BYD's Cross-Continent Balancing Act: Record Exports and Factory Talks Outweigh Home Market Pain

BYD pursues aggressive European expansion, acquiring idled factories, but net profit plunges 55% in Q1 2026 as domestic sales fall and margins shrink.

The Chinese electric-vehicle giant BYD is pursuing an increasingly aggressive European expansion, but the costs of that ambition are becoming harder to hide. While management confirms it is actively negotiating with Stellantis and other European manufacturers to acquire idled factories, the company's latest earnings show a dramatic profit squeeze that raises questions about how long this rapid scaling can be sustained without eroding the bottom line further.

BYD's net profit collapsed 55% in the first quarter of 2026, even as the company shipped a record 135,000 vehicles abroad in April alone — a 70% surge year-on-year. The full-year export target stands at 1.5 million units. Yet at home, sales have now fallen for eight consecutive months, with the government halving EV tax breaks for 2026 and 2027 pushing buyers to pull forward purchases into 2025. That policy shift weighed heavily on the first quarter, and the company's 2025 annual profit already dropped 19% despite record global deliveries of 4.6 million vehicles.

JPMorgan remains upbeat on the stock, reiterating an "Overweight" rating with a price target of 120 Hongkong dollars. The bank sees a clear margin catalyst: pricier models — those costing more than 200,000 yuan — should account for over 30% of BYD's domestic sales by the fourth quarter of this year. For the second quarter, JPMorgan anticipates a 60% sequential rebound in deliveries as the tax-pull effect fades. The shares closed Friday at 96.45 Hongkong dollars, well below the JPMorgan target.

BYD vice-president Stella Li confirmed on the sidelines of a London auto conference that the company is in talks with Stellantis and several other European players about taking over underused production capacity. "We are looking for every available factory in Europe," she said, ruling out a joint venture structure because BYD wants full control. She also described Stellantis luxury brand Maserati as "very interesting", signalling that the Chinese group is eyeing not just factories but also struggling European nameplates as it builds out its local presence.

The urgency is clear: EU tariffs on Chinese-built EVs range from 17% to 35%, making local production a strategic necessity. In Brazil, BYD has already overtaken Volkswagen in total monthly sales, and in the UK it now leads the EV market. Italian plant Cassino — owned by Stellantis and running well below capacity — is seen as one potential acquisition target, though Li stressed that negotiations extend beyond a single deal.

The international push is financed by increasingly thin margins. For 2025, BYD's annual profit fell despite pumping out more cars than ever. The first-quarter 2026 net profit decline of 55% underscores the margin pressure from domestic price wars, slowing Chinese demand and the upfront costs of building global sales infrastructure. Still, the company is projecting domestic sales of up to four million vehicles this year, plus the 1.5 million abroad, pushing total deliveries beyond five million for the first time.

Stella Li's comments have thrown the spotlight squarely on Stellantis, which is deep into its own strategic review ahead of an investor day on 21 May. A factory sale to BYD would reshape the competitive landscape in Europe, but it would also hand a powerful rival immediate production capacity. For BYD, the calculus appears simple: faster access to European assembly lines outweighs the drag from shrinking profits at home. Whether investors share that view will depend on how quickly the Chinese group can prove that the new factories in Europe will deliver the margins that its domestic operations are losing.