.png){kind=logo}
Chinese EV maker BYD reported its first profit fall in more than three years. Net profit for Q2 2025 dropped 29.9% to 6.4 billion yuan, equal to about $895 million. The fall has raised questions about whether this is only a short setback or a sign of deeper trouble in the EV market.
This ends a 3.5-year streak of growth and signals growing pressure on margins. Revenue rose 14% to 200.9 billion yuan, yet it missed forecasts. A Beijing crackdown on aggressive discounting and extended payment terms also dampened performance.
The main reason behind the BYD Profit drop is heavy price cuts. BYD reduced prices on 22 models this year, with discounts reaching 34%. Sales rose as buyers rushed to take advantage, but the cuts sharply reduced margins. In Q2, gross margins were only 10% to 15%, compared to Tesla’s 18%.
Price wars are not new in China. The government has been pushing carmakers to cut costs to deal with overcapacity in the industry. BYD has an advantage with vertical integration, making its own batteries, chips, and even mining lithium. Still, the company’s dependence on subsidies adds risk. From 2018 to 2022, BYD received at least €3.4 billion in support. If subsidies are reduced, margins may weaken further.
While the Chinese market looks tough, global expansion offers hope. In Europe, BYD’s sales surged 311% in Q2 to 70,500 units. Market share reached 1.2%, ahead of Tesla’s 0.8%.
The company is also building factories in Hungary, Mexico, and Pakistan, which will help avoid tariffs and lower costs. BYD’s low-priced models give it a strong edge, with the Seagull selling for about $12,000, far cheaper than Tesla’s $38,000 Model 3.
Still, challenges abroad are real. The EU has placed a 17% tariff on Chinese EVs, and the US has raised tariffs to 100%. To respond, BYD is shifting toward plug-in hybrids in some markets, but that requires new research and production spending.
Despite the earnings decline, BYD remains the world’s top EV seller. It delivered more than 600,000 vehicles in Q2, a rise of over 42% from last year. Investors remain divided. The stock fell after the earnings news, but it is still up 50% this year. Analysts say BYD’s energy business, which grew more than 50% last year, adds another growth path outside of cars.
In the end, BYD’s story is mixed. The profit decline shows how hard the EV price war has become. But strong global expansion, vertical integration, and energy growth suggest long-term promise. For investors, BYD may be both a warning and an opportunity, depending on how the next year unfolds.
Also Read: Best Tesla Electric Vehicle Alternatives
