BYD’s Export Surge Powers Stock Rebound, but Inventory Glut and Cash Flow Drain Test Investor Patience

Despite record Q2 EV sales overtaking Tesla, BYD faces 22% China sales drop, 55% profit plunge, and soaring inventory. Export growth offers hope but EU tariffs and subsidy loss loom.

The BYD share has clawed back roughly 16% from its June nadir of €8.03, closing Friday at €9.58 after the Chinese auto giant posted its second consecutive month of year-on-year growth in new-energy vehicle sales. The headline number was impressive: 403,472 vehicles sold worldwide in June, a 5.5% increase that helped BYD deliver more than 557,000 battery-electric vehicles in the second quarter — enough to overtake Tesla. Yet beneath the volume narrative, a different story is unfolding.

For all the export heroics, the company’s domestic business is bleeding. June sales inside China fell to 228,123 units, a 22% slide from a year earlier. That left first-half total NEV sales at 1,808,511, down 15.7% year-on-year. The price war at home, driven by rivals such as Xiaomi and Geely, has forced BYD into its steepest discounts in two years — and the profit consequences are stark. Net profit in the first quarter plunged 55% to 4.08 billion yuan, marking four consecutive quarters of declining earnings.

While management trumpets the overseas ramp-up — June exports surged 95% to 175,349 vehicles, accounting for 43.5% of monthly sales — the balance sheet is flashing warning signals. Finished-vehicle inventories have swollen to over 160 billion yuan, an all-time high. Operating cash flow in the first quarter collapsed by more than 67% to just 2.79 billion yuan, suggesting that production is still outpacing real demand despite the export surge. The cash burn raises a pressing question: can the company liquidate those bloated stockpiles at decent margins before the domestic price war forces further write-downs?

The export engine is humming — but can it offset home-market damage?

Optimists point to the accelerating international push. First-half exports reached 792,256 units, a 71% jump that puts BYD more than halfway toward its full-year target of 1.5 million vehicles shipped abroad. In Australia, the brand is now just 243 units behind market leader Toyota. In Western Europe, Chinese makers led by BYD captured a 10% market share in April. The premium pricing available outside China — combined with a pipeline of new models for overseas markets — could gradually rebuild margins. The stock’s 9% one-day spike on the June sales release shows the market is willing to overlook domestic weakness as long as the export chart keeps climbing.

Yet the risks are piling up just as quickly. Since July 1, BYD has lost state EV subsidies in South Korea after failing a new government review, forcing the company to offer its own discounts to buyers. In the European Union, tariffs exceeding 40% are looming; a second European factory would take years to build and offers no near-term shield. Domestically, the industry’s saturation is deepening: analysts expect a 10% contraction in China’s overall vehicle market this year. BYD’s own production cuts date back to July 2025, when the company trimmed shifts at some plants — the first production decline in 16 months — as the domestic price war escalated.

Chart signals and key catalysts

Technically, the rebound has room to run but remains fragile. The stock trades 3.8% below its 50-day moving average of €9.96 and roughly 11% below the 200-day line at €10.76. The relative strength index of 56.6 has worked off the oversold condition without entering overbought territory. Still, the share is down 12.6% year-to-date and remains 35% below its July 2025 high of €14.80 — a reminder of how much trust has been shattered.

The next quarterly report will be decisive. Two numbers matter most: a meaningful drawdown in inventories from the 160.4 billion yuan level, and confirmation of a second European production site that would insulate BYD from EU tariffs. If both come through, the margin story could begin to shift. If they don’t, the rally built on volume headlines alone will face a harsh reality check — and the four-quarter earnings slump may extend to five.