BYD’s US$45 billion stock wipeout raises doubts on China outlook

[HONG KONG] BYD faces pressure to restore investor confidence after a US$45 billion stock sell-off, with growing concerns over its ability to fend off competition amid a destructive price war in China.

The Chinese electric-vehicle (EV) maker’s Hong Kong-listed shares have tumbled more than 30 per cent from the all-time high reached just four months ago, underperforming peers. Analyst sell ratings on BYD have surged to the highest level since 2022, Bloomberg-compiled data show.

Investors are losing patience with BYD’s strategy of taking the lead on deep discounts, while the government is clamping down on the so-called involution, wreaking havoc on the industry. At the same time, rivals including Geely Automobile Holdings and Zhejiang Leapmotor Technology are gaining ground.

“While I believe investors retain a positive long-term view, there is a real concern around BYD’s aggressive ‘market share gain by pricing pressure’ strategy in the anti-involution context,” said Kevin Net, head of Asian equities at Financiere de L Echiquier. “In the short term, this should still weigh on both topline and margins.”

The company reported a 30 per cent plunge in its June-quarter profit, its first decline in more than three years on the price war impact. China’s top EV maker, BYD has been a major driver of the multiple rounds of discounts over the past few years as makers fight for market share.

Meanwhile, Beijing has become increasingly vocal in its efforts to rein in excessive competition it sees as creating deflationary pressure and damaging the international reputation of Chinese manufacturing.

BYD now expects to deliver 4.6 million vehicles this year, a steep drop from its earlier target of 5.5 million. To meet even this lowered goal, the company must deliver some 1.7 million units in the last four months – that’s a tall order given its ageing product lineup and the new regulatory environment.

The unveiling of new models in the first quarter of 2026 will be a key stock catalyst for BYD, market watchers say. The company postponed some launches to next year so it can make the vehicles more competitive, and as rivals notched success with recent offerings.

“No OEM could keep their product cycle strong forever – even BYD cannot,” said Xiao Feng, co-head of China industrial research at CLSA Hong Kong. BYD’s offerings have become stale since its dominance from 2018 to 2024, and buyers have turned to “new faces” such as Geely and Leapmotor.

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Despite its domestic challenges, BYD has been making strong inroads abroad thanks to more product launches and increased localised production. Its overseas volume may reach 900,000 to one million units in 2025, exceeding management’s 800,000 target at the beginning of the year, according to Goldman Sachs analysts.

Valuation is another point of appeal for the stock, which is trading at 17 times forward estimated earnings, below its three-year average of 20 times. Meanwhile, options volume has climbed to a record of almost 600,000 total contracts outstanding, nearly triple the level in June.

All eyes will be on the company’s upcoming domestic product launches, with features in focus as well as pricing strategy. Analysts expect fresh looks, inclusion of its God’s Eye autonomous driving system in lower priced models and battery upgrades, as well as extended ranges for its plug-in hybrids.

“Strategic developments that reposition BYD as a technology leader rather than simply a highly efficient EV manufacturer could reshape investor perception and drive share price upside through a valuation re-rating, despite near-term downward pressure on earnings,” said Gary Tan, a fund manager at Allspring Global Investments. BLOOMBERG