BYD’s God’s Eye B Price Hike Signals a New Cost Pressure as Export Engine Offsets Home Market Pain

BYD's Q1 net profit fell 55% due to currency losses and a domestic price war, but exports surged to 45% of sales, driving a raised 2025 target of 1.5 million vehicles.

The Chinese electric vehicle giant BYD has delivered a first-quarter earnings report that, on the surface, looks like a rout. Net profit slumped by more than half, and revenue fell by nearly 12% to 150.2 billion renminbi. But beneath the headline numbers lies a story of two very different realities: a brutal price war at home and a surging export business that is reshaping the company’s future.

The 55% drop in net profit to 4.08 billion renminbi was driven largely by factors outside the company’s core operations. A strengthening Chinese yuan against the US dollar and the euro inflicted unexpected currency losses, pushing financing costs to 2.1 billion renminbi. Strip out that one-off effect, and the underlying business showed resilience, with gross margins actually improving over the quarter.

Structural headwinds also played a role. The halving of China’s purchase tax for 2026 and 2027 prompted many customers to pull forward their car purchases into the fourth quarter of last year, leaving a hangover in the first three months of this year. On top of that, the relentless price war with rivals such as Xiaomi and Geely continued to squeeze margins on each vehicle sold.

The Export Juggernaut

The international business has become BYD’s most important growth driver. Of the roughly 700,000 vehicles delivered in the first quarter, 45% went to export markets. In April alone, the company shipped more than 134,000 vehicles abroad, a 71% jump from the same month last year. The export share of total sales has now climbed to nearly 43%.

In markets like the UK and Australia, BYD has already become the best-selling electric vehicle brand. To sustain that momentum and sidestep potential EU tariffs, the company is accelerating local production. Test production has begun at its first European passenger car plant in Szeged, Hungary, where BYD is investing up to €4 billion for an annual capacity of 300,000 vehicles.

Management has responded to the export surge by raising its full-year target to 1.5 million units. The global market must absorb the growth while the domestic market stagnates.

A New Cost Headwind: AI-Driven Chip Shortages

Beyond the sales numbers, a fresh cost pressure has emerged from an unexpected quarter. BYD raised the price of its advanced driver-assistance system, “God’s Eye B,” from 9,900 to 12,000 renminbi in early May. The company cited a sharp rise in global memory hardware costs, driven by the AI boom and new Chinese technology strategies that are diverting vast amounts of storage capacity to data centers.

This is squeezing the supply of vehicle-grade chips and pushing contract prices sharply higher. The strategic importance of the technology is clear: BYD’s fleet of vehicles with activated assistance systems now numbers over 2.85 million, collecting around 180 million kilometers of real-world driving data every day.

Analyst Confidence Holds

The Hong Kong-listed H-shares are trading just below the HK$100 mark, having moved sideways since the start of the year after a significant decline in 2025. The market appears to have already priced in the weak quarterly figures.

Analysts remain bullish. The average price target stands unchanged at HK$124, with Citigroup maintaining a buy rating and a target of HK$142. The bank expects a recovery in the second quarter, forecasting an operating net profit of up to 11.3 billion renminbi. That recovery, however, is conditional on export volumes staying high and domestic prices stabilizing.

For now, BYD is running a two-speed operation: one engine roaring in global markets, the other sputtering in the price war at home. The question is whether the export surge can keep the company’s momentum alive long enough for the domestic market to find its footing.