BYD Faces a Fork in the Road as Trade Talks and Domestic Woes Collide

BYD's Q1 profit plunged 55% amid tax policy shifts, but strong export growth and a potential US-China trade détente offer hope for a stock bounce.

The stage is set for a pivotal week in Shenzhen. With US President Donald Trump set to meet Chinese leader Xi Jinping in Beijing on Tuesday, BYD’s stock is hovering at a precarious 99.75 Hong Kong dollars — below the psychologically important 100-dollar threshold. The outcome of that summit could determine whether the electric-vehicle giant’s recent share-price bounce is the start of a sustained recovery or just a dead-cat bounce.

A Profit Wipeout Masks a Brighter Core

The numbers from the first quarter of 2026 were ugly on the surface. Net profit collapsed 55.4 percent to 4.09 billion yuan, while revenue slipped nearly 12 percent to 150.2 billion yuan — the third consecutive quarter of declining top-line sales. Strip out the one-offs, however, and the picture shifts.

The biggest culprit was a change in China’s EV purchase-tax policy. After two years of full exemption in 2024 and 2025, Beijing halved the relief to a maximum of 15,000 yuan per vehicle from January. That prompted a wave of pull-forward buying in the fourth quarter of 2025, leaving Q1 2026 starved of demand. Currency losses added to the pain, with financing costs surging 210 percent year-on-year to 2.1 billion yuan as the renminbi strengthened.

Yet revenue still beat analyst estimates of 132 billion to 140 billion yuan by a comfortable margin. That has given the bulls a foothold in the debate.

Export Engine Revs While Home Market Bleeds

The international business is where the real momentum lies. BYD shipped 321,165 vehicles abroad in the first quarter, a jump of nearly 56 percent from a year earlier. Exports now account for 45.85 percent of total EV sales, and management has lifted its full-year target to 1.5 million units.

Canada has emerged as an unexpected bright spot. Ottawa slashed tariffs on Chinese EVs from 100 percent to just 6.1 percent in January, with an initial quota of 49,000 vehicles per year. BYD is preparing to enter the market by year-end, building on an existing bus plant in Ontario. The US, by contrast, remains effectively closed — combined tariffs exceed 125 percent, and import bans on vehicles running Chinese software make direct sales uneconomical.

The export push, however, carries its own risks. The currency losses that hit Q1 earnings are a reminder that international expansion exposes BYD to foreign-exchange swings, supply-chain complexity and regulatory friction in key markets.

Price War Eats Into Margins as Rivals Circle

At home, the competitive landscape is brutal. Rivals Xiaomi and Geely have forced BYD into repeated price cuts, which Bloomberg data shows hit a two-year high in March. Profit has now fallen for four straight quarters. The gross margin did improve sequentially in Q1, suggesting some cost discipline is taking hold, but whether that holds if the price war intensifies is an open question.

The stock’s Friday rally of nearly 5 percent was partly fuelled by optimism around the Trump-Xi meeting. But technical levels tell a cautious story. Support sits at 96.83 Hong Kong dollars — a break below that could trigger further selling. Resistance at 105.12 Hong Kong dollars caps the upside for now.

Analyst Views Split Wide Open

The divergence among sell-side analysts reflects the uncertainty. Goldman Sachs has a buy rating and a 134-dollar target, arguing Q1 2026 marked the trough for both revenue and profit. Citigroup is even more bullish at 142 dollars, forecasting core earnings of up to 11.3 billion yuan in the current quarter. Nomura recently nudged its target higher to 127 dollars, also with a buy.

BNP Paribas stands as the outlier. Its underperform rating and 87-dollar target flag pressure on earnings estimates and uncertain domestic margins. The consensus from 25 analysts lands at 124 dollars, but the range — from 87 to 147 dollars — is unusually wide. That spread alone signals how much hinges on the next few weeks.

April and May sales data for BYD’s fast-charging models will provide the first real test of whether demand is recovering. The Trump-Xi summit could shift sentiment overnight. For now, BYD is balancing on a knife-edge between a promising export story and a home market that refuses to give it any breathing room.