Hua Er Jie Jian Wen·2025-08-31 06:23Core Viewpoint - BYD's revenue surpassed Tesla for the first time in the first half of the year, but its gross margin declined from 18.78% in the same period last year to 18.01%, with a significant drop in the second quarter gross margin to 16.3% [1][2] Financial Performance - BYD's net profit for the second quarter was 6.4 billion yuan, a decrease of 31% quarter-on-quarter and 30% year-on-year, significantly below Morgan Stanley's previous forecast of 10 billion yuan [2] - The gross margin of 16.3% in the second quarter is the lowest since the second quarter of 2022, while sales volume has increased significantly compared to that period [2] - The single-vehicle profit for BYD's automotive business dropped to 4,800 yuan in the second quarter from 8,800 yuan in the first quarter, marking the lowest point since the first quarter of 2022 [2] Factors Affecting Profitability - Three main factors are identified as contributing to the pressure on profit margins: 1. Dealer rebates provided to stimulate sales in the Chinese market, which directly eroded single-vehicle profits [2] 2. Rising costs associated with the advanced "Tianshen Eye" intelligent driving system, which increased manufacturing costs without sufficient sales volume to cover the additional expenses [2] 3. Ongoing price competition in the domestic market, with further price cuts since late April putting direct pressure on profit margins [2] Overseas Growth and Profit Discrepancy - Despite strong overseas sales growth, particularly in Europe where new car registrations tripled, this did not translate into higher average selling prices or improved profitability in the second quarter, creating a profit "mystery" [3] - Analysts speculate that there may be undisclosed one-time factors or that the company may be choosing to absorb negative costs in the second quarter in preparation for larger cost reductions in the third quarter [3] - Future catalysts that could reassure investors include seasonal sales rebounds, new model launches around the Chengdu Auto Show, and the potential for overseas business to achieve real profit recovery [3] Stock Performance - BYD's stock price has corrected 27% from its peak this year but is still up 29% year-to-date, indicating ongoing tension between short and long positions in the market [4]