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China’s EV champion just hit a cold patch, and not a small one. BYD opened the year with a profit drop sharp enough to make the entire electric car industry sit up: a 55.38% fall in first-quarter net profit attributable to shareholders, down to about €524 million.
That number says more than one thing at once. Yes, BYD is still moving enormous volumes of plug-in hybrids and electric cars. Yes, it remains one of the most formidable carmakers on the planet. But the first quarter showed how quickly momentum can turn when incentives fade, buyers rush purchases into the previous year, and rivals start throwing discounts around like confetti.
After stripping out non-recurring gains and losses, BYD’s net profit came in at roughly €532 million, down 49.24% year on year. Revenue also slipped, falling 11.82% to around €19.26 billion. For a company used to setting the pace in China’s new energy vehicle market, those are unusually bruising figures.
The bill arrives after the incentive rush
The slowdown was not exactly a surprise. BYD sold 700,463 new energy vehicles in the first quarter, a 30.01% drop from a year earlier and nearly 48% lower than the fourth quarter. That quarterly comparison is the real gut punch. It shows how much demand was pulled forward before China’s purchase tax support became less generous.
In 2024 and 2025, buyers of new energy vehicles in China could avoid purchase tax, with savings capped at about €3,850 per vehicle. From 2026 through 2027, that support is reduced to half of the standard 10% purchase tax, with the maximum saving falling to roughly €1,925.
Anyone who has watched incentive cycles before knows the pattern. Shoppers hurry to beat the deadline. Dealers lean into the urgency. December looks heroic. Then January feels like someone turned off the lights.
Nio founder and CEO William Li warned about exactly this dynamic back in September 2025, saying the phase-out of national stimulus would put serious pressure on the Chinese EV sector in the first quarter of 2026. His blunt forecast was that if first-quarter industry sales reached even half of fourth-quarter levels, it would count as a decent result.
That sounded cautious at the time. Now it looks realistic.
BYD’s pain also reflects a broader squeeze across China’s car market. The fight for share has become ferocious, especially in the mainstream EV and plug-in hybrid segments where BYD is strongest. Price cuts, limited-time offers, dealer incentives and tech-heavy trim battles have become part of daily life. Great for buyers. Less fun for margins.
BYD acknowledged in late March that China’s domestic price war was one of the main reasons behind pressure on its 2025 profitability. At the same time, rising hardware costs across the supply chain are creating another headache, particularly as vehicles become more dependent on advanced driver assistance systems, sensors, chips and data storage.
That pressure is already showing up in options pricing. From May 1, BYD will raise the upgrade price for its God’s Eye B smart driving system on selected models from about €1,270 to roughly €1,540. The company linked the increase to a surge in global storage hardware costs.
It is a telling move. In the EV business, software may grab the headlines, but hardware still sends the invoices.
Overseas sales are becoming more than a side story
If the domestic picture looks messy, BYD’s international expansion is starting to look like the company’s pressure valve. Overseas sales reached 321,165 vehicles in the first quarter, up 55.84% year on year. That means exports and overseas deliveries accounted for 45.85% of BYD’s total new energy vehicle sales during the period, according to data compiled by CnEVPost.
For years, BYD’s rise was mostly framed as a China story. That is changing fast. The company is pushing deeper into Europe, Southeast Asia, Latin America and other growth markets, while also working to localize production and reduce exposure to trade barriers.
Management has now lifted BYD’s full-year export target for 2026 to 1.5 million vehicles, a figure that would make overseas demand central to the company’s next chapter rather than a useful add-on.
The first-quarter earnings per share figure underlined the scale of the reset. Basic EPS fell 56.89% year on year to about €0.057. Not catastrophic. Not existential. But certainly a warning light.
BYD is not running out of road. Far from it. The company still has scale, brand strength, vertical integration and a product range few rivals can match. But the latest results show that even the strongest player in China’s EV market cannot escape the combined drag of weaker seasonal demand, reduced incentives, discount warfare and rising technology costs.
The next test is simple enough to describe and much harder to execute: protect margins at home while turning global ambition into durable profit abroad.
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