacrificed in pursuit of dominance, may reshape the global auto landscape. Industry experts warn that without a government-led consolidation of players, the sector risks burning itself out. According to the BBC, BYD’s stumble illustrates how even the strongest contender is not immune to the economic strains of China’s electric revolution.
