Beijing’s Policy Shift Fuels Optimism for BYD Shares

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BYD shares closed the trading week on a strong note, posting a gain exceeding 5%. This Friday surge was attributed to more than just a new manufacturing milestone; it was primarily driven by a long-awaited political signal from China's regulators. The move has sparked investor speculation that a damaging price war, which has severely pressured industry profitability, may finally be nearing its end.

The rally was catalyzed by an announcement from China's National Development and Reform Commission (NDRC) on December 26. The commission pledged targeted support for the so-called "Three New" industries: New Energy Vehicles (NEVs), lithium batteries, and photovoltaics. The core objective is to "standardize order" and foster competition based on innovation rather than aggressive price-cutting. Market participants view this as a regulatory intervention aimed at curbing the chaotic discount battles that characterized 2025. As the global leader in the NEV sector, BYD is seen as optimally positioned to benefit from a more stable and orderly market environment.

Record Output Amid Profitability Challenges

The company's operational momentum remains formidable. Just prior to the share price increase, BYD announced a historic achievement: its 15-millionth New Energy Vehicle, a Denza N8L SUV, rolled off the production line at its Jinan facility. The speed of this scaling is notable, as the leap from 10 to 15 million units took the company only 13 months.

However, this volume growth has recently come at a cost. In the second quarter of 2025, BYD reported a 29.9% decline in net profit to 6.4 billion yuan, as fierce domestic competition eroded margins. The explicit backing from policymakers in Beijing now offers the first concrete prospect that this margin pressure could begin to ease in upcoming quarters.

International Expansion Gains Traction

BYD's strategic focus is yielding significant results overseas, particularly in contrast to some rivals. While competitors like Tesla have faced stagnation in Europe, reports from December 24 indicate BYD achieved sales growth of 222% in that region. This international success is becoming an increasingly important pillar of the company's growth narrative.

This positive shift in sentiment also coincides with the final chapter of the "Buffett era" for BYD. Berkshire Hathaway completed its full exit from the position by March 31, 2025, a move that was officially confirmed in September. With this substantial overhang of shares now cleared, the stock's valuation is realigning more closely with the company's fundamental prospects and expansion strategy, free from the shadow of a major shareholder's divestment.

Looking Ahead: December Sales and Premium Models

The technical breakout from a recent consolidation phase has turned market attention toward the imminent release of December sales figures. Analysts suggest it is possible that BYD could challenge the milestone of 500,000 units sold in a single month during the year-end sales push. For the restoration of its former profitability margins in 2026, the successful global rollout of higher-priced models, such as the Denza Z9GT and the Shark 6 pickup truck, will be crucial.