BYD: Still the king of cars! But can it keep sprinting?

$BYD COMPANY(01211.HK) released its Q1 2025 earnings after the Hong Kong market closed on April 25th Beijing time. Key highlights:

1. Another impressive auto gross margin report, BYD's cost-cutting prowess undeniable: Despite being at the cyclical bottom for car sales in Q1, BYD still achieved strong auto gross margins (24% vs market expectation of 22.3%).

From a comparable gross-to-sales spread perspective (accounting adjustments moved warranty provisions from SG&A to COGS, naturally depressing gross margins), the Q1 gross-to-sales spread reached 16.4%, matching last year's Q1 level that significantly exceeded market expectations. This continues to reflect the triple advantages of strong supply chain pricing power + high vertical integration + overseas high-margin expansion.

2. Auto revenue slightly missed expectations, but Dolphin Research sees limited concerns during inventory clearance: While Q1 auto revenue appeared below expectations, Dolphin Research believes market expectations for BYD's ASP were too high. Although overseas sales hit record highs (20.9% of mix, nearly doubling QoQ) providing positive ASP lift, Dolphin understands BYD was primarily clearing older inventory with steep discounts while new autonomous driving models launched later in the quarter.

3. Strong net profit per vehicle slightly above expectation midpoint: For the closely watched net profit per vehicle metric, BYD's preliminary earnings alert had already set market expectations. The actual Q1 figure reached ¥8,700 (above the ¥8,000-8,500 consensus range and significantly higher than ¥6,700 in Q1 2024), demonstrating rare bottom-cycle resilience driven by high auto margins and strict cost controls.

4. Lingering risks prevent full pricing of BYD's 5.5M unit 2025 sales guidance: Inventory levels suggest clearance continues into Q2, as BYD overstocked DMI 5.0 models last Q4 amid competitive pressure from rivals like Geely's Thunder hybrid technology.

Dolphin Research View:

Overall, BYD delivered solid Q1 results with auto margins and net profit per vehicle exceeding expectations during cyclical lows, reaffirming its cost leadership. However, the market isn't fully pricing in the 5.5M unit sales target due to March market share declines, high inventory risks, and uncertainty around "autonomous driving democratization" supporting aggressive targets.

Dolphin expects sequential improvement in Q2 as autonomous models (launched March/April) ramp up. These models maintain strong margins (hardware costs ¥6,000-7,000 vs ¥10,000-20,000 price premiums over discounted legacy models) and could offset continued legacy inventory discounts. Weekly orders stabilizing at ~80,000 units with increasing autonomous mix supports this thesis.

Strategically, BYD appears focused on: ① Accelerating urban NOA R&D for ¥100k segment amid competition from XPeng/Leapmotor; ② Expanding overseas (particularly Europe if tariff negotiations succeed) to provide margin buffer for potential domestic autonomous model price cuts.

European strategy adjustments could serve as positive catalyst, with potential 10%+ upside if 5.5M units/¥10k net profit guidance is fully priced.

Dolphin recommends accumulating BYD on pullbacks given improving fundamentals, but cautions against chasing rallies without clear autonomous order momentum.

PS: For BYD's complex business structure analysis, see Dolphin's prior deep dives: BYD: The Battery Maker Who Masters Car Manufacturing, BYD: Seeking Fortune Through Stability.

For autonomous driving democratization impact, see February reports: Can "Autonomous Driving Democratization" Rebuild BYD?, BYD's 30% Surge: What's Behind "Autonomous Driving Democratization"?