BYD: Can It Schlep Through the Storm?

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Alright, settle in, folks. Let’s talk cars. Specifically, the Chinese car market. It’s so big, it makes our American obsession with pickup trucks look like a toddler’s toy collection. Thirty percent of all new vehicle sales in 2025? That’s not a market; that’s a continent on wheels! The US, bless our hearts, trails behind at 18.4%. Japan and India are tied, which is polite, I suppose. It’s like a polite automotive standoff.

For years, the Chinese market was a Volkswagen, Toyota, and General Motors free-for-all. But then, these plucky Chinese manufacturers started popping up like… well, like electric scooters in a crowded city. And now, they’re calling the shots. It’s a bit like a tiny David taking on a bunch of automotive Goliaths, except David has a really big factory and a government backing him.

And the early leader? BYD. (BYDDY +4.26%). A name that sounds like a sneeze, but don’t let that fool you. They’re making cars, and lots of them. But here’s the question, the one that keeps me up at night, staring at spreadsheets and muttering about margins: Can BYD prove it’s a real contender, or is it just another flash in the pan? Because let me tell you, I’ve seen enough “revolutionary” stocks to fill a junkyard.

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Weathering the Storm (Or, The Subsidies Run Dry)

The problem, my friends, isn’t necessarily the cars themselves. It’s the market. China has been the electric vehicle (EV) and hybrid king for a while now. The International Energy Association (IEA) thinks EVs will make up 60% of Chinese sales in 2025, heading toward 80% by the end of the decade. That’s…ambitious. It’s like saying you’re going to build a rocket to Mars using only duct tape and good intentions.

For years, the Chinese government was practically giving people EVs. Tax breaks, subsidies…you name it. It was a lovely arrangement, if you were a car buyer. But now? The party’s over. The government is pulling the plug on those subsidies. It’s like taking the training wheels off a unicycle.

Fitch thinks this will cause a decline in Chinese passenger vehicle sales in 2026. A decline! Can you imagine? It’s a catastrophe! Or, you know, a normal market correction. Depends on your perspective.

And then there’s the lithium situation. Lithium, the stuff that makes those batteries tick. The price has doubled in a year! Doubled! It’s like discovering gold in your garage, except you need it to power your car. It’s bad news for everyone, but especially for companies like BYD that rely on the stuff. Their last quarter saw a 3.05% drop in revenue and a 36% drop in earnings per share. Ouch.

Now, it wasn’t all doom and gloom. Revenue was still up 12.75% overall, and they’re still profitable, with decent margins. But let’s be honest, a drop in earnings is never a good look. It’s like showing up to a costume party in your pajamas.

So, what does BYD need to prove in 2026? Simple. It needs to show it can thrive in a tough market, without relying on government handouts. Since 2014, EV and hybrid sales in China have gone up every year. But 2026 is shaping up to be the first year that trend might break. And BYD needs to prove it can weather that storm and stay on top.

If they can do that, if they can hold their own or even grow in a difficult market, then, then I’ll be a lot more confident in them as an investment. Because let’s face it, in this business, you need a company that can not only build a good car but also navigate a minefield of economic challenges. And a sense of humor helps too.

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2026-02-06 20:14