The investment case for BYD presents a study in contrasts. While its Hong Kong-listed shares have retreated significantly from their mid-2025 peak above HKD 158, currently trading in a HKD 97-100 range, the company is simultaneously executing critical strategic moves across trade policy, manufacturing, and its battery division.
Clarification on EU Tariffs Eases Hybrid Vehicle Concerns
A significant source of recent uncertainty has been alleviated by a definitive statement from the European Commission. Contrary to earlier media speculation, EU trade spokesperson Olof Gill confirmed that Brussels is not currently investigating potential tariffs on hybrid vehicle imports from China. This clarification is crucial for several reasons, underscored by recent trade data:
- Chinese hybrid vehicle exports to the EU surged by 155% in 2025.
- In contrast, exports of Battery Electric Vehicles (BEVs)—already subject to additional duties—grew by a more modest 12%.
- Hybrids now constitute one-third of all Chinese passenger car exports globally.
The existing EU tariffs on Chinese BEVs range from 7.8% to 35.3%, applied on top of the standard 10% import levy. A recent agreement between China and the EU has also established a pathway for automakers to avoid these additional duties by committing to minimum selling prices.
Accelerated Manufacturing Ramp-Up in Brazil
Beyond trade developments, BYD is rapidly advancing its production capabilities in Brazil. Its Camaçari facility in Bahia state is transitioning from a simple assembly operation to a full-scale manufacturing plant. Key production phases, including stamping, welding, and painting, are scheduled to commence between April and May 2026.
Key Metrics for Brazilian Expansion:
* Workforce: Planned increase from 2,000 to 5,000 employees by end-2026.
* Monthly Capacity: Expansion from 4,000 to 20,000 vehicles.
* Investment: BRL 3 billion of a pledged BRL 5.5 billion already deployed.
* 2025 Sales: 112,000 vehicles sold in Brazil, a 50% year-on-year increase.
According to BYD Vice President Alexandre Baldy, the local value-added content is projected to reach 50% by the second half of 2026. Furthermore, production of ethanol-compatible hybrid models, developed jointly by engineering teams in Brazil and China, is set to begin in May.
Analyst Spotlight on the Standalone Battery Business
Investment research firm Bernstein has reaffirmed its Outperform rating on BYD, placing particular emphasis on the valuation of its battery segment. Analysts note that BYD is the world’s second-largest producer by installed EV battery capacity, supplying approximately 70% more battery capacity than the third-ranked player.
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Bernstein’s analysis suggests the battery business alone could be worth around $110 billion. This valuation approaches the conglomerate’s current total market capitalization of approximately $115 billion. External battery customer sales already contributed over 10% of total revenue in 2025, with expectations for this figure to rise into the mid-teens percentage range this year.
Bernstein’s Forecast Summary:
* Domestic Vehicle Sales: +10% to 5.4 million units.
* Overseas Vehicle Sales: +4.4% to 1.5 million units.
* Total Battery Shipments: +35% in 2026.
Policy Volatility Identified as a Headwind
Speaking at the World Economic Forum in Davos, BYD Vice Chair Stella Li highlighted the persistent uncertainty surrounding EV subsidy and regulatory policies. She noted that disparate and frequently shifting rules across different markets complicate planning for manufacturers and slow the global adoption of electric mobility.
Michigan Governor Gretchen Whitmer, participating on the same panel, concurred, stating that “back-and-forth decisions at the national level” have made it difficult for the industry to commit fully and expand capacity at the pace achieved by some Chinese automakers.
Market Position and Valuation Outlook
Despite geopolitical trade tensions, BYD continues to solidify its position in key international markets. In Brazil, the company ranks seventh in the overall passenger car market and fourth by retail sales volume. Its medium-term ambition is to break into the top three by 2027 and achieve market leadership by 2028. Cumulative sales in Brazil have surpassed 200,000 vehicles since April 2022.
On the Hong Kong exchange, BYD shares have declined roughly 40% from their 52-week high of HKD 158.87. This correction reflects intense domestic competition in China’s EV sector and moderating growth in home market sales. Bernstein maintains a fair value estimate of HKD 130 per share—approximately 30% above the current trading level—attributing this upside potential to the company’s international strategy and the value of its battery division.
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