BYD Shares Under Pressure as Sales Momentum Falters

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The Chinese electric vehicle giant BYD is confronting a severe slowdown, grappling with collapsing domestic demand and a sharp surge in material expenses. A dramatic $60 billion erosion in market capitalization since May has been compounded by concerning January delivery figures, prompting market observers to question whether this represents a temporary setback or a more fundamental challenge to the company's market leadership.

Data released on February 1 paints a stark picture. BYD's global vehicle sales for January totaled 210,051 units. This figure represents a substantial year-on-year decline of 30.1% and constitutes the fifth consecutive month of falling sales.

The contraction was particularly acute in the pure-electric vehicle segment, where sales of 83,249 units plunged to their lowest level since February 2024. Plug-in hybrid sales, which typically account for more than half of the company's volume, also fell by nearly 29%. Perhaps most alarming was the performance in its home market, where domestic deliveries were nearly halved year-over-year to approximately 110,000 units.

A Dual Challenge: Soaring Costs and Policy Shifts

Analysts point to a confluence of macroeconomic and regulatory headwinds. On the cost front, lithium prices for batteries have more than doubled in the past three months, according to Bloomberg. Concurrent shortages of storage chips are driving up expenses for intelligent vehicle components. Industry experts estimate these added costs could exceed $1,000 per vehicle for some premium models.

Simultaneously, a change in Chinese government policy is dampening consumer demand. A purchase tax exemption for electric vehicles, which had been in place for over a decade, expired at the start of the year, reinstating a 5% levy. This is applying significant pressure in the price-sensitive mass market segment where BYD has historically held a dominant position.

Rivals Seize the Initiative

As BYD stumbles, competitors are capitalizing. Geely moved into second place in China's EV market for January, reporting sales exceeding 270,000 units. Aito, backed by Huawei's technology, also posted impressive growth, with deliveries surging over 80% to 40,000 vehicles.

A lone bright spot emerges from the international business. Exports accounted for nearly half of all January deliveries. In Germany, new registrations skyrocketed by over 1,000% to 2,629 vehicles. The company is also expanding its production capacity in Brazil. Despite this overseas momentum, management has revised its global export target for 2026 downward, from a previous high of 1.6 million vehicles to 1.3 million.

Sector-Wide Uncertainty Prevails

The near-term outlook remains challenging. Analysts at Morgan Stanley note that most local automakers anticipate a quarter-on-quarter volume decline of 30% to 40% in the first quarter. Clarity on potential government support measures for the sector may not emerge until China's annual parliamentary meeting in March. Until then, uncertainty is expected to remain elevated across the industry.