---
endpoint: analytics
pattern: Autos
status: done
latency_ms: 253084
conversation_id: 2aecd5dd-d186-4a90-b051-01322563f624
citations: 17
created: 2026-05-31 21:51:04Z
---

# What’s the bull case bear case for BYD?

# BYD (1211 HK / 002594 CH) — Bull Case vs. Bear Case

**Context (as of 31 May 2026):** BYD is the world's #1 NEV maker and China's largest auto group, but the story has clearly bifurcated in the last 12 months between an ascendant overseas franchise / intelligence-led product roadmap (bull) and a brutal domestic price war that has already broken the four-year profit growth streak (bear). CLSA's internal coverage (latest dated 25-Jun-2025) remains constructive (HC Outperform, TP HK$161 / Rmb484) [5], but corpus recency is ~11 months stale and the 2025 earnings cycle has since printed materially worse than CLSA's forecast — a delta the bear case has to carry. (Note: CLSA coverage is provided by analyst Xiao Feng @clsa.com, a CLSA-parent analyst, not CLST.)

---

## BULL CASE

### 1. Overseas is the new growth engine — and it's accelerating

- 1H25 overseas revenue reached **Rmb135.4 bn**, with NEVs now available in **110+ countries across six continents and overseas sales up 1.3x YoY** — overseas explicitly called out by management as "a new engine driving the Group's sustained, rapid and high-quality expansion" [10].
- Ro-Ro fleet at 6 ships in 1H25, since expanded; **NEV bus exports are #1 globally for 3 consecutive years with 24% share** — defensible logistics moat that smaller Chinese OEMs cannot replicate.
- Localized manufacturing build-out: Cambodia (Sihanoukville) groundbreaking April 2025, European HQ + Szeged plant in Hungary, voestalpine steel supply [10]. Most recent BBG reporting (May 2026) shows BYD's EVP Stella Li confirming **talks with Stellantis to take over underused European factories** — a credible path to bypass Chinese-origin tariffs by producing in-region [13].
- CLSA framing: "We expect BYD's vertical integration model to offer greater leeway in an intensifying price war environment. We like its visible overseas and high-end growth stories" [4].

### 2. Vertical integration + technology moat

- BYD is the only Chinese OEM with full in-house control of the **"three electric + one chip" stack** (battery, motor, electronic control, IGBT) plus its own Ro-Ro export fleet — structurally the lowest-cost producer.
- **Intelligent driving is now the differentiator**: "Sky God's Eye 5.0" launched Jan 2025 with end-to-end reinforcement learning, deployed across the lineup including sub-Rmb100k models. By end-May 2025, >710k intelligent-driving-equipped vehicles sold generating 44m km/day of training data. The "Integrated Vehicle Intelligence" strategy democratizes ADAS to the mass market — a feature competitors price as premium [11].
- **Flash-charging infrastructure**: industry-leading 1,500 kW single-gun mass-production charger; **20,000-station national rollout targeted by end-2026** (18k urban "station-within-stations" + 2k highway), addressing the #1 EV ownership pain point in China [11].
- R&D intensity stepped up: **Rmb30.9 bn in 1H25 (+53.1% YoY)**, the largest absolute R&D spend among Chinese OEMs [10].

### 3. Premium portfolio is finally working

- "Yangwang U7" (D-class, Rmb1 m+, "DiSus-Z" levitated-motor suspension, 0-100 in 2.9s) launched March 2025 — first Chinese brand to ship million-Rmb cars in volume.
- "Denza" brand entered Europe at Milan Design Week with the Z9GT — premium pricing in overseas markets validates the brand-up strategy.
- Mix shift to higher-priced models is the only sustainable margin defense in the current China pricing environment.

### 4. Cyclical / regulatory tailwinds being underwritten by the bull case

- **June 2025 "60-day payables cap" regulation**: forces OEMs to shorten payment cycles to suppliers. CLSA argues this transitions the industry "from being purely price driven to a matrix of value factors, including technology upgrades such as intelligent driving and fast charging, safety features, supply chain, distributor stability and residual value" [7]. Net long-term margin positive for the tech leader.
- **Destocking initiated June 2025** at BYD factories. CLSA reads it as bullish: c.500k monthly capacity vs. c.300-400k output means a controlled production cut to clear inventory rather than a demand collapse — "helpful for BYD and the industry's efforts to reduce inventory overhang… enable a move towards developing a sustainable distribution supply chain" [1].
- **CLSA forecast trajectory (25-Jun-2025)** — Rmb 25CL NP **60.6 bn**, 26CL **75.1 bn**, 27CL **90.3 bn**; ROE ~28% sustained; 26CL P/E 14.6x falling to 12.1x by 27CL; FCF yield rising from 1.0% to 6.0% [6]. TP HK$161 / Rmb484, based on **18.0x 26CL EPS — 10% premium to historical** justified by "high growth visibility from the promising model pipeline and supply chain advantages and its significant improvements in the intelligent driving field, which should leave BYD as an auto plus intelligence conglomerate" [2]. Rated **High-Conviction Outperform** on both H and A shares [5].

---

## BEAR CASE

### 1. The profit growth story has already broken

- **The single biggest update vs. the CLSA bullish forecast**: Nikkei's aggregation of FY2025 China-listed results (May 2026) shows **BYD net earnings fell 19% in 2025, the first decline in four years** [12]. This is roughly **Rmb33 bn actual NP vs. CLSA's Rmb60.6 bn 25CL forecast** — a ~45% miss to internal sell-side numbers and a structural break in the compounding thesis.
- 1H25 already telegraphed the rollover: **NP +13.8% YoY to Rmb15.5 bn was decelerating sharply from prior 30-80% growth rates**, and management explicitly flagged that "rampant chaos in the auto industry such as 'one-price' [一口價] and 'over-marketing,' along with intensified competition, has also affected the 'intelligent driving for all' strategy, resulting in short-term pressure on domestic profitability" [9] [8].

### 2. Domestic price war is structural, not cyclical

- April 2026 CPCA data: BYD EV retail **182k units** — still #1 but the gap has narrowed sharply with Geely 95.5k, Changan 64.5k, Leapmotor 57.2k, Xiaomi 36.7k and HIMA/Aito 32.8k all chasing aggressively [16]. **April total sales -15.5% YoY at 321.1k** [17] — the first sustained YoY contraction in BYD's modern history.
- HK-listed EV sector traded -2.8% on May 5 and -3.6% on May 18 sessions, with BYD a notable laggard in continuous sessions — the market is repricing the China EV cohort downward, not just BYD.
- CLSA's own field check at the June 2025 dealer conference: **dealer incentives c.Rmb700-800m ex-exports vs. market expectation of Rmb1 bn** — a tangible negative read-through to 2Q25 profits that has only worsened into 2H25/1Q26 [1].

### 3. The hidden balance-sheet bear case — supplier financing

- Per CLSA's 10-Jun-2025 sector deep-dive, BYD's **2024 trade payable turnover days were 141 days vs. industry median ~100 days**, and total payable days (note + trade + other) at **227 days vs. GAC 177, SAIC 194, GWM 191** [7]. BYD has been financing its growth on the backs of its suppliers — using c.Rmb 241.6 bn of trade payables vs. revenue of Rmb 777 bn.
- The State Council's June 2025 60-day payables cap directly targets this practice. BYD's working-capital flywheel is the single most exposed in the industry; compressing 227 days to 60 days implies **a multi-tens-of-billion Rmb cash absorption** and removes the implicit zero-cost supplier float that subsidized aggressive pricing.

### 4. Geopolitical wall is rising

- **US**: April 2026 bipartisan "Connected Vehicle Security Act" in the Senate, with a companion House bill, would "essentially ban Chinese vehicles from the US"; Reuters' Congressional aides indicate **it could pass in 2026** [14]. The US market is effectively foreclosed.
- **Canada**: Ottawa actively calculating a **Chinese EV import quota that would cap BYD's Canadian volume** [15].
- **Europe**: regime-change concerns in Hungary (BYD's Szeged hub) are forcing tightened compliance on BYD + CATL operations; the "build in Europe to bypass tariffs" workaround is real but is several years from material volume contribution, and Stellantis-factory talks are still in negotiation phase [13].
- The "overseas is the engine" bull case is increasingly dependent on **Latin America, Southeast Asia and a few non-aligned markets** — a narrower runway than the original 110+-country narrative suggested.

### 5. Valuation supports the bear if 2025 numbers reset

- CLSA's 18.0x 26CL EPS TP rests on Rmb 75 bn 26CL NP. If actual 2025 NP came in at ~Rmb 33 bn (-19%), the **2026 baseline a credible bear would mark to ~Rmb 40-45 bn**, not Rmb 75 bn. At 18x on Rmb 40 bn, the implied valuation is roughly half the CLSA TP — and that's before any multiple compression from policy/geopolitical overhang.
- **Investment risks per CLSA itself**: economic slowdown destroying big-ticket demand a la 2009, delay in global EV mass adoption, change of favourable EV policy, technology bottlenecks, rising raw materials, infrastructure gaps, fuel-cell substitution [3]. Several of these have moved from theoretical to active.

---

## Bottom Line

| Dimension | Bull | Bear |
|---|---|---|
| 1H25 trajectory | Revenue +23.3%, NEV #1 globally, R&D +53% [8] | NP only +13.8% — deceleration begun [8] |
| FY2025 outcome | (CLSA 25CL forecast: Rmb60.6 bn NP) [6] | Actual: NP **−19% YoY** — first decline in 4 yrs [12] |
| Domestic | "Intelligent driving for all" democratizes ADAS [11] | "一口價"/over-marketing chaos compresses margins [9] |
| Overseas | 110+ countries, 1.3x growth, Stellantis-factory talks [10][13] | US ban bill advancing; Canada quota; Hungary risk [14][15] |
| Supply chain | Vertical integration = cost moat [4] | 227 payable days vs. 60-day cap = working capital shock [7] |
| Valuation | 18x 26CL EPS, +24%/+39% to TP, HC Outperform [5][2] | Forecasts stale ~11 months; mark-to-actual implies ~50% downside to CLSA TP |

**The honest synthesis**: CLSA's internal thesis (the firm's house view) remains High-Conviction Outperform, anchored on overseas expansion, intelligent-driving leadership and vertical integration [2][4][5]. But that thesis was written before the FY2025 -19% profit print [12] and the April 2026 -15.5% sales contraction [17]. **The bull case is intact qualitatively but stale quantitatively**; the bear case has already begun to print in the tape. Anyone underwriting BYD here needs to (a) re-base 2025 actuals, (b) stress-test the 60-day payables transition, (c) handicap a US/Canada/EU triple-protectionism scenario, and (d) decide whether the Stellantis-factory and intelligent-driving optionality is enough to bridge the next 12-18 months of margin compression.

---

**Sources**
- [1] CLSA, "BYD (Destocking initiated)" — 25 Jun 2025 (607962811LinqAlpha.PDF) — destocking thesis
- [2] CLSA, "BYD (Destocking initiated)" — 25 Jun 2025 — valuation methodology (18x 26CL EPS)
- [3] CLSA, "BYD (Destocking initiated)" — 25 Jun 2025 — investment risks
- [4] CLSA, "BYD (Destocking initiated)" — 25 Jun 2025 — investment thesis (vertical integration, overseas)
- [5] CLSA, "BYD (Destocking initiated)" — 25 Jun 2025 — rating: HC Outperform, TP HK$161 / Rmb484
- [6] CLSA, "BYD (Destocking initiated)" — 25 Jun 2025 — financial forecasts table
- [7] CLSA, "China auto (Seeking a diversified value matrix)" — 10 Jun 2025 (607961713LinqAlpha.PDF) — major OEMs 2024 payable turnover days table
- [8] BYD Company Limited — Q2 2025 (1H25) Interim Report — financial highlights
- [9] BYD Company Limited — Q2 2025 Interim Report — domestic profitability pressure ("一口價" / over-marketing chaos)
- [10] BYD Company Limited — Q2 2025 Interim Report — overseas market in 110+ countries, +1.3x YoY
- [11] 比亚迪 2025 年年度报告 — Sky God's Eye 5.0; 20,000 flash charge stations by end-2026
- [12] Nikkei (via StreetAccount) — "China listed company earnings remained sluggish in 2025" — 6 May 2026 (BYD NP −19%)
- [13] Bloomberg (via StreetAccount) — "BYD in talks to buy underused factories from Stellantis" — 13 May 2026
- [14] Reuters (via StreetAccount) — "House lawmakers introduce bill to ban Chinese vehicles in the US" — 11 May 2026
- [15] Bloomberg (via StreetAccount) — "BYD could face import cap in Canada as Ottawa calculates China EV quota" — 7 May 2026
- [16] CPCA April China passenger vehicle market analysis (via StreetAccount) — 11 May 2026
- [17] StreetAccount Summary — April auto sales — 5 May 2026 (BYD Apr -15.5% YoY)

## Citations

- [1] **607962811LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962811LinqAlpha.PDF>
- [2] **607962811LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962811LinqAlpha.PDF>
- [3] **607962811LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962811LinqAlpha.PDF>
- [4] **607962811LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962811LinqAlpha.PDF>
- [5] **607962811LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962811LinqAlpha.PDF>
- [6] **607962811LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962811LinqAlpha.PDF>
- [7] **607961713LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961713LinqAlpha.PDF>
- [8] **BYD Company Limited - Q2 2025 - Interim report** · external
- [9] **BYD Company Limited - Q2 2025 - Interim report** · external
- [10] **BYD Company Limited - Q2 2025 - Interim report** · external
- [11] **比亚迪：2025年年度报告** · external
- [12] **China listed company earnings remained sluggish in 2025 — Nikkei** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4663723&_doc_date=2026-05-06&_doc_product=SA>
- [13] **BYD in talks to buy underused factories from Stellantis, other European carmakers — Bloomberg** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4677220&_doc_date=2026-05-13&_doc_product=SA>
- [14] **House lawmakers introduce bill to ban Chinese vehicles in the US — Reuters** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4673016&_doc_date=2026-05-11&_doc_product=SA>
- [15] **BYD could face import cap in Canada as Ottawa calculates China EV quota — Bloomberg** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4663889&_doc_date=2026-05-07&_doc_product=SA>
- [16] **CPCA issues April China national passenger vehicle market analysis** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4671494&_doc_date=2026-05-11&_doc_product=SA>
- [17] **StreetAccount Summary: April automobile sales/delivery highlights** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4654449&_doc_date=2026-05-05&_doc_product=SA>

