BYD's Racco Triumph in Japan Masks a Home Market Under Beijing's Watchful Eye

BYD's Racco EV wins 5,000 orders in Japan, but Beijing's crackdown on price cuts and falling domestic sales pose a strategic challenge.

The contrast could hardly be starker. On one side, BYD is celebrating a runaway success in Japan, where its new kei-car has racked up more than 5,000 orders in its first week on sale. On the other, Beijing is wagging a finger at the company's aggressive discounting at home, warning that a ruinous price war threatens the broader economy.

The Japanese milestone arrived on July 21 with the launch of the Racco, a compact electric vehicle that has already captured half of the 10,000-unit sales target BYD had set for the model through the end of 2026. Some 70 percent of buyers are replacing an existing kei-car, while the remaining 30 percent are adding the Racco to their garage. Priced from ¥2,145,000 for the base version — which offers 210 kilometres of range — up to ¥2,497,000 for the premium trim with 320 kilometres, the car undercuts the market further once a ¥150,000 government subsidy is factored in. Crucially, it is the first electric kei-car to exceed 300 kilometres of range under WLTC standards, giving BYD a foothold in a segment that accounts for roughly 40 percent of all new-car sales in Japan.

That momentum builds on a solid 2025, when BYD sold 3,870 vehicles in Japan — a 62 percent jump driven largely by the Sealion 7 SUV. Tesla, by comparison, crossed the 10,000-unit mark in Japan for the first time in the same period.

Beijing's Rebuke Lands at an Awkward Moment

The political pressure in China comes at a delicate time for the entire industry. President Xi Jinping has reportedly criticised overinvestment in computing power, artificial intelligence and electric vehicles — a phenomenon China calls "involution" — and BYD was among the manufacturers summoned for talks. The immediate trigger: BYD slashed the price of its Seagull hatchback by 20 percent to 55,800 yuan, with the Great Wall Ora 3 suffering a similar cut. A legislative change targeting such price wars is reportedly in the works.

The timing compounds an already difficult stretch. Retail passenger-car sales in China fell 18 percent year-on-year in the first 26 days of July, with new-energy vehicles accounting for 65.7 percent of that volume. High temperatures, the seasonal lull and swollen dealer inventories are all weighing on demand. For BYD, the intervention presents a delicate balancing act: defend market share without reigniting the price spiral that Beijing has explicitly condemned.

The domestic weakness is not new. In June, BYD's China sales dropped 22 percent year-on-year, even as global volumes rose 5.5 percent to 403,472 vehicles — the second consecutive monthly increase. The export engine more than compensated: overseas sales surged 94.7 percent to 175,349 units. The company delivered 557,090 battery-electric vehicles in the second quarter, a year-on-year decline but likely enough to reclaim the global crown as the world's largest pure-EV seller from Tesla.

A Flagship Bid for the Premium Segment

The Chengdu Motor Show, running from August 21 to 30, will serve as the stage for BYD's next big bet: the Great Han, a D-segment flagship sedan that has already been spotted testing on public roads. The company has confirmed a range of 1,008 kilometres per charge under CLTC standards, equipped with the second-generation Blade battery and flash-charging technology. Dynasty sales division chief Lu Tian has promised further surprises at the unveiling.

The Great Han follows the Da Tang, the first D-segment SUV in the Dynasty line, which went on sale in mid-June. With this push upmarket, BYD is signalling its intent to compete in a premium arena long dominated by Western and Japanese marques, rather than relying solely on its reputation for budget-friendly models.

The model also marks a return to form for the Dynasty family. The Song L GT is making a comeback after a year-long hiatus with a redesigned exterior, following a near-89 percent collapse in sales of the original version.

F1 Talks and a Washington Headwind

Beyond the showroom floor, BYD is exploring other avenues of influence. Vice-president Stella Li has held discussions with Formula 1 chief Stefano Domenicali and FIA president Mohammed Ben Sulayem at the Monaco Grand Prix. The company insists its interest lies in technology transfer rather than a full team entry, and no concrete plans have been announced. Chairman Wang Chuanfu, meanwhile, has set an overseas sales target of more than 1.5 million vehicles for 2026, supported by a Blade battery capacity expansion expected to add 20,000 to 30,000 units of monthly sales volume.

A less welcome development came from Washington, where the US Defense Department added BYD — alongside Alibaba and Baidu — to an updated list of Chinese military companies. The designation bars the affected firms from US defence contracts; China's embassy has called the move discriminatory.

Shares Stabilise Below the Peak

The stock has found its footing in recent sessions, closing Thursday at €10.40, down 0.29 percent, and trading at €10.38 on Friday — essentially flat. Over the past month, the shares have gained 19.84 percent, a notable recovery, yet they remain roughly 21 percent below the 52-week high of €13.23 reached last August. Between regulatory headwinds at home and an accelerating international expansion, BYD's equity remains a mirror of the company's own contradictions — a global growth story tethered to a home market that Beijing is determined to keep in check.