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Over the past few days, I have been scouring through BYD’s 1H Interim Financial Report. Overall, performance was what I expected, if below some projections, but a few notable items stood out.
The major numbers look solid, if not stellar. Sales, revenue, gross profits, net earnings … were all up YoY for the half, as I expected, but lower than some forecasts. And when you went in to do the math to break it down by quarter, 2Q was not as impressive. We may have gotten used to BYD massively exceeding expectations, but these numbers were less of a positive surprise. They also talked about some market dynamics and product introductions that we already knew about. There were no big reveals about what is in the pipeline.
The balance sheet was increasingly positive, with more assets than liabilities. Liabilities, including accounts and trades payable, remain low by industry standards. As noted in the report: “The turnover days of the trade payables and bills payables of the Group were at low level in the automotive industry and further declined during the reporting period as compared to the same period in 2024.” Total shareholder equity (assets minus liabilities) was up a significant 32% YoY.
Gross and net profit for the half were both up YoY on higher revenue. However, margins declined slightly YoY. When broken down by quarter, it looks less positive, with margins declining in 2Q versus a stellar 1Q and net profit down 30% YoY, the first quarterly decline since 1Q 2022. However, margins still remained higher than most competitors, particularly in what has been a challenging first half for the industry. But the decline in margin was also expected by some, as I mentioned in a post a few months ago — “BYD has stayed net profitable and grown gross margins to reinvest in R&D and business growth. Typically, when net profits have risen, they reinvest, increase R&D and/or cut prices to increase scale. From a historical perspective, current net margins are relatively high and overall earnings are growing, so I would expect them to make some shifts.”
Speaking about R&D, spending was up 53% YoY — more than twice net earnings. People have wondered how long BYD could maintain its R&D growth, but it doesn’t seem to be slowing down. This undoubtedly contributes to the company’s growing patent count lead. And they are rapidly building a new campus for roughly 60,000 senior level researchers and engineers, mostly with graduate degrees, providing infrastructure to expand R&D activities further.
Screengrab from BYD 2025 1H Interim Report
In terms of expansion, BYD has clearly shifted emphasis. Overseas revenue has rapidly grown to over 36% of total revenue. When you consider that an increasing majority of the company’s revenue comes from EVs, China alone makes up almost ⅔ of the global EV market, and the governments of the US/Canada are essentially blocking them from their markets; then BYD’s expansion outside of China is substantial. Its increased investment outside of the Chinese market also seems to be paying off. This is especially the case in the developing countries of the Global South, both for sales and manufacturing. We have seen several notable reports in just the past week of expansion in LATAM, Africa, and Asia, including exports from Thailand to Europe. As these are growing economies, they create long-term opportunities.
Something also should be mentioned that was not in the report: subsidy or regulatory credit revenue. In the 2024 Annual Report, there was revenue listed under “government grants.” But nothing here. In addition, the official final accounting for all subsidy payments from 2016–2020 was recently released by MIIT, and BYD received a net total of $2.2 million USD during that period of time. That’s less than 1% of total subsidies paid to automakers in China, and less than many individuals have in their 401K. From 2021–2022, the estimated total subsidies that BYD subsidiaries were slated to receive was up to just $10.27 million USD. But that’s millions, not billions. There are also subsidies paid to consumers in China, like the up to ~$2,800 USD scrappage incentive to take older ICE off the road and replace them with EVs. However, that is still less than the $7,500 consumer tax credit in the US. In addition, BYD pays significant taxes, more than net profits, and is a net contributor to government revenue. All of this runs counter to the persistent but false “unfair subsidies” narrative.
Overall, BYD seems to be on solid financial ground. However, sales within China are evolving, their global footprint is evolving, and their R&D-fueled technology is evolving. It will be interesting to see how this develops in future quarters.
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