BYD Faces 8% Drop in Core Car Deliveries Amid Regulatory Scrutiny and Intensifying Competition

BYD Co., China’s leading automaker, is facing a series of challenges that are testing its dominance in the electric vehicle (EV) market. The company's monthly sales have plateaued, and the traditionally slower summer months are not expected to bring a reversal in this trend. This stagnation comes at a time when Beijing is cracking down on "irrational competition" in the EV sector, aiming to curb deflationary price wars that threaten economic and industrial growth.

BYD's international expansion efforts are also encountering unexpected hurdles. The company is struggling to meet its ambitious sales targets, particularly in regions like Saudi Arabia, where EV adoption is hindered by high costs, limited charging infrastructure, and extreme temperatures. In India, regulatory barriers have consistently blocked BYD's expansion plans, while in Europe, the company faces substantial tariff challenges and increasing competition from established automakers.

At home, BYD's aggressive pricing strategies have drawn regulatory scrutiny. In late May, the company slashed prices by up to 34%, triggering a sector-wide discounting frenzy. This move was later criticized by the People’s Daily, which condemned the "rat-race competition." The effectiveness of Beijing's efforts to control price discounting by privately held companies remains a topic of debate. Analysts suggest that authorities may use administrative tools such as price reviews or cost investigations to establish a de facto price floor, or coordinate capacity reductions among leading EV makers, although these measures are not without challenges.

BYD's annual sales target for 2025 is looking increasingly out of reach. The company needs to sell over 560,000 electric and hybrid vehicles each month through December to meet its goal, a figure that exceeds its highest monthly sales record of just under 515,000 units. Analysts are now questioning whether BYD can achieve its target of 5.5 million units for 2025, with consensus estimates being downgraded. Deutsche Bank AG expects 5 million in wholesales for this year, while Morgan Stanley has lowered its projection to 5.3 million, citing a smaller number of new models. Bloomberg Intelligence’s Joanne Chen suggests that BYD may need to sacrifice some profit and maintain hefty discounting in the second half to stay on track.

Domestically, BYD's core car deliveries in China are shrinking. In June, these deliveries slipped 8% year-on-year as competitors like Zhejiang Geely Holding Group Co., Xpeng Inc., and Xiaomi Corp. gained market share. HSBC Holdings Plc data indicate that Geely was the largest gainer of market share in the first half, while BYD was among the biggest losers. Overseas sales are performing better, with BYD on track to reach its forecast of 800,000 units. However, higher margin international sales may not be enough to offset aggressive domestic discounting, given the new difficulties in foreign markets.

As BYD prepares to release its first-half results later next month and July sales data within weeks, analysts will be closely monitoring whether the company's 2025 targets remain achievable. The challenges BYD faces both domestically and internationally highlight the complexities of maintaining leadership in a rapidly evolving market. The company must navigate regulatory scrutiny, intense competition, and market-specific hurdles to sustain its growth trajectory.