BYD, the world’s biggest maker of electric vehicles, is selling record numbers of cars but has reported its first fall in profits in more than two years. The toll of a fierce price war in China’s car industry turns BYD’s strategy into a balancing act.
The Shenzhen-based carmaker sold almost 2.2 million vehicles in the first half of 2025, up by a third from the same period last year. Revenues jumped 23% to € 44.6 billion, while net profit climbed 14% to €1.9 billion. Yet beneath the strong headline figures, the company admitted that in the second quarter, profits fell by 30% to €770 million, as its shift to gain market share through steep discounts began to take effect.
Keep factories humming
BYD had long resisted the cut-throat competition that swept through China’s auto sector, driven by dozens of new entrants and slowing consumer demand. But earlier this year, it could no longer resist and began slashing prices on its most popular models in an effort to keep factories humming.
The tactic worked. Sales were lifted, but at the expense of margins. BYD’s gross profit margin has slipped to 16.3%, which is lower than that of rival Tesla (17.2%) but on par with Mercedes-Benz (16.4%) and BMW (16.4%).
The price war, encouraged for years by China’s rapid industrial expansion, is now worrying even Beijing. The government has warned manufacturers against excessive discounting, saying it erodes brand value and threatens financial stability.
Even so, BYD and its rivals have continued offering deals. And then there’s the phenomenon of nearly new cars. Some competitors accuse the company of using ‘zero-kilometer cars’, unsold new vehicles registered as second-hand to inflate sales. Still, BYD denies this practice.
Tripling sales in Europe
The turmoil at home means BYD is increasingly focusing on making inroads abroad. Additionally, this plan, which is still in its early phase, is also successful. Overseas sales increased 144% in the second quarter compared to the same period a year earlier, with 258,000 cars sold outside of China.
In Europe, registrations more than tripled in July to almost 9,700, giving the brand a 1.1% market share. That same month, BYD outsold Tesla on the continent for the first time, registering 12,503 cars against Tesla’s 8,837.
Tesla’s decline, a 40% drop year-over-year, has been fueled by the adverse marketing effect of Musk’s political endorsement and the brand’s reliance on the aging Model 3 and Model Y, which account for more than 90% of its sales.
Elon Musk has been blowing hot and cold over a cheaper Model 2 for years, but with no launch date in sight, analysts say the brand risks losing relevance.
Ease the burden
BYD, meanwhile, is advancing its European strategy. It has secured the lowest EU tariff of any Chinese automaker, still 27.4% in total per car, and plans to ease that burden with a new factory in Hungary. Until then, it is diverting shipments from plants in Thailand to soften the impact.
The model range is growing rapidly as well, with the still-new Dolphin Surf lowering the threshold for electric car buyers in Belgium to € 20,651. On the other hand, its luxury brand, Yangwang, with the record-breaking sports car U9, is set to hit European soil in 2026.
The company has set itself a target of selling 5.5 million vehicles worldwide this year, but with less than half that achieved so far, the second half of 2025 will be critical.
