Revenue of 566.2 Billion Yuan, Yet Shareholders Are in Tears: What’s Really Happening with BYD?

In the first three quarters of this year, BYD’s revenue soared to RMB 566.2 billion, equivalent to earning RMB 3.1 billion per day. It might seem like they’re “printing money,” but a closer look reveals a different story.

In the third quarter, net profit plummeted by 32% year-on-year. Even more puzzling is the stock market performance: while the new energy vehicle sector index surged by 30% over the past three months, BYD’s share price fell by 7%. What’s behind this反常 trend?

BYD Financial Report Analysis

Why are investors fleeing? They’ve spotted two turning points.

First, revenue growth has slowed. In Q1 and Q2, BYD’s revenue grew by 36% and 14% respectively, but in Q3, it declined by 3%. Investors are starting to question whether BYD’s market share is under siege.

The sales decline is continuing. October sales data shows BYD still leading, but with a 12% year-on-year drop. Meanwhile, other automakers on the list reported positive growth. BYD’s previous strategy of “big bowl, more noodles” helped it capture the market quickly, but as competitors catch up, its foundation is being challenged.

Second, net profit has fallen sharply. Except for a significant increase in Q1, net profit dropped by 29% and 32% year-on-year in Q2 and Q3, respectively.

In short, Q3 revenue declined, October sales fell, and net profit dropped significantly. For short-sighted capital, this series of setbacks signals: “Sell!”

But Is That the Full Picture?

Let’s look deeper into the financial report. Operating costs have increased compared to last year, understandable given the intense price war. Even with a gross margin drop to 17.87%, BYD remains highly competitive in the market.

The real secret lies in R&D expenses. BYD has been “splurging” on R&D in recent years. From RMB 8.6 billion in 2020, R&D expenses surged to RMB 54.2 billion in 2024. In the first three quarters of this year, R&D spending hit a new high of RMB 43.8 billion, up 31% year-on-year. Interestingly, BYD’s capitalization rate for R&D expenses is extremely low—only 1.8% in 2024.

What does this mean? If BYD spends RMB 10 billion on R&D, only RMB 180 million is recognized as an “asset,” while the remaining RMB 9.82 billion is treated as an “immediate expense,” directly reducing current profits. In comparison, Changan Automobile and SAIC Motor capitalized 36% and 19% of their R&D expenses, respectively, in 2024.

This low capitalization rate suggests BYD is “hiding profits.” This isn’t an accident but a strategic choice: deliberately lowering figures during good times to create a “financial reservoir” to smooth out future profit fluctuations.

Future Outlook

So, can BYD still be optimistic about the future?

BYD’s future hinges on three pillars: breakthroughs in intelligent driving, global expansion, and brand premiumization.

As its core market faces pressure, BYD must rely on “intelligentization” to break through. Heavy R&D investment aims to make BYD’s smart driving technology truly “user-friendly.” Many institutions believe that by 2026, BYD’s core technologies—such as the TianShen Eye B, second-generation Blade Battery, megawatt-level fast charging, and YunNian suspension—will trickle down to mass-market models, helping BYD reclaim market share through “technology democratization.” However, success ultimately depends on whether its intelligent driving technology delivers, which only time will tell.

On the global front, BYD’s factories in Cambodia and Hungary (annual capacity: 310,000 units) will begin production in Q4 this year, followed by plants in Indonesia and Turkey (annual capacity: 600,000 units) next year. By the end of 2025, BYD’s overseas production capacity will approach 1 million units.

Additionally, BYD currently operates 8 roll-on/roll-off vessels with an annual shipping capacity exceeding 1 million units. This signals its ambition to conquer the global market. While this year’s overseas sales target is 800,000 units, that number is likely to double next year.

In terms of premiumization, BYD has faced challenges. Denza sales have stabilized at around 120,000 units annually. To counter competitors eating into its base, BYD is fighting back in the premium segment. Both Denza and Yangwang models are queuing up to set lap records at the Nürburgring. Next year, BYD is expected to further increase investment in brand premiumization to secure a “luxury entry ticket.”

BYD has spent heavily on R&D. Do you think its intelligent driving technology can break through next year?

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