After several years of rapid expansion, China's new energy vehicle market has entered a less comfortable period of adjustment.
Once leading the pack with a technological advantage, Byd Company Limited (BYD) now faces a group of fast-closing competitors. In May 2026, Li Auto saw its monthly sales exceed 80,000 units for the first time, with year-on-year growth surpassing 80%. Xiaomi steadily achieved monthly sales of 30,000 units, while Geely's domestic monthly volume of 153,000 units is also closing in. The market structure has shifted from one dominant leader with several challengers to a multi-front melee.
In this environment, BYD's figures are not comfortable reading. Cumulative sales for the first five months of this year exceeded 1.405 million units, a year-on-year decline of over 20%. Its A-share price has retreated from a May 2025 high of 137.67 yuan per share to just over 90 yuan. As of June 9, 2026, BYD's year-to-date share price change stands at -5.97%.
At the 2025 Annual General Meeting on June 9, an emotional shareholder pressed the company on its future prospects. BYD Chairman Wang Chuanfu sought to boost shareholder confidence, declaring that within five years, BYD aims to become the "true global number one" in scale.
Focus on Current Performance
However, compared to this long-term vision, Wang spent more time at the meeting addressing immediate performance pressures. His core assessment is that BYD's current sales pressure stems primarily from production capacity constraints.
Wang stated that market feedback for the second-generation Blade Battery is positive, but production lines are in a transition period, with capacity ramp-up lagging behind order intake. He projected that as capacity increases, monthly sales will rise by 20,000 to 30,000 units by year-end. This year's vehicle sales volume will depend on battery output, with a true volume surge expected next year.
This is not the first time Wang has cited second-generation Blade Battery capacity as a constraint on sales. At a major business conference on May 15, 2026, he had already publicly stated that "orders exceed supply, with the bottleneck at the battery end," noting that multiple key models across four brands were queuing for batteries.
Technical Challenges and Product Promise
The capacity tightness has technical roots. The second-generation flash-charging Blade Battery, launched in March, achieves a 10% to 70% charge in 5 minutes, representing a performance leap. However, the generational shift in manufacturing processes necessitates simultaneous adjustments to old and new production lines, causing unavoidable short-term disruption. The first flagship model equipped with this battery, the Tang EV, is set for launch on June 17, with pre-sale orders exceeding 100,000 units in two weeks and a range of 950 kilometers. From a product perspective, market acceptance of the new battery is not an issue.
Information from the supply chain indicates that due to process adjustments, second-generation Blade Battery capacity is still ramping up, with relief for high-end model production expected in the third quarter of 2026. With competing automakers having similar battery solutions, whether BYD can deliver on schedule before its capacity is fully utilized is a key point for maintaining its edge.
Overseas Growth and Financial Strain
On overseas operations, Wang revealed that the original annual sales target of 1.6 million units is likely to be exceeded, but he emphasized the need for localization, stating, "We must not make competitors too nervous."
More pressing issues are evident in the financial report. First-quarter domestic sales were only 381,000 units, nearly halving year-on-year. Overseas sales accounted for nearly half of the total 700,000 units sold. Revenue was 150.2 billion yuan, with profit at 4.085 billion yuan, down 12% and 55% respectively. The profit figure was impacted by a one-time foreign exchange loss of approximately 4 billion yuan, but the volume contraction is real. The gross margin recovered sequentially to 18.8%, a rare bright spot, but it could not offset the profit collapse driven by declining sales volume.
May data showed signs of an inflection point. Monthly sales of 383,500 units ended an eight-month streak of year-on-year declines, while overseas exports hit a record high of 160,000 units. However, a breakdown shows domestic sales were only 220,000 units, meaning overseas markets are propping up the overall figures. With overseas markets showing high growth and profitability, and domestic markets experiencing volume contraction and lower margins, BYD's profit center is rapidly shifting abroad.
The Capacity Narrative and Future Outlook
Wang attributes domestic sales pressure to the production line transition. Based on the current pace, line adjustments are indeed progressing, and the validation window for this explanation is near: as second-generation Blade Battery production lines gradually come online, monthly sales data in the second half of the year will provide a clearer answer.
At an extraordinary general meeting last December, when domestic sales had declined year-on-year for seven consecutive months, Wang attributed it to "reduced technological lead and industry homogenization." The shift from citing competitive demand-side issues to supply-side capacity bottlenecks itself indicates that BYD's assessment of the domestic market is still dynamically adjusting.
Several international investment banks maintain Buy ratings on BYD. Goldman Sachs set an A-share target price of 137 yuan in April, forecasting total sales of 5.05 million units this year. Morgan Stanley predicts overseas sales will reach 1.6 to 1.8 million units. However, even the most optimistic institutions anchor their growth expectations primarily on overseas expansion and capacity recovery, viewing the domestic market more as a base that needs stabilization.
Wang Chuanfu has chosen to explain the current situation with a capacity story. Whether this narrative will be enough for shareholders to hold on will become clearer in the second half of the year.
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