Quote from Alex bobby on May 27, 2025, 6:20 AM

BYD Shares Slide Amid Price Cuts, But Growth Outlook Remains Strong Against Tesla

Shares of BYD, China’s leading electric vehicle (EV) manufacturer, plunged this week as the automaker launched aggressive price discounts across multiple models—raising alarm over a potential resurgence of a price war in the already-competitive Chinese EV market. Despite this market reaction, analysts maintain a bullish long-term outlook on BYD as it continues to outperform key global rivals, including Tesla.

Steep Discounts Spark Sell-Off

On Monday, BYD shares fell 8.6% after the company announced substantial discounts on 22 electric and plug-in hybrid models. The sell-off continued into Tuesday’s Asian trading session, with shares dropping an additional 4% in Hong Kong. The discounts, which range from 10% to 30%, include a dramatic 34% cut—or 53,000 yuan (€6,460)—on the popular Seal 07 DM-i model.

These price cuts, valid through June 30, apply to models from BYD’s Ocean and Dynasty series. According to the company’s Weibo post, the move is part of a strategic initiative to clear excess inventory and maintain competitive momentum amid an increasingly saturated market. Dealer inventory reportedly increased by about 150,000 units in the first four months of 2025—equal to roughly half a month’s worth of retail sales.

The price-cutting campaign triggered a wave of concern among investors, stoking fears of further margin erosion. Other Chinese EV manufacturers—including Geely, Great Wall Motor, and Xpeng—also suffered share declines between 4% and 9%, as the market braced for a possible sector-wide margin squeeze.

A Calculated Risk to Drive Sales

While the discounts raised short-term fears, analysts believe they may ultimately help BYD maintain momentum in a sluggish economy. Citi analysts project that the company could see a 30% to 40% weekly sales boost as a direct result of the price reductions, potentially offsetting lost profits from thinner margins.

In the context of heightened competition and economic uncertainty, BYD’s pricing strategy is seen as a proactive move to defend market share and accelerate inventory turnover, rather than a signal of financial weakness. Analysts also note that BYD is better positioned than many competitors to weather pricing pressures, thanks to its robust production scale and cost-efficiency stemming from vertical integration.

BYD Outpaces Tesla in Europe and Maintains Strong Global Performance

Despite market jitters, BYD remains on a powerful growth trajectory. In April 2025, the company reported 380,089 new energy vehicle (NEV) sales—a 21% year-on-year increase. Overseas demand remains particularly strong, with BYD setting a new monthly sales record abroad for the fifth straight month.

One of the most significant milestones came last month when BYD outsold Tesla in Europe for the first time. BYD registered 7,231 new battery-electric vehicles, marking a 169% year-on-year surge. Tesla, by contrast, saw its European sales slump, partially due to growing political controversies surrounding CEO Elon Musk.

Globally, BYD sold nearly 1 million vehicles in the first quarter of 2025, positioning the company well to reach its ambitious annual target of 5.5 million vehicle sales. Financially, BYD’s performance has been solid, with the company posting a Q1 net income of 9.15 billion yuan (€1.11 billion) and a gross profit margin of 20%. In comparison, Tesla reported a net income of $409 million (€359 million) and a 16% gross margin during the same period.

Innovation and Expansion Strategy

BYD continues to invest heavily in innovation to maintain its competitive edge. The company recently integrated DeepSeek’s R1 AI model into its advanced driver-assistance systems—technology that analysts believe could rival Tesla’s Full Self-Driving (FSD) system at a more affordable price point.

Additionally, BYD benefits from strong vertical integration, as it is also China’s second-largest battery manufacturer after CATL. This not only helps reduce production costs but also enhances supply chain resilience and scalability.

In terms of global expansion, BYD is less exposed to escalating US-China trade tensions than Tesla, as it does not currently sell passenger vehicles in the US. Instead, the company has focused on expanding its presence in Southeast Asia and South America. It is also investing in a new manufacturing plant in Hungary, a move expected to significantly boost its production capacity and market share in Europe.

Outlook: Short-Term Volatility, Long-Term Strength

While the immediate reaction to BYD’s price cuts has triggered investor anxiety, the company's fundamentals remain strong. With growing international sales, expanding production capacity, and technological innovation, BYD is positioned to remain a dominant force in the global EV market.

As competition heats up and the industry enters a phase of consolidation, BYD’s ability to scale efficiently, manage costs, and innovate quickly will be critical in maintaining its edge—not just in China, but across Europe and emerging markets. Despite short-term share volatility, the long-term story for BYD remains one of resilience and aggressive global growth.