Chinese car manufacturer BYD has seen a sharp decline in profitability. Following a 19% drop in net profit in 2025, the group is facing an even tougher start to 2026, with a 55% fall in profit in the first quarter. This sequence of events confirms growing pressure on margins, against a backdrop of intense competition and massive investment.
Profitability down despite a strong year in terms of volume in 2025
In 2025, however, BYD maintained strong sales momentum. The group sold 2.26 million vehicles worldwide – a record high – whilst generating revenue of 804 billion yuan (approximately 101 billion euros), up 3.5%.
However, at the same time, net profit fell to 32.6 billion yuan (approximately 4.08 billion euros), a year-on-year decline of 19%.
The picture is clear: BYD continues to grow, but this growth is becoming less profitable. The manufacturer is selling more, but profit growth is no longer keeping pace.
The price war in China is putting pressure on profit margins
This shift can largely be attributed to the situation in the Chinese market. Competition there is particularly fierce, with a growing number of players and constant pressure on prices. Against this backdrop, manufacturers have launched a full-blown price war to maintain their sales volumes. BYD is no exception, offering substantial discounts on part of its range.
The direct consequence is that margins are shrinking. Whilst the group is maintaining its sales, this is at the expense of reduced profitability. This phenomenon extends beyond BYD alone. It reflects a broader trend in the Chinese electric vehicle market, where growth remains strong but competition is becoming increasingly cut-throat on prices.
A slowdown already evident in the second half of 2025
The decline in results did not happen overnight. It unfolded gradually throughout 2025. The first quarter still posted a very strong performance, with a net profit of 9.15 billion yuan, up by more than 100% year-on-year.
However, the trend then reversed. In the third quarter, net profit fell by 32.6% to 7.82 billion yuan, whilst turnover also fell by 3.05%.
A deterioration that is set to worsen in early 2026
The initial results for 2026 confirm and reinforce this trend. In the first quarter, BYD reported a 55% year-on-year fall in net profit to 4.08 billion yuan. At the same time, turnover fell by 11.8%.
This is a significant sign. In 2025, BYD was still managing to maintain its sales volumes despite falling profitability. By early 2026, the pressure had spread to the business itself, with a decline in revenue. In other words, the downturn was beginning to affect business performance.
Heavy investment that is also weighing on results
Beyond competitive pressure, BYD is also feeling the effects of its own strategy. The group is investing heavily in its manufacturing capacity, technologies and international expansion. This ramp-up, which is essential to sustain its growth, comes at a cost that is weighing on profitability in the short term.
The business model remains focused on volume, innovation and international expansion. However, this strategy entails a phase in which margins are inevitably under pressure. The decline in profit can therefore also be attributed to this combination of external pressure on prices and internal pressure linked to investment.
A group that remains dominant, but is under strategic pressure
Despite this backdrop, BYD remains one of the world’s leading electric vehicle manufacturers, ahead of Tesla in terms of sales volume. Its industrial position remains strong, with the capacity to produce on a large scale and cover a wide range of electrified vehicles.
But the situation is changing. It is no longer simply a matter of growing rapidly, but of maintaining a balance between volume, margins and expansion. Pressure on profitability is mounting just as BYD is stepping up its international expansion, particularly in Europe. This gap between global ambition and economic constraints represents a key strategic challenge for the coming years.
Growth remains steady, but is becoming more challenging
BYD is not in crisis. The group remains profitable, continues to sell on a large scale and retains a dominant position.
But the 2025–2026 period marks a turning point. Growth in volumes no longer guarantees a corresponding increase in profits, and pressure on margins becomes a defining factor.
