In 2025, BYD Company (BYDDY) solidified its position as the world’s largest EV manufacturer by volume, surpassing peers in unit sales and expanding exports to over 70 markets. The company delivered 3.2 million vehicles during the year, a 45% increase from 2024, and opened three new assembly plants in Southeast Asia and Latin America. BYD’s automotive segment accounted for 82% of total revenue, while non-auto businesses—including energy storage and electronics—contributed the remaining 18%, up from 14% in 2024. This diversification underpinned a consolidated gross margin of 23.15%, marking the highest level in the past five years.

With volume leadership established, BYD’s key challenge in 2026 is margin stabilization. Fierce price competition in China drove average selling price declines of 6% in late 2025, compressing automotive margins by 120 basis points year-over-year. Investors should monitor quarterly gross margin trends closely, looking for signs of recovery via cost reductions in battery cell production—where BYD targets a 5% cut in per-kWh costs—and an improved sales mix with higher-margin plug-in hybrids and software-enabled features. Management guidance of a mid-20% automotive gross margin for full-year 2026 will serve as a critical profitability barometer.

BYD entered 2026 with five overseas plants under construction—in Hungary, Thailand, Brazil, Mexico and South Africa—with a combined annual capacity of 600,000 vehicles. While these facilities address tariff and logistics challenges, they also face higher labor costs and ramp-up delays. Investors should track utilization rates, targeting at least 50% in the first year of operation, and compare local manufacturing costs against Chinese benchmarks. Early sales incentives in Brazil and Thailand have boosted uptake, but returns on invested capital will hinge on sustaining demand without heavy discounting, with a target ROIC above BYD’s 12% hurdle rate by Q4 2026.

Beyond vehicles, BYD is leveraging its software platform and energy storage division to diversify earnings. In 2025, software‐related revenues grew 80% to RMB 4.2 billion, yet remained less than 2% of group revenue. The energy storage segment posted RMB 18.7 billion in revenue, a 55% rise, but contributed only 4% of total operating profit. For 2026, key indicators include: software feature adoption rates (targeting 30% penetration of over-the-air subscription services), recurring services revenue surpassing RMB 6 billion, and energy storage gross margins exceeding 20%. Demonstrating operating leverage in these units will be essential to offset automotive margin pressure and support a higher overall consolidated margin.