BYD, Tesla Competition and Regulations Are Going Through a Difficult Period

BYD's Sales Decline and Regulatory Pressures

BYD (Build Your Dreams) had surpassed Tesla to become the global leader in electric vehicle (EV) sales in 2024. However, the company is experiencing a challenging period due to increased competition and regulatory pressures in China. Consecutive quarterly profit declines have driven BYD’s stock to its lowest level in the past nine months.

Falling Targets and Sales Performance

Growing with government support and aggressive pricing strategies, BYD faced its first annual sales decline in the domestic market since 2020. The company's senior executive Li Yunfei announced that the vehicle sales target set for 2025 has been reduced from 5.5 million to 4.6 million. Although high prices for overseas purchases partially offset profit losses, this has proven insufficient to overcome existing threats. The company experienced a net profit loss of 30% in August and 33% in October.

Regulatory Measures and Supply Chain Issues

The Chinese government imposed restrictions on price cuts in the automotive sector, citing that increased competition has disrupted market stability as of 2023. This weakened one of BYD's most crucial sales strategies. Additionally, new regulations in supply chain financing forced the company to reduce its payment period to suppliers from 275 days to 60 days, making operational processes more complex.

Global Trade Challenges and Stock Fluctuations

BYD is also facing challenges in overseas markets. Notably, Europe and Mexico are progressing toward limiting the import of low-cost Chinese electric vehicles. In the U.S. market, high tariffs and technology restrictions set to take effect in 2027 make it difficult for Chinese manufacturers to enter the market.

Investor Concerns and Stock Performance

BYD's market value peaked at $175 billion in May, but following regulatory constraints and a slowdown in sales, its stock has lost 8%. Warren Buffett's sale of the company’s shares contributed to a further 7% drop in the stock price within three days. A BYD spokesperson stated, “Stock trading is inherent to the markets. We thank Buffett for his long-term support.” Following the third-quarter results announced at the end of October, the stock price reached its lowest point in the past nine months.