China’s biggest electric vehicle maker, BYD, has reported its steepest earnings decline in four years as it struggles with a mix of slowing demand, fierce price competition, and tighter regulations. The company’s second-quarter profit fell nearly 30% compared to last year, dropping to about USD 876 million (¥6.4 billion).

For much of the past year, EV makers in China have been slashing prices to hold on to market share in what has become the most competitive auto market in the world. While these discounts helped boost sales volumes, they also ate into profits. Regulators have recently stepped in to cool down the “price war,” warning carmakers to avoid extreme cuts that could destabilize the industry. But even with this intervention, BYD’s production has been slipping. In August, global output was down 3.8% compared to the year before, following a 0.9% drop in July. This marks the company’s first two-month production slowdown since 2020, raising concerns that this is not just a short-term dip.

BYD’s main challenge is balancing its aggressive push to expand with the need to keep profits healthy. The company has been adding new EV and hybrid models at a rapid pace, but heavy discounts have squeezed its margins. At the same time, BYD is facing more competition at home from both local startups and foreign players.

To offset the pressure in China, BYD is expected to shift its focus toward higher-value vehicles and speed up its international expansion. The company has already made progress in markets such as Europe and Southeast Asia, but it may need to lean more heavily on these regions if domestic profitability remains under strain.