BYD Shares Extend Losses Amid Domestic Slump and Market Pressures

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The world's leading electric vehicle manufacturer is facing significant headwinds. For the third consecutive month, BYD has reported a decline in vehicle deliveries, underscoring a challenging period marked by falling sales, a substantial battery recall, and intensifying competition. November saw the company deliver 480,186 vehicles, representing a 5.3% year-over-year decrease.

This persistent weakness arrives at an inopportune moment. Industry observers had anticipated a sales surge ahead of the scheduled expiration of China's full EV purchase tax exemption at the end of December. Instead of a demand spike, BYD is confronting a contraction.

Hitting its adjusted annual target of 4.6 million vehicles now requires BYD to sell approximately 418,000 units in December. The company had already abandoned its initial, more ambitious goal of 5.5 million vehicles—a 16% downward revision that weighed heavily on its stock price.

The competitive landscape is increasingly fierce. Rivals are applying pressure on multiple fronts: Geely Automobile is capturing market share with a refreshed model lineup, while newcomer Xiaomi is making an impact with successful launches like the YU7. An ongoing and brutal price war continues to compress industry profit margins, a situation that has even prompted Chinese regulators to scrutinize aggressive discounting practices. These factors have contributed to a notable erosion of BYD's profitability in recent quarters.

Software Recall Impacts Key Vehicle Line

In a further complication, China's market regulator has mandated a software update for 88,981 units of the Qin Plus DM-i plug-in hybrid. The recall covers vehicles manufactured between January 2021 and September 2023, addressing an issue where battery packs could lead to reduced performance or a complete prevention of pure electric mode.

This model is commercially significant, accounting for roughly one-fifth of BYD's monthly sales volume. The company has stated its plan to deploy over-the-air updates and replace any faulty battery packs free of charge.

Export Growth Fails to Offset Domestic Weakness

One relative bright spot emerged from overseas markets, where BYD exported 131,935 vehicles in November. However, its international expansion faces hurdles. Trade barriers are rising in key regions like Europe and North America, with the EU imposing a 27% tariff. Although BYD is establishing production facilities in Hungary and Turkey to circumvent some of these barriers, these plants are only ramping up capacity slowly.

The company's market valuation reflects these accumulating challenges. Trading on the Hong Kong exchange, BYD shares carry a price-to-earnings ratio of 24 and a market capitalization of approximately HKD 900 billion. The stock has declined 21% over the past six months.

Key Financial Metrics:
- Return on Equity: 23.8%
- EV/EBITDA: 7.84
- Net Margin: 5.2%
- 52-Week Range: HKD 81.80 - HKD 159.27

Saturated Market Intensifies Challenges

The competitive intensity is amplified by a crowded marketplace; China's EV sector now hosts 129 distinct brands. BYD's own strategy of aggressive price competition, which initially triggered the industry-wide price war, is now being used against it by competitors with newer models.

Looking ahead, analyst forecasts for BYD's 2025 sales diverge. Deutsche Bank projects 4.7 million vehicles, Morningstar anticipates 4.8 million, and S&P Global Mobility maintains a more optimistic outlook of 5 million units. Notably, all these estimates exceed BYD's own revised 2024 target of 4.6 million, suggesting that some market experts view the company's downward adjustment as excessively cautious. December's sales figures will reveal whether this external optimism is warranted.