Chinese electric vehicle giant BYD (SZ:002594) is cutting production and delaying expansion plans as rising inventory and sluggish sales pressure operations. According to sources familiar with the matter, BYD has reduced shifts and cut output by at least one-third at several factories in China. The company has also suspended plans to add new production lines.
These actions suggest a cooling of BYD’s rapid growth, which had helped it surpass Tesla (NASDAQ:TSLA) as the world’s top EV maker. Despite offering aggressive price cuts—bringing its cheapest model down to 55,800 yuan ($7,800)—BYD is facing softening demand in China’s fiercely competitive auto market.
In April and May, BYD’s year-on-year output growth slowed sharply to 13% and 0.2% respectively, the weakest performance since early 2024, according to the China Association of Automobile Manufacturers. Average output during those two months was 29% lower than in Q4 2024.
BYD, which sold 4.27 million vehicles in 2024, aims to boost sales to 5.5 million this year. However, growing inventory is a concern. A May survey by the China Automotive Dealer Association reported BYD’s dealer inventory averaging 3.21 months—more than double the industry average. One major BYD dealer in Shandong province recently shut down, leaving over 20 locations deserted.
Industry groups are urging automakers to align production with actual sales and provide faster cashback incentives to relieve dealership financial strain. Chinese regulators have also stepped up scrutiny of pricing strategies, citing mounting pressure on profitability across the supply chain.
In response to slowing domestic demand, BYD is accelerating its global push. Of the 1.76 million vehicles sold in the first five months of 2025, about 20% were exported, highlighting its shift toward overseas markets to sustain momentum.
