Breaking down BYD's profit statement: Where did the money go under pressure

After three straight years of BYD’s revenue and profits surging wildly, it has finally slammed the brakes on profit.

According to the company’s performance report disclosed by BYD, in 2025, BYD’s revenue broke through 804 billion yuan, up about 15% year over year; however, its net profit attributable to shareholders fell to 32.6 billion yuan, down nearly 19% year over year, and even below market expectations of between 34.3 billion yuan and 35.2 billion yuan.

Even so, BYD’s vehicle sales and total net profit attributable to shareholders still lead 吉利 (Geely), 奇瑞 (Chery), and 长城 (Great Wall) in terms of scale. In 2025, BYD sold more than 4.6 million vehicles, and for the first time ranked among the global top five automaker groups by sales.

This isn’t the first time BYD has seen a profit decline. In 2010, it went through the darkest moment when dealers exited en masse and net profit plunged. From 2017 to 2012019, it also waited three years before dawn, and in 2019 net profit was only 1.6 billion yuan.

Each time, it invested when others were shrinking, expanded when others hesitated, and then emerged from the trough. But this time is different. The first two times were questions of “how to survive,” and this time it’s “how to live even better.”

In 2025, BYD’s passenger vehicle sales surpassed 4.54 million units. Revenue from its automotive business was 541.9 billion yuan; calculated per unit, the average price per vehicle was about 119,200 yuan. This means the Qin and Song series remain the main force, while the three major premium brands 仰望 (Yangwang), 腾势 (Denza), and 方程豹 (Fangchengbao) still haven’t produced enough volume to lift the overall average price.

The marginal returns of scale effects are diminishing, and the ceiling of the domestic market has already appeared. Overseas expansion and premiumization are the two paths that must both be cracked open.

In 2025, the combined annual sales of BYD’s three premium brands—Yangwang, Denza, and Fangchengbao—were nearly 400,000 units, yet their prices have been moving downward. For example, Fangchengbao’s “Titanium” series is priced in the 150,000 to 200,000 yuan range, but it helped Fangchengbao break free from the sluggish sales of the Leopard series, achieving a 316% year-over-year increase in the brand’s full-year sales.

Overseas markets have higher gross margins, and their shares of both sales and revenue are still rising. In 2025, BYD’s overseas sales first broke the one-million-vehicle threshold, reaching 1.0496 million units, up 145% year over year. In the first quarter of 2026, BYD’s overseas cumulative sales were 319,800 units, accounting for about 46% of total sales.

Perhaps the “sexier” story is hidden in energy storage and AI. In 2025, BYD’s energy storage system shipment volume surpassed 60 GWh. BYD’s brand and PR general manager, Li Yunfei, said that its shipment volume has climbed to No. 1 globally. But compared with energy storage, BYD’s AI layout is more concentrated on the production side. BYD says AI technology will fully cover all company R&D, manufacturing, and service business scenarios.

BYD is also increasing R&D investment. In 2025, BYD’s R&D spending was 63.4 billion yuan, up 17% year over year—equivalent to burning 174 million yuan per day. This figure is nearly double net profit, and it remains No. 1 among A-share auto companies.

On April 2, BYD’s A-share stock closed at 101.65 yuan, down 0.97%.

**　　Where did the profit go?**

Wang Chuanfu said that China’s new-energy vehicle industry is going through a brutal “elimination round.” In 2025, BYD for the first time felt the chill of this elimination round while earning the title of global new-energy sales leader.

It was to be expected that net profit growth would slow year over year. Since 2022, BYD’s year-over-year growth rate in net profit attributable to shareholders has gradually eased down from 445.86% to 34% in 2024.

What was unexpected was that when Geely and Chery delivered their net profit growth results in 2025, BYD—widely regarded as a “market leader that wins across the board”—instead became the one among leading automakers whose profits declined.

Increasing revenue without increasing profits is, in essence, a decline in profit per vehicle.

In 2025, BYD’s gross margin for its auto business fell from 22.31% to 20.49%. Based on the financial report data, assuming no income tax is calculated, BYD’s total profit from its auto business was 28.4 billion yuan, down 21.78% from 36.332 billion yuan in 2024. With full-year sales of 4.6 million vehicles, BYD’s profit per vehicle was about 6,174 yuan, down nearly 30% year over year; in 2024 this figure was about 8,500 yuan.

Morgan Stanley previously pointed out in a research report that BYD’s profit per vehicle fell from 8,800 yuan in the first quarter of 2025 to 4,800 yuan in the second quarter, returning to the lowest point since the first quarter of 2022.

In its financial report, BYD attributed the cause to “the continued price war in China’s domestic auto market and an environment of intense competition.” In May 2025, BYD launched a limited-time one-price promotion. Core models such as the Qin PLUS and Song PLUS were offered large concessions through cash discounts and replacement subsidies.

Rivals also weren’t having an easy time. Compared with the profit per vehicle of Geely, Chery, and Great Wall, Geely’s net profit per vehicle fell from about 7,700 yuan in 2024 to about 5,500 yuan in 2025, down nearly 30% year over year. Meanwhile, benefiting from overseas revenue comprising more than half, Chery’s net profit per vehicle rose from about 5,500 yuan in 2024 to about 7,400 yuan.

The impact of the price war is industry-wide. In 2025, China’s auto industry profit margin fell to 4.1%, the lowest since 2015. But at the same time, the price of battery-grade lithium carbonate jumped from 75,700 yuan per ton at the start of the year to 130,000 yuan per ton by year-end, a rise of 73%. According to UBS estimates, the cost of a typical mid-sized intelligent electric vehicle therefore increased by between 4,000 yuan and 7,000 yuan, and automakers find it difficult to pass this portion of cost onto consumers.

A decline in profits can force companies to improve technology to reduce costs. However, one industry concern is that when “value for money” becomes the only pursuit, long-term manufacturing competitiveness may be drained.

But this is only one side of the reasons behind the profit decline. Compared with other domestic brands, BYD typically compresses current-period profits by expense-recognizing R&D spending with high investment.

For example, in 2025, BYD’s R&D spending totaled as much as 63.4 billion yuan, up 17% year over year. The R&D expense-recognition rate reached 91.4%, while the corresponding R&D capitalization rate was only 8.6%. The vast majority of R&D spending is directly recognized as an expense in the current period, meaning it does not need to carry heavy amortization costs in the future. This is also one of the reasons for BYD’s “revenue growth without profit growth”—a strategic choice to trade short-term profit for long-term competitiveness.

By contrast, Great Wall Motor uses a higher R&D capitalization strategy. According to its 2025 annual report, Great Wall’s annual R&D capitalization rate was 43.41%. This means that nearly half of its R&D spending is not recognized as expenses in the current period, but instead is converted into intangible assets on the balance sheet, which will be amortized over the coming years. For comparison, Geely’s R&D capitalization rate in the same period was about 64%, and Chery’s R&D capitalization rate was about 22.2%. Compared with this, such accounting treatment can lessen the immediate direct impact on the income statement in the short term, but it will also create ongoing amortization costs in the future.

Spending on sales and administrative expenses also causes the most direct and visible loss to profits. The financial report shows that in 2025 BYD’s selling expenses were 26.185 billion yuan and administrative expenses were 20.2 billion yuan, increasing 8.72% and 8.34% year over year, respectively. BYD said that the increase in advertising and exhibition fees drove the growth in selling expenses, while increases in staff compensation and depreciation/amortization drove the rise in administrative expenses.

**　　Overseas expansion must grow, but risks and opportunities coexist**

In 2025, BYD’s sales in the China market were about 3.55 million units, down about 8% year over year. In the first quarter of 2026, BYD is undergoing a short adjustment in the domestic market.

Deutsche Bank expects that BYD’s wholesale volume in the first quarter will decline 48% quarter over quarter to about 700,000 units, while net profit will fall 46% to 50 billion yuan quarter over quarter.

New-energy penetration in 2025 first broke through 50%, reaching 54%, signaling a new stage in which new-energy vehicles dominate the industry. But gasoline vehicles still occupy 46% of the market, with a volume of about 11 million units. The “Flash Charging” technology BYD announced in March 2026—charging 10% to 70% in only 5 minutes—will be rolled down to models in the 150,000 yuan price range, aiming to capture the remaining core customer base of gasoline vehicles.

However, the ceiling in the domestic market has been reached, and competition is getting fiercer.

Geely is “crossing the river by feeling the stones” with BYD. In 2025, Geely’s new-energy vehicle sales reached 1.6878 million units, up 90% year over year. Leapmotor, leveraging an all-domain self-developed strategy paired with high configurations and low pricing, pushed full-year sales to nearly 600,000 units, becoming a strong rival to BYD in the 100,000 to 200,000 yuan range. Data from the China Association of Automobile Manufacturers shows that in the first two months of 2026, BYD’s sales fell 35.8% year over year to 4 million units, ranking fourth, overtaken by SAIC, Geely, and FAW.

BYD needs to become a company that earns by making money overseas. This is the confidence it projects outward.

On March 30, 2026, BYD raised its full-year overseas sales target from 1.3 million units to 1.5 million units, an increase of about 15%.

In 2025, BYD’s overseas sales first exceeded the one-million-vehicle mark, reaching 1.05 million units, up 145% year over year. If the 1.5 million target is achieved, it would mean BYD’s 2026 overseas sales would grow about 43% year over year.

When the average profit margin in China’s domestic auto industry is only 4.1% and the price war is “bloody from point-blank range,” overseas markets are becoming the pillar for rebuilding BYD’s profitability model.

In 2025, BYD’s revenue from overseas was 310.7 billion yuan, up 40.05%, accounting for 38.65% of total revenue. More importantly, overseas business gross margin was 19.46%, higher than the 16.66% for domestic business. A senior executive at BYD once told a reporter from 21st Century Business Herald that BYD’s profit per vehicle in overseas markets is about four times that of the domestic market.

In the first quarter of 2026, BYD’s overseas cumulative sales were 319.8 thousand units, accounting for about 46% of total sales. This means that for every two vehicles sold, nearly one is sold overseas.

Major securities firms have all set BYD’s next growth point as overseas expansion. In its research report, Goldman Sachs predicted that the overseas market will become BYD’s growth engine for the next decade, and that overseas sales from 2026 to 2035 will reach between 1.5 million and 3.5 million units. Morgan Stanley is even more aggressive, forecasting that BYD’s overseas sales in 2026 will reach between 1.6 million and 1.8 million units, a year-over-year increase of 68% to 89%.

But the road of overseas expansion has never been as full of uncertainty as it is today.

Geopolitical conflicts in the Middle East are escalating, and the Red Sea route is being obstructed, directly affecting China’s vehicle exports. Bernstein’s research report noted that the Middle East region absorbs 17% of total exports of China passenger cars. With this share growing at a 59% five-year compound annual growth rate, China’s auto manufacturers face the gravest risk of losses amid this conflict.

Europe is another important piece of BYD’s overseas expansion puzzle. The “VAT-by-price” mechanism creates new room for BYD’s continued operations in the European market.

In January 2026, China and the EU reached an important framework consensus regarding the EU’s anti-subsidy case on Chinese electric vehicles. They decided to shift from the previously confrontational high tariff measures to a constructive “minimum price commitment” mechanism. This means that as long as Chinese automakers commit that the price of electric vehicles exported to the EU is not lower than the set minimum import price, it can replace the anti-subsidy duties.

Localization production is also accelerating. In 2026, BYD’s Hungary plant will be the first to begin production. The plant in Szeged is planned with a maximum annual capacity of up to 300,000 units. The first batch of production equipment arrived in Hungary at the end of 2025, with trial production planned to start in the first quarter and full production scheduled for the second quarter. Entry-level electric vehicle Dolphin Surf will become the first model assembled at the Szeged plant, and models such as Atto 2 (元PLUS), Dolphin, and Seal will be introduced sequentially.

As overseas plants such as those in Brazil, Hungary, and Thailand come online one after another, capacity bottlenecks are being addressed. BYD’s self-built fleet of 8 auto transport ships is also building a complete global delivery system.

The core confidence behind BYD’s overseas expansion is shifting from cost advantages to technology advantages. At the Flash Charging technology launch event, Wang Chuanfu previously said that starting in 2027, BYD will also fully deploy flash-charging stations overseas.

For BYD at the current stage, it is still the global new-energy sales leader, but defending the throne is far harder than climbing to it. Historically, whenever BYD has emerged from a downturn, what it relied on was continuing R&D investment through the darkest times and waiting for technology dividends to be released.

This time, BYD is continuing to hold the fort. Every problem it faces is new, with no precedent and no ready-made answers.

（Source: 21st Century Business Herald）