BYD’s Record Year Overshadowed by Market Concerns

Despite achieving a historic milestone by surpassing Tesla as the world's leading electric vehicle (EV) seller in 2025, BYD's stock performance tells a different story. The company's shares concluded the trading year with a decline of nearly three percent, reflecting investor apprehension over significant subsidy reductions in its home market.

The Chinese automaker solidified its lead with total sales exceeding 2.5 million units for 2025, leaving its U.S. rival Tesla, which delivered approximately 1.65 million vehicles, far behind. The achievement is underscored by profitability, not just volume. Through aggressive vertical integration and localized production in Hungary and Thailand, BYD reported a gross margin above 20%, outperforming Tesla's 16.3% margin and demonstrating superior operational efficiency.

A Subsidy Shift Threatens Core Strategy

The primary headwind for BYD's equity value, which closed 2025 at $12.20, originates from a major policy change in China. Government incentives for 2026 have been sharply revised. The full premium of 20,000 yuan will now apply exclusively to vehicles priced above 166,700 yuan.

This recalibration directly challenges BYD's mass-market approach. For popular entry-level models like the BYD Seagull, with a price tag around 69,800 yuan, the state support plummets from the previous 20,000 yuan to roughly 8,400 yuan. Market analysts anticipate this regulatory shift will substantially cool demand in the high-volume, low-cost segment where BYD has thrived.

Should investors sell immediately? Or is it worth buying BYD?

Navigating Competition Through Pricing and Export

In response to these pressures, BYD is adjusting its international pricing strategy. Effective January 1, the company raised prices for models including the Sealion 7, Atto 3, and Seal in markets like India. This move aligns with actions taken by premium manufacturers such as BMW and Mercedes-Benz, which have also implemented increases of up to three percent.

Exports are gaining strategic importance, with Europe emerging as a key region after sales surpassed 19,000 units in October alone. However, the competitive landscape in China is intensifying. The entrance of tech giant Xiaomi with its YU7 model poses a new threat, targeting the mid-range SUV category directly. Over 200,000 orders received within the first hour of availability signal that the battle for market share in 2026 will be fiercer than last year's volume comparisons suggested.

The current share price decline embodies investor skepticism about BYD's ability to maintain its dominant position under the more challenging conditions expected in the coming year.