Hong Kong-listed EV giant BYD (01211.HK) reported first-quarter results late on April 28 that were better than feared, as strong overseas growth cushioned a sharp slowdown at home — but not enough to fully offset mounting domestic pressures.
Revenue for the three months to March fell 11.8% year on year to 150.2 billion yuan ($20.7 billion), reflecting a steep decline in vehicle sales volumes. Automotive revenue dropped 16.1% to 112 billion yuan. Even so, the topline exceeded market expectations, supported by a stronger-than-expected increase in average selling prices.
The improvement in pricing was striking. Average vehicle prices rose 20% year on year to 160,000 yuan, driven by a rapid shift in sales mix towards overseas markets, where prices are roughly 1.5 times higher than in China. Exports accounted for 47% of total sales volume in the quarter, more than double the level a year earlier, offsetting the impact of domestic discounting as the group cleared older inventory.
Margins buoyed by overseas sales
Despite weaker volumes and rising costs, BYD’s automotive gross margin rose to 23.4%, up 1.8 percentage points from the previous quarter and well above market expectations. The surge in higher-margin overseas sales offset pressures from domestic price cuts, rising raw material costs and negative operating leverage linked to lower volumes.
Net profit attributable to shareholders shrank 55.4% year on year to 4.08 billion yuan, largely due to non-operating factors including significant foreign exchange losses. Stripping out currency effects and other one-offs, however, underlying profitability proved more resilient. Core operating profit per vehicle rose to 5,900 yuan from 5,600 yuan a year earlier.
International expansion becomes profit anchor
The key driver behind this resilience is the accelerating contribution of overseas markets. In the first quarter alone, BYD sold 320,000 vehicles abroad, accounting for nearly half of total volume and providing a crucial boost to both pricing and margins.
Higher average selling prices and profitability overseas mean that international operations have evolved from a source of incremental growth into a core earnings pillar. If the company achieves its 2026 export target of 1.5-1.6 million vehicles, overseas business could contribute 300-320 billion yuan in net profit, based on an estimated per-vehicle profit of 20,000 yuan — potentially accounting for nearly two-thirds of total automotive earnings.
To support this push, BYD is accelerating localisation of production. Plants in Brazil and Hungary are either operational or nearing completion, while additional capacity is being developed in markets such as Indonesia and Turkey. By the end of 2026, overseas production capacity is expected to exceed 500,000 units annually.
At the same time, the company is rapidly expanding its distribution footprint, with plans to double its European dealership network to around 2,000 outlets.
Domestic market under strain
By contrast, BYD’s domestic business is facing mounting challenges. Its vehicle sales in China fell sharply in the first quarter, with volumes down 52.3% year on year to 380,000 units. The group’s share of the domestic new energy vehicle market has also declined significantly, dropping from a peak of 37.3% in 2024 to around 25% in the first quarter of 2026.
Competition in the mass-market segment has intensified, particularly in the 100,000 yuan to 200,000 yuan price range, where rivals such as Geely and Chery have narrowed the technological gap in plug-in hybrid systems. At the same time, regulatory efforts to curb excessive price competition have limited BYD’s ability to deploy aggressive pricing strategies.
The company has also faced headwinds from policy changes, including reduced purchase tax incentives and subsidy structures that increasingly favour higher-priced models — a disadvantage for BYD’s core mass-market offerings.
In response, BYD is doubling down on technology and product upgrades. At a March launch event, the group unveiled megawatt-level fast charging and its second-generation Blade battery, which promises improved energy density and significantly faster charging times — as little as five minutes to charge from 10% to 70%. The company is also ramping up investment in intelligent driving systems, shifting towards greater in-house development of both hardware and software.
Outlook depends on global execution
Looking ahead, BYD’s domestic outlook remains uncertain, with analysts expecting only modest growth or even further declines in 2026. Weekly order data suggests demand has softened since the launch of new models earlier in the year.
Against this backdrop, overseas markets are set to play an increasingly decisive role in the company’s trajectory. The extent to which BYD can sustain strong export growth and successfully localise production will determine whether it can unlock further upside.
For now, the company’s global expansion provides a vital buffer — but it has yet to fully compensate for the growing strains in its home market.
Source:
Dolphin Research
