Author | Zhou Zhiyu
BYD adopted a new playbook in 2025.
Over the past four years, the company's profits surged from 3 billion to 40.3 billion, achieving high growth for four consecutive years. The gross margin climbed from 12% to 19%, and its cash holdings consistently exceeded interest-bearing debt.
In 2025, the old labels were shed.
Revenue growth slowed to a five-year low, and profits experienced their first decline in the new energy era. However, BYD made its biggest bet in history that year—capital expenditure nearly doubled compared to 2023, and total borrowing doubled.
This was not passive. From an industry perspective, during this year of further intensifying domestic competition, BYD's expansion reached a high point.
It can be said that BYD is placing its largest stakes at its most uncomfortable moment. As it defends its domestic market and just begins to open up high-profit territories overseas, BYD has no choice but to push forward against the tide.
Facing two tough battles, BYD must go all out.
<h2>Challenger</h2>
BYD is facing the most severe domestic situation since the start of the new energy era.
BYD's fourth-quarter revenue in 2025 was higher than expected, but this was mainly due to the growth of BYD Electronics; automotive revenue remained essentially flat. Meanwhile, sales volume declined year-on-year, meaning each vehicle was sold for less. By the second half of the year, the domestic average selling price per vehicle had dropped to 127,000 yuan, and the gross margin fell to 17.2%—a figure that was 23.9% two years ago.
It's not that BYD has weakened, but its rivals have become stronger.
In 2024, BYD's DM5.0 plug-in hybrid technology had almost no rivals in the market. By 2025, Geely's Leishen Electric Hybrid 2.0 and Chery's C-DM 6.0 were launched successively, narrowing the gap in fuel consumption under battery-depleted conditions to within 0.1L per 100km. The technological generation gap shifted from &#34;one generation ahead&#34; to &#34;half a step away.&#34;
In BYD's core 100,000–200,000 yuan price segment, competitors engaged in &#34;close-quarters combat.&#34; Geely's Galaxy series, relying on a strategy of &#34;high configuration + strong cost-effectiveness,&#34; nearly doubled its sales, with its new energy market share rebounding to 16.3% in February 2026, closing in on BYD. Leapmotor, Changan, and Great Wall are also exerting force in their respective segments. Although BYD has managed to maintain its plug-in hybrid market share at around 36% by launching long-range versions, its dominance is no longer what it once was.
The situation for pure electric vehicles is even more passive. BYD launched its Super e-Platform in March 2025, with solid technical parameters like 400km of range from a 5-minute charge. However, this technology initially only covered models priced above 200,000 yuan, such as the Han L and Tang L, while the mass market below 150,000 yuan did not benefit. Pure electric market share has also remained under pressure.
&#34;Anti-involution&#34; policies have also restricted BYD's traditional path of reclaiming market share through pricing—as the industry leader, its pricing strategy is subject to stricter scrutiny.
BYD is not without responses. The pure electric range of the Qin Plus doubled from 55km to 128km. Fangchengbao shifted from high-end off-roading to launch the Ti3 and Ti7; the Ti7 became an instant hit, with cumulative sales exceeding 100,000 units by January 2026. However, the essence of these moves is &#34;more value for the same price,&#34; using higher configuration costs to defend existing markets.
There was an additional passive factor in Q4. The 2026 new purchase tax policy raised the threshold for pure electric range of plug-in hybrids from 43km to 100km. BYD needed to clear inventory of old models with &#34;significant terminal discounts + purchase tax subsidies,&#34; while simultaneously pushing up BOM costs to ensure the Qin and Song series met the new standards.
The result was that Q4 sales surged to 1.34 million units, up 20.5% quarter-on-quarter, but the gross margin fell to just over 16%. In the third quarter, the market once thought BYD had &#34;emerged from its operational trough,&#34; but this financial report shows that scale effects did not unlock profits in the fourth quarter; instead, they were swallowed by the price war and passive configuration upgrades.
Furthermore, the share of high-end brands in BYD's Q4 sales jumped from 6% to 11%, almost entirely due to the Fangchengbao Ti7, which starts at 179,800 yuan. Excluding the Ti7 and Ti3, the sales share of core high-end models priced above 300,000 yuan is still hovering around 5%. Brand premium has not yet been established.
The domestic battle is not an easy one for BYD to defend.
<h2>Two Fronts</h2>
Despite domestic pressure, BYD has not chosen to retrench. On the contrary, it is doubling down in two directions simultaneously.
Domestically, it is a defensive battle, where it is trading technology for time.
The second-generation Blade Battery and megawatt-level flash charging technology, released on March 5, focus on downward migration. The 6C-level flash charging will systematically cover mainstream models in the 150,000–200,000 yuan range, with plans to build 20,000 flash charging stations by the end of 2026, offering one year of free flash charging benefits. This is BYD using infrastructure investment to fix its pure electric weaknesses, directly countering the layouts of Geely and XPeng in the 800V mass market.
Competitors are also quite concerned about this technology. In recent exchanges between Wall Street News and several auto executives, one of the questions they were most concerned about was the implementation of BYD's flash charging technology.
Intelligent driving is also accelerating. Total R&amp;D investment for the year was 63.4 billion yuan, with capitalized R&amp;D expenditure jumping from 966 million to 5.463 billion yuan. The installation volume of &#34;Eye of the Gods&#34; exceeded 2.56 million units, and the first batch of L3 models was approved for road pilot programs in December 2025. However, the problem is that intelligent driving is not yet a mass-market necessity. &#34;Intelligent driving versions&#34; of new cars have not effectively translated into terminal sales due to delays in feature implementation and rising BOM costs.
Wall Street News has learned that BYD will hold an intelligent driving launch event in April 2026, where the industry expects the release of lidar covering multiple price points and new algorithms. This launch will also be a key validation point: whether the self-developed urban NOA algorithm can migrate down to 100,000-yuan models will determine if the domestic base can stop the bleeding.
According to industry chain research, DM6.0 is expected to bring fuel consumption under battery-depleted conditions down to 1.8L, but the release time might be in the second half of the year, which is too far off to solve immediate needs.
Flash charging, intelligent driving, and DM6.0—three cards are being played in sequence, but they all have time lags. The domestic positional warfare has not yet reached the harvest period.
Overseas is the true confidence that allows BYD to remain aggressive in its expansion despite domestic pressure.
Overseas automotive revenue surged from 99.7 billion to 191.3 billion yuan, nearly doubling. Exports broke through 1.05 million units. But the profit structure behind the numbers is the real story.
In the second half of the year, the average selling price overseas was 186,000 yuan, compared to 127,000 yuan domestically—a difference of nearly 60,000 yuan. The overseas gross margin was 28.1%, while the domestic margin was 17.2%—a gap of nearly 11 percentage points. The gross profit per vehicle overseas was 52,000 yuan, 2.4 times the domestic figure of 22,000 yuan. After deducting various expenses, the net profit per vehicle overseas remained stable at over 20,000 yuan.
Overseas markets have gradually become the core source of BYD's future profits.
If the 2026 export target of 1.5–1.6 million units is met, based on a net profit per vehicle of 20,000 yuan, overseas will contribute 30–32 billion yuan in net profit—accounting for nearly two-thirds of automotive profits. BYD is transforming into a company that makes its money overseas.
Consequently, a significant portion of the 140.2 billion yuan in capital expenditure was poured into overseas markets. The Hungarian plant is expected to start production in Q2 2026 with a planned annual capacity of 150,000 units. The Brazil plant is planned to expand to 300,000 units. The Thailand plant has started production, and the Cambodia plant has laid its foundation. Eight ro-ro ships have entered operation. Overseas non-current assets doubled from 15.3 billion to 31.8 billion yuan. European store plans are to double from 1,000 to 2,000. By the end of 2026, overseas localized capacity is expected to exceed 510,000 units.
BYD is attempting to quickly establish a global capacity and supplier system. Localized manufacturing means changes in cost structure—local labor, compliance, and depreciation during the capacity ramp-up period will all drive up unit costs. It remains to be seen at what level the 28.1% overseas gross margin can stabilize.
Domestic efforts rely on technology investment to buy time, while overseas efforts rely on capacity investment to lock in profits. Both lines are burning money, but one is defensive while the other is offensive.
<h2>Second Half</h2>
The result of burning cash on two lines simultaneously is BYD's current financial report.
Full-year net profit attributable to the parent company was 32.6 billion yuan, down 19% year-on-year. The gross margin fell from 19.44% to 17.74%. Operating cash flow halved from 133.5 billion to 59.1 billion yuan, while capital expenditure soared from 92.5 billion to 140.2 billion yuan. Total borrowing doubled to 113.4 billion yuan. During the year, 134 billion yuan in new bank loans were added, 20 billion yuan in corporate bonds were issued, perpetual bonds increased by about 3.9 billion yuan, and approximately 40 billion yuan was raised through a Hong Kong stock placement—four financing tools were deployed simultaneously.
In 2024, every 1 yuan of capital expenditure corresponded to 8.4 yuan in revenue; in 2025, that fell to 5.7 yuan. Investment efficiency is declining while investment intensity is rising.
But BYD is not betting on 2025; it is betting on 2026 and beyond.
Substantial domestic growth in 2026 is unlikely, given the impact of the halved purchase tax and the fact that national subsidy policies favor mid-to-high priced models above 167,000 yuan—which is unfavorable for BYD's absolute mainstay price range of 100,000–150,000 yuan.
With the domestic market being defended, BYD's 2026 profits will likely depend on overseas performance. In January–February 2026, overseas sales already accounted for 51%, surpassing domestic sales.
On the domestic side, validation nodes are tightly packed. The launch of intelligent driving technology, the release of DM6.0, and the rollout of the flash charging network from planning to 20,000 stations all take time and money. The effects of these three cards will not be visible in financial reports until the third quarter at the earliest.
On the overseas side, there is only one core question: can the speed of capacity ramp-up outrun the speed of gross margin narrowing? After the Hungary plant starts production in Q2 and the Brazil plant expands, the 28.1% gross margin will inevitably trend downward as localized manufacturing advances. If it can stabilize above 22%, 1.5 million units in overseas sales will be enough to support a profit of 30 billion yuan, providing a buffer for domestic pressure.
As this year gradually reaches these critical milestones, the specific figures reflected in the financial reports will determine whether the market reads 2025 as a &#34;capacity construction year&#34; or a &#34;profitability inflection point.&#34;
In 2023, BYD saw growth in both volume and price, with profits exploding and everything going smoothly. In 2025, BYD is fighting on multiple fronts, making the largest bet in its history.
This is the answer given by Wang Chuanfu. Whether the answer is correct remains to be seen in 2026.

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BYD's most aggressive year in history

- BYD implemented a new strategy in 2025, experiencing a drop in revenue growth and profit for the first time in the new energy era while doubling its capital expenditure.  
- Domestic competition intensified, leading to decreased vehicle sales prices and profit margins, although overseas expansion significantly increased, with profits from international markets becoming a key revenue source.  
- Despite a decline in overall net profit and challenges in the domestic market, BYD continues to invest heavily in technology and infrastructure to stabilize its performance in 2026 and beyond.

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