China’s BYD, the world’s leading electric vehicle manufacturer, has reported its first quarterly profit drop in more than three years, a sign of mounting pressure on the company as authorities move to rein in the ongoing price war in the auto sector.
The company announced that its net profit for Q2 2025 slipped to 6.4 billion yuan (around $895 million), marking a steep 29.9% decline compared to the same period last year. This comes after an impressive Q1 performance, where profits had doubled by more than 100%.
Despite shrinking margins, BYD’s revenues still grew by 14% in the second quarter, reaching 200.9 billion yuan by the end of June, thanks to higher vehicle sales and increased returns. Looking at the bigger picture, the company managed to deliver a 13.8% net profit increase and a 23.3% revenue jump in the first half of the year—thanks largely to its robust Q1 results that helped offset the recent slowdown.
Yet, analysts warn the Q2 drop raises red flags. BYD’s dominance in China, which accounts for 80% of its total sales, is under strain. Sales in its home market fell for the third month in a row in July, while production dipped for the first time in 17 months. In response, BYD has reportedly scaled back factory output and put parts of its expansion on hold. This coincides with new government rules introduced in June that require automakers to settle supplier payments within 60 days and curb aggressive discounting, a move that has put BYD’s finances under closer scrutiny.
Numbers underline these concerns. The company’s working capital deficit widened sharply to 122.7 billion yuan at the end of June, compared to 95.8 billion yuan in March, edging closer to the 125.4 billion yuan deficit recorded at the end of 2024. Its debt-to-asset ratio also ticked up to 71.1% from 70.7% in the previous quarter.
Looking ahead, BYD has set itself an ambitious target of selling 5.5 million vehicles in 2025. However, by the end of July it had delivered only 2.49 million units—just 45% of the goal. Analysts now forecast year-end sales of between 5 and 5.2 million vehicles, falling short of the company’s lofty projections.
In short, BYD finds itself at a crossroads: still achieving growth on an annual basis, but increasingly constrained by domestic headwinds that threaten to slow its global momentum. Its ability to hit 2025 targets will depend on how well it can balance expansion ambitions with the new market realities reshaping China’s auto industry.
