BYD reports steepest drop in six years on weak China market

BYD recorded its steepest quarterly drop in net profits since 2020 during Q1 2026, achieving CN¥4.09bn, marking a 55.4% year-over-year decline as conditions in its native market continue to eat at sales. Revenue fell 11.82% to CN¥150.23bn, extending a run of declining quarterly revenues to three consecutive periods, though the figure did beat a market consensus of around CN¥132.3bn.

New energy vehicle (NEV) sales totalled 700,463 units in the quarter, down by a staggering 30% Y.o.Y and nearly 48% below the previous quarter’s record-setting volumes. The scale of the sequential fall should be of little surprise given the phasing out of national stimulus support as China winds down its five-year electrification plan and moves on to AI and robotics. In September 2025, Nio Chief Executive William Li warned that this shift would cause demand to concentrate in Q4 and leave the country’s automakers reckoning with a punishing opening quarter in 2026. 

The policy shift has been particularly damaging for BYD’s plug-in hybrid (PHEV) business, which accounts for roughly 60% of its total sales. Beijing excluded short-range PHEVs—those with a battery range below 100 km—from purchase tax subsidies entirely in 2026, triggering a 62% Y.o.Y drop in BYD’s domestic plug-in hybrid deliveries to just 135,000 units. Overseas, hybrid sales arguably take precedence over battery-electric vehicles (BEVs), particularly in the EU given the lack of exposure this vehicle type has to import tariffs. 

BYD’s share of the Chinese passenger car market fell to 26% in March, down 7% from just a year earlier. Thus, its struggle cannot easily be reduced to the loss of tax subsidies. The automaker is also facing heavy pressure from newcomers in the NEV segment, with software-forward brands like Xiaomi, Huawei’s Aito among those posing the most formidable challenge. At the outset of 2026, Xiaomi announced it would target 550,000 sales in 2026 against the 410,000 it delivered in 2025. 

The overseas business is providing a partial counterweight to BYD’s sagging performance domestically. Export volumes reached 321,165 units in the quarter—up an impressive 55.84% Y.o.Y and representing 46% of total NEV sales—up from approximately 21% in Q1 2025. A few weeks ago, BYD quietly raised its full-year overseas sales target to 1.5 million units from 1.3 million, implying an annual growth of more than 40% is now expected.

Effectively locked out of the US due to insurmountable 100% tariffs and other cumbersome regulations around connected car software, BYD must look to the global south for the bulk of its overseas volume growth. However, the margins it can command in a developing market, compared to a developed market, are quite small. Thus, Europe is increasingly central to the automaker’s efforts to offset local weakness.

Local manufacturing will allow BYD to circumvent the bloc’s duties on Chinese-made BEVs entirely. The automaker’s regional flagship plant in Hungary began trial production in January 2026 and is expected to reach mass production later in the year; a second plant in Turkey will do likewise. UK registrations rose nearly 148% year-on-year in March to approximately 4% market share, with the SEAL U DM-i PHEV driving much of that volume.

The domestic recovery depends substantially on uptake of the fifth-generation DM-i platform replacing older short-range models across its lineup. The loss of subsidies weighed on its Q1 results—as did currency exchange factors in the region of CN¥4bn.