Chinese ICE fleet peaks as NEV fleet rises. Source: Ember 

As the world’s largest car market, nearly double the size of the US, China has been a big growth engine for major European and US car manufacturers. Now, however, they are now disproportionately losing out there to more powerful, high-tech new models offered by local brands. Despite tariff protection in home markets, that applies across international developing markets too.  

Even so, intense domestic competition means Chinese EV OEMs can take nothing for granted either. Profitability remains under real pressure. Many have already gone under and others have been running unsustainable negative margins. Even the biggest and most financially robust are not immune, although they may also see potential consolidation opportunities. 

The good news: global EV markets 

If profitability in China has become more challenging, then the key to surviving - and ideally thriving - will be access to the many fast growing international markets, where BEV demand still remains relatively untapped. In Europe, EV poster children Norway and Denmark are the furthest up their adoption curves at 98% and 80%. But they are also very small, at less than 1% each of China’s population. The significance of these Scandinavian markets isn’t so much their size as their proof of concept, demonstrating that a full transition is possible. 

But Europe is no longer just a story of progressive Scandinavians. Across the whole oil-import dependent continent, electrification is an urgent strategic priority as the key to greater energy security and economic resilience. Demand is changing fast across the region: French monthly sales of BEV alone (not NEVs) has just reached a record 38% of total sales, with Germany hitting 32% and the UK 30%. Currently, the EU charges up to 35% tariffs on imported BEVs on top of its standard 10% import tariff rate, but not on imported PHEVs, inflating demand for the latter. That distinction is expected to change within the next year. To overcome trade barriers, Chinese OEMs are investing both in joint-ventures with European OEMs and ultimately in their own plants within the EU, giving direct access to key markets.

Meanwhile in Australia, NEVs have just overtaken ICE sales - and they won’t look back. In just a single year from July 2025 to July 2026, monthly sales of BEVs in particular have tripled, both in absolute terms and market share, reaching 33,869 or 32% of the market. As for the US, the world’s second largest car market, protectionist measures have locked Chinese OEMs out for the foreseeable, but any future policy change under a new administration there could unlock significant further upside.

Ultimately, however, the international prize will not lie so much in richer countries naturally biased towards their own long-established manufacturers as in upwardly-mobile demographics in “emerging market and developing economies” (EMDEs) across Asia, Middle East, Latin America and Africa. BYD is well positioned to tap into rising EV adoption rates across such lower to middle income countries from Malaysia, Indonesia and Pakistan to Brazil, Mexico and Colombia, plus too many others in between to mention. Individually, none can remotely compare to China in scale, but collectively they have the potential to more than compensate financially for slower domestic growth. Even as adoption takes off in key Latin American markets as shown in the chart below, total market share still remains below 10%, leaving considerable further upside. Big markets like India are still very early in their adoption curve. NEV shares are doubling in several other emerging markets, but likewise still have far to go before reaching majority shares, let alone turning over actual fleets.  

Selected markets share of NEVs. Source: Our World in Data

Taken together, these “rest-of-world” markets will represent the tailwind of global NEV demand, offsetting the structural decline in ICE sales. The trend is clearly boosted by far higher crude and refined products prices, but the underlying direction will likely continue even if peace suddenly breaks out across the Middle East and Ukraine. As range extends, costs decline and charging infrastructure expands, enhancing convenience and pulling down total cost of ownership, NEVs - and BEVs in particular - fall ever more within reach of average buyers in these markets. 

For EMDE populations, affordability really matters, both in up-front and running costs. They can least afford exposure to high oil prices and so have the strongest incentives to go electric, especially if local incentives support it. Outside of the heavily protected US and European markets, Chinese imports have risen from 10% of EV sales in 2021 to 55% in 2025. From 2023 to 2025, BYD’s market share across Africa flew from 4% to 35%, and is now over 80% in some individual countries. 

If the race is now on to meet this demand, then Chinese OEMs are answering the call. Over 1H26, Chinese NEV exports grew by over 120% to nearly 2.5 million units. China still exports plenty of ICE cars too, but NEVs share of total exports has already risen to more than half.  

Chinese NEV exports 1H25-1H26. Source: IEA 

These are exciting figures, but with NEVs in total still barely 5% of the cars on the road today, the vast majority of global NEV sales are yet to come. The mobile battery revolution is still only just getting started. 

BYD: From domestic heavyweight to global behemoth 

It will come as no surprise by now that BYD’s centre of gravity is shifting decisively both from China to international and from PHEVs to BEVs. The company latest half-year report makes no secret of this pivot: 

"China's automotive industry entered a stage of profound adjustment and divergence characterized by 'sluggish domestic demand and robust export growth… The group's overseas growth momentum will continue to be unleashed."

The shift is already clear in sales numbers. Domestic sales fell 33% to 1.51 million vehicles over January-August. But rising international sales restricted the overall sales decline to 2.67 million, only 7% down. Monthly trends suggest the worst may be now behind it. Both Chinese and international monthly sales have grown every month since bottoming out in February (January and February are typically the weakests months of the year for car sales). 

As the chart below shows, after peaking in 4Q24, BYD’s domestic sales were fairly flat in 2025 before hitting a new low below 100,000 in February 2026. They have since rebounded steadily to 243,918 in August. This is still a long way short of November 2024’s record of 473,026, which looks still well out of reach. But despite intense competition, BYD has retained its leading market share of Chinese BEV sales, both domestically (23.3%) and for exports (35.4%). 

BYD domestic sales by month. Source: BYD via Electric Nick 

The attributes that have enabled BYD to succeed in a hyper-competitive Chinese market - scale, vertical integration, technology leadership and distribution capacity - now position it very well to lead the wider global competition. International sales are rising fast. In August 2026, it sold ~190,000 vehicles overseas, more than double the ~81,000 in August 2025 and more than 5x the ~31,000 of August 2024. That represents 44% of its total monthly sales, versus 22% a year earlier. This share looks highly likely to keep rising as international market growth outpaces China. Over the past 12 months, BYD has sold nearly 1.6 million cars outside of China, quadrupled the 400,000 of only two years ago. 

BYD international sales and share, rolling 12-month basis. Source: BYD via Electric Nick

But it’s not just a volume game. International markets have a crucial attraction: the same car can command a much higher price. Each international sale makes on average ~$3k in net profit, up to 3-4x what it makes per car in China. The Seal hybrid SUV costs €40,000 in Germany, more than double the Chinese sticker price. Higher international sales underpin overall profitability. 

In Europe (including UK), BYD has grown from almost nowhere two years ago to selling an aggregate of over 90,000 cars in 2Q26. And the numbers keep rising: in August 2026, BYD’s UK sales doubled year-on-year to over 48,000. 

BYD quarterly European sales. Source: BYD via Electric Nick

BYD’s export markets are also well diversified. In 1H26, Brazil was the biggest at nearly 100,000 vehicles, followed by Australia and the UK, which collectively accounted for another ~90,000. The next 7 largest were Italy, Germany, Thailand, Indonesia, Spain, Philippines and France. In most of those markets sales more than doubled, albeit total volumes in each case were below 30,000. 

These international sales are now starting to show up in BYD’s financials. In 1H26, with 44% of international sales, international revenues overtook domestic revenues for the first time at CNY 181.3bn or 53% of the total. In fact, roughly one third of BYD’s total revenues shifted from domestic to international over that period alone. That helped net income rise for the first time in over a year. 

Fulfilling the potential for much higher international sales has naturally requires much new investment. A key challenge has been retooling from its first-generation to second-generation Blade (2.0) battery, which promises a quantum leap in range to over 1000km ultra-fast charging times (10% to 97% in 9 minutes). This process has hindered the rollout of newer, much more competitive models like the Denza Z9 GT, Yangwang U7 and the AT3 EVO, creating an estimated backlog of 250,000 vehicles. By the same token, completing this transition over the next half-year should help to unlock higher sales going forward. 

Then there is getting those new models to markets. BYD already boasts an impressive container ship fleet of 8 roll-on/roll-off (RoRo) car carrier vessels with capacity of up to 9,200 cars per ship, but this has still been a bottleneck. Clearly, this is also a good problem to have as unlocking it can support higher growth. That’s why BYD has just ordered 10 more RoRo ships, expanding the fleet to 18 in total over 2027-29, with an expected capacity of 130,000 cars at any one time.

Perhaps even more importantly, BYD’s international expansion strategy also requires establishing its own factories to build and sell cars directly in fast-growing global markets. It already has plants up and running in Brazil (150,000 vehicle/pa capacity rising potentially to 600,000), Indonesia, Thailand and Kazakhstan. Its Hungarian plant, a key strategic footprint in Europe, is expected online by year end. Then there are plants in Mexico, Malaysia, Pakistan and Vietnam to follow, no doubt not the last.  

International plants of selected Chinese EV OEMs. Source: The Economist

As new investment expands overseas factories and shipping capacity, BYD’s sales will continue to trend international. Those higher volumes and higher margins should in turn support robust revenue and income over the next few quarters and beyond, if a global oversupply can be avoided. That recovery appears to have started by 2Q26 when net income rebounded by 34% to CNY 8.2bn. 

From hybrid to full electric 

Across all markets, BYD’s annual sales volumes are currently fairly evenly split between PHEVs and BEVs. 

BYD sales split by drivetrain, trailing 12-month view. Source: BYD via Electric Nick

However, that balance is also shifting towards BEVs. PHEV monthly sales peaked in late 2024, and on a trailing 12-month view have been fairly stable since. By contrast, BYD’s monthly BEV sales just hit a new high in August 2026, reaching ~60% share of the total. After a slow start to 2026, BYD’s BEV sales are now on track to overtake its 2025 BEV sales this autumn and very likely end the year higher. 

Sales targets

With a weaker market in China, BYD’s overall sales have levelled off recently after years of rapid growth. From 1.86m in 2022, they reached 3.01m in 2023 and 4.25m in 2024, before slowing down to 4.54 in 2025. This year is now on track to end up roughly level with 2025 and in revenue terms we expect 2H26 will likely compensate for the 7% drop in 1H26. 3Q26 data provide scope for grounded optimism: July sales grew 22% year-on-year and August was BYD's best month of 2026, with 440,293 NEVs sold, up 17.8% on August 2025, That was its fourth straight month of year-on-year growth after eight months of decline.

As capital investments pay off, management now sound much more bullish about the future. The Blade 2.0 upgrade puts BYD back on the front foot both domestically and for international market share. Stella Li, BYD’s top international executive, recently told the FT that BYD plans to show the world “how innovation, performance, premium design and sustainability can coexist within one of the most comprehensive automotive portfolios in the world”. Initial guidance for 1.3 million international sales in 2026 has been revised up by around 50% to nearly 2.0 million - with over 2.5 million projected for 2027. 

BYD is betting big on new models to hit these targets. First generation Blade battery models typically offered a range of up to 500-700 km with charging times of around half an hour. Big sellers include the Song, Qin, Seagull, Seal, Sealion and Atto ranges. But the Blade 2.0 battery raises the stakes considerably. With 1000 km range, charging times under 10 minutes, floating infotainment screens front and back, zero gravity seats and even built-in fridges, all at competitive prices, BYD has significantly enhanced its proposition to the next generation of drivers. The shift towards higher value brands and models is a key strategy to offset price and margin pressure.

Flash charging

The other key to higher sales is the rollout of flash charging infrastructure. To support the appeal of Blade 2.0 models, BYD is aiming to roll out 20,000 flash-charging stations in China this year, a further 30,000 in 2027 and 40,000 in 2028. Outside of China it is aiming for another 6,000, half of which are to be in Europe. This can also provide charging revenue in its own right. 

The arrival of flash-charging is designed to break another key barrier to BEV adoption: the perception of slow charging times. Matching the refuelling turnaround time of ICE vehicles - perhaps their last remaining advantage - is another decisive step in creating a superior driving experience and thereby opening up the whole market. Much longer Blade 2.0 range also simply reduces the need for frequent charging. 

Unsurprisingly, sales data suggests that the combination of longer range, faster and more ubiquitous charging, semi- and fully autonomous driving features and high-tech interfaces is starting to particularly attract younger, smartphone-generation drivers. 

Batteries on wheels 

It’s also worth remembering that BYD is also much more than just a car manufacturer, for two reasons. First, it made batteries before it ever made cars. Behind global leader CATL, it is very well established as the world’s second largest battery manufacturer, well ahead of the rest of the field. BYD therefore offers investors exposure to the tailwinds in the global battery energy storage system (BESS) space, as covered in detail in the first of these two battery focused editions, Edition 22 on the BESS market and CATL. It has delivered large storage projects in well over 100 countries and regions. Second, if it can put wheels on batteries, then that applies to not just cars but also larger commercial vehicles, buses and trucks, among other formats. 

The competition is also on the charge  

Of course, BYD is far from the only manufacturer with ambitions to dominate electric transport. Even if the global EV market does double to ~40m by 2030 and triple to ~65m by 2035, the race to win over cost-conscious buyers will remain highly competitive. Tesla sales are also showing signs of recovery after a flat couple of years. Major Chinese manufacturers like Geely, SAIC, Leapmotor, Chery and Changan are all determined not to be left behind, bringing hot new models all the time. The obvious risk is that all these manufacturers end up like Chinese solar OEMs, with too much supply chasing demand that struggles to ever catch up. A perpetual race to the bottom in international markets would hit longer-term profit margins. And if anything shows how fast-paced and brutally competitive the Chinese car industry really is, it’s the fact that a consumer tech firm like Xiaomi with no history of carmaking managed to bring highly desirable EVs, the SU7 and YU7, to market within barely two years. Other up and coming challengers include Vietnam’s Vinfast, which is growing fast in south-east Asia.  

2021-1H26 BEV sales for 4 top OEMs: BYD, Tesla, Geely, VW. Source: Electric Nick 

Financial Performance 

BYD’s operating and net profit margins peaked in 2024, when the Chinese BEV and PHEV markets were growing faster. By 2025, BYD’s size and market share made it particularly vulnerable to the domestic price war. Revenues of just over CNY 800bn were 3.5% up on 2024, but operating margin fell from 6.4% to 4.2% and net margin from 5.2% to 4.0%. By contrast, its key rival Geely’s adjusted gross and net margins improved by 70 basis points in 2025.  

The latest profitability metrics may just reflect usual seasonal effects, or possibly that the worst effects of the domestic price war may be over. BYD’s net margin declined through 3Q25-4Q25 before plunging to a trough of 2.7% in 1Q26, particularly affected by a spike in FX expenses. It then rebounded strongly to 4.2% in 2Q26, while the gross margin held near cycle highs of 18.9%. By that second quarter, margins appeared to be recovering ahead of the top line, with net profit rebounding by 34% year-on-year.  

Capex and free cash flow (FCF) levels have shifted considerably with the Blade 2.0 investment and international plant build-out. Capex rose over 60% in 2025 to a record CNY 157bn. Operating cash flow fell by more than half to CNY 59bn, pushing FCF to just under CNY -100bn: the first negative number since 2019. This in turn increased balance sheet leverage for the first time in a decade. By mid-2026, BYD went from net cash to a marginal net debt position (~0.1x).

Overall, these figures reflect the strategic narrative: having established a strong domestic position, over 2025-26 BYD has been investing its cash reserves in the strategic pivot from a national champion into an international powerhouse, to launch the next decade of growth. International markets are the ultimate prize. The recovery from 1Q26 to 2Q26 - and subsequent sales data in Q3 to date - provide some early data points indicating that strategy is now starting to bear fruit. 

In terms of trading multiples, BYD’s share price normalised from an ultra-high growth 240x trailing price/earning (P/E) ratio in 2021 to ~19x by 2023-24, as earnings caught up. The ratio then rebounded to ~26x even as earnings fell amid tougher domestic trading conditions in 2025, before 2026 share price weakness has brought it back to ~21x. 

By contrast, EV/EBITDA has been more stable, remaining within a tight 6.7-7.1x band over 2023-25 before falling to 5.9x currently. EBITDA has proven more resilient than implied by the faltering share price, albeit much of it is being consumed by reinvestment rather than flowing through to free cash flow. This gap should close as the capex cycle matures, but is worth monitoring. 

Relative Share Price Performance 

Over the first half of 2026, BYD shares (Hong Kong listing) fell from HKD ~95 to a low of HKD 72.45 by 30 June. They then briefly recovered to HKD ~90 range, before falling again to just under 20% down year-to-date at the time of writing in early-mid September 2026:

BYD (HK listing) share price performance YTD to 10 Sept 2026. Source: Google

Verdict: BYD remains the most promising long-term play on the global BEV megatrend, but profitability will need careful monitoring   

Our modus operandi for the Energized Portfolio is to take a very long-term view, assuming we may hold investments for up to a decade. In our view, as a vertically integrated supplier with ever stronger access to global markets, BYD has a great opportunity to establish itself as the leading supplier in a tripling of the global EV market over that period. That is the core rationale for its inclusion as a core electrification play in the portfolio.  

To help focus the mind, back in November 2025 we dipped our toe into a small position in BYD at HKD 100/share: a bit of skin in the game to nudge us into tackling the investment story more deeply. Admittedly, our timing was poor, just as the Chinese market slowdown started weighing on the shares. The following quarter, 1Q26, was hit by weaker market conditions (partly due to seasonal policy effects) and a spike in FX costs, while the Blade 2.0 battery upgrade was still ongoing. But if BYD’s investments pay off, that may yet prove to be the sales and profitability nadir. Sales have been recovering through the second and third quarters, as the new more competitive range scales up both domestically and internationally. How strong and sustainable that recovery will be, and when the market will start to recognise it, remains to be seen.

On that basis, in mid-September, with the forward P/E down to ~13x from 17-19x in early 2026, we added to our position, before what should be better revenue and earnings numbers land for 3Q26 and FY2026. Tactically, so long as the thesis holds, further share price weakness may offer the opportunity to average down and aggregate a more material long-term position. As the car market does appear quite seasonal, decent 1Q27 numbers would particularly enhance our confidence levels.

Clearly, in such a competitive space, BYD’s international BEV leadership cannot be taken for granted. The key risk is long-term global oversupply weighing on international margins amid intensifying (domestic and international) competition and protectionist headwinds in key target markets, alongside a slower Chinese market. High oil and refined products prices should be a tailwind for EV growth, but alongside this lurks the spectre of broad collateral damage of an AI bubble burst. So this is definitely no “set-and-forget” - it will need careful monitoring to see if the thesis actually plays out as expected.

Key industry and company-specific data points we’ll be watching over the year ahead include:

• Chinese car market: absolute sales and relative shares of BEV vs PHEV vs ICE 

• Likewise for adoption rates and absolute numbers in key international markets

• BYD’s domestic market share and profit margins 

• BYD domestic vs international sales - absolute numbers and relative shares

• Sales numbers for newer models

• Completion of Blade 2.0 reconfiguration, full ramp-up of new plants in Brazil, Indonesia, inauguration of the Hungary plant, and investment decisions on any further plants 

• Roll-out of flash-charging infrastructure vs stated targets

• Operating and net margins, and net debt position, particularly through 4Q26 and 1Q27 (the first quarter is typically the weakest every year) 

• Trading multiples (P/E, EV/EBITDA) relative to prior periods and peer group 

• FX exposure as the ratio of international sales increases  

• Potential further dilution given the capex cycle and higher leverage

• And longer-term, delivery of new shipping export capacity linking BYD’s Chinese output to global markets