BYD Slows Production Amid Rising Inventory and Fierce Price War

EV giant delays expansion plans in China as demand falters and industry pressure mounts

BYD Cuts Output and Cancels Expansion Plans

China’s top electric vehicle manufacturer, BYD (SZ:002594), has slowed production across multiple factories and delayed planned capacity expansions. According to sources familiar with the matter, the automaker has:

• Cancelled night shifts
• Cut output by at least one-third at select facilities
• Suspended new production lines at four major plants

This shift marks a sharp contrast to BYD’s aggressive growth in recent years, during which it surpassed Tesla to become the world’s largest EV maker.

Slower Sales Growth Prompts Caution

The production slowdown signals that BYD’s rapid sales growth may be levelling off, despite deep price cuts aimed at boosting demand in China’s ultra-competitive EV market.

The company, which sold 4.27 million vehicles in 2024, set a target to increase sales to 5.5 million in 2025. However, recent data shows:

• Output growth slowed to just 13% in April and 0.2% in May year-on-year
• Average production in April–May was 29% lower than Q4 2024
• Inventory levels at BYD dealerships reached 3.21 months—more than double the 1.38-month industry average

One major dealer in Shandong province reportedly shut down at least 20 outlets due to unsold stock.

Deep Price Cuts and Dealer Strain

BYD recently launched aggressive price cuts, reducing the base price of its cheapest model to just 55,800 yuan (£6,100). While this sparked a broader price war in China’s auto sector, it also:

• Triggered a selloff in Chinese auto shares
• Squeezed margins for BYD and its competitors
• Increased pressure on dealerships already burdened by high stock levels

In June, the China Auto Dealers Chamber of Commerce called for manufacturers to:

• Set more realistic production targets
• Avoid oversupplying showrooms
• Provide cashback incentives within 30 days to ease dealer cash flow

Regulators Step In as Industry Struggles

Regulatory authorities have stepped up scrutiny of the auto sector amid mounting concerns that price wars are:

• Squeezing profit margins for automakers and suppliers
• Destabilising the industry as competition intensifies
• Worsening financial pressures on dealerships across the country

Looking Overseas for Growth

With domestic demand weakening, Chinese carmakers—including BYD—are increasingly eyeing overseas markets. In the first five months of 2025:

• BYD sold 1.76 million vehicles
• Around 20% of those were exports, as the company ramps up international expansion

Summary

• BYD cuts production and delays expansion amid excess inventory
• Sales growth slows despite heavy price discounts
• Dealer stockpiles and closures reflect growing strain in the market
• Regulators and trade groups urge more sustainable practices
• BYD and peers look to global markets to sustain growth

Sources: (Investing.com, Reuters.com)