Here's Exactly What Drove BYD's 30% Spike in Profits -- Is It Still a Smart Buy?

Investors following the global automotive industry know the name BYD (OTC: BYDDY) after its impressive surge over the past few years, even managing to top Tesla in global full electric-vehicle (EV) sales in 2025. In fact, BYD has grown its number of new energy vehicles (NEVs), which includes hybrids as well as EVs, from 1.86 million vehicles in 2022 to 4.6 million in 2025.

Despite its delivery growth and international expansion, the company has struggled with earnings because of an intense and lengthy price war in China's domestic auto market. The good news? BYD reversed its trend of losses and posted a 30% spike in profit during the second quarter. Here's how.

BYD is even venturing into Japan with its Rocco -- a market few foreign automakers attempt to enter. Image source: BYD Co.

Global stage

BYD's story has been complicated over the past year or two, mostly because of the intense competition in China that created a brutal price war that eroded margins and caused concern among even political leaders. China's domestic price war led BYD to post four consecutive quarters of net profit declines before that streak was finally snapped in the Chinese automaker's second quarter of 2026.

More specifically, BYD's second-quarter net profit jumped 30% over the prior year to $1.22 billion, or 8.2 billion yuan. It wasn't a reversal or softening in China's domestic market driving BYD's result. Rather, it was surging overseas exports that have suddenly become the company's primary engine for growth, not only in deliveries but also in profitability. Keep in mind that at least currently, BYD's international sales bring higher margins, and in Europe BYD can generate significantly more profit per car than it can domestically in China.

During the second quarter, BYD's overseas deliveries spiked 82% year over year to more than 471,000 vehicles. On the flip side, BYD's domestic sales dropped 28% to 637,000 during the second quarter. More broadly, BYD's export growth is still accelerating. While BYD battled sluggish domestic demand, rising costs for commodities, materials, and chips, the automaker's exports have increased by an impressive 68% to 792,000 vehicles during the first half of 2026, emphasizing that the second quarter was a big driving force in the first-half result.

With BYD being a two-sided story currently, as exports surge and domestic deliveries slide, is it still a smart buy?

Still a buy

Investors shouldn't get too caught up in the roller coaster of ups and downs between its domestic market and international growth. Long-term, BYD has incredible competitive advantages that will enable it to thrive, and eventually the price war in China will ease, leaving the company in an even more competitive position among its peers.

One such competitive advantage is BYD's lauded vertical integration. BYD builds almost 75% of its vehicle components in-house, including critical components such as semiconductors, electric motors, and batteries. Furthermore, many investors overlook that the company's vertical integration even includes owning the supply chain back to raw lithium mining rights in Brazil and its own cargo ships, including the world's largest vehicle-carrying ship.

Not only does this setup protect BYD from external supply chain disruptions, which we've seen plenty of in recent years, but it also enables the company to undercut competitors on price at a global scale. In an industry known for razor-thin margins, BYD's vertical integration can be a game-changer.

Another couple of advantages come with BYD's technology and scale. BYD developed its well-known Blade Battery technology, which has set industry benchmarks and is even sold to other automakers. BYD also dominates in both full-electric vehicles and hybrids, giving it flexibility to launch the right product mix for different global markets. BYD has scaled impressively and in April became the first automaker to produce and deliver 16 million NEVs. Only 82 days later, BYD rolled out its 17 millionth NEV, and it has its target set on becoming the world's No. 1 automaker by volume.

BYD is still a buy thanks to a languishing stock price driven by domestic market struggles. Investors have an intriguing opportunity to scoop up shares of a global, highly integrated, rapidly expanding, and technologically advanced automaker that has durable competitive advantages. Savvy investors would be wise to research further into BYD.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.