BYD Stock Downgraded Amid European Price Erosion Concerns

BYD's stock (OTC: BYDDF, SHE: 002594) is facing increased scrutiny today, following a downgrade by Erste Group, reflecting concerns about declining average selling prices (ASPs) in the crucial European market.

The downgrade to “Hold” signals a shift in sentiment as markets weigh the company’s growth ambitions against profitability pressures.

Year-to-date, BYDDF has gained over 20%, but the recent analyst action introduces a note of caution. The core issue highlighted by Erste Group is the consistent quarterly decline in the average price of BYD cars sold in Europe over the past two years. This trend is directly impacting the company's bottom line, raising questions about the sustainability of its European expansion strategy.

BYD's strategy of aggressive pricing, exemplified by the introduction of the Dolphin Surf model at €19,990, has undoubtedly driven market share gains. The company even surpassed Tesla in European EV sales in April 2025, demonstrating the effectiveness of its competitive pricing. However, this success has come at a cost, contributing significantly to the downward pressure on ASPs. While increased volume is generally positive, the erosion of per-unit profitability introduces a complex dynamic that markets are now reassessing.

Adding to the challenges, BYD has experienced recent production setbacks. A 0.9% year-over-year decline in vehicle production in July 2025 ended a 16-month growth streak, potentially signaling emerging operational constraints. Furthermore, the commencement of mass production at a new factory in Hungary has been delayed until 2026, with initial operations expected to run below full capacity. These delays introduce uncertainty regarding BYD's ability to meet growing demand efficiently and capitalize on its European market opportunities.

The combination of declining ASPs and production challenges has prompted analysts to adopt a more guarded outlook. While BYD's strategic initiatives have undeniably bolstered its market position, the financial implications associated with these strategies necessitate careful monitoring. The downgrade to “Hold” emphasizes the importance of balancing growth prospects with the challenges of maintaining profitability in an increasingly competitive global EV market.