BYD is battling to remain dominant in its home market of China amid a prolonged price war and government concerns that cut-throat competition could damage product quality.

The Shenzhen-based company spent the last five years racing ahead.

In 2024, with the help of government support, aggressive pricing and overseas expansion, the Chinese carmaker surpassed Tesla to become the world’s top seller of electric vehicles.

Now, BYD faces a reality check.

Its challenges initially came to light when it reported a shock 30% plunge in second-quarter profit, and the EV maker has continued to struggle with stalling sales that even saw it lose its title as China’s best-selling automaker to state-owned SAIC Motor Corp in September.

Total revenue in the three months ended September 30 dropped about 3% to 194.98bn yuan, missing analyst estimates for 216bn yuan.

Since authorities earlier this year stepped up scrutiny of the bruising price war in China that helped fuel BYD’s rise, the automaker’s sales momentum has stalled.

What was expected to be another blockbuster year has instead become the company’s toughest stretch since 2020.

Outside of China, BYD is faring well.

An aggressive and expensive global push has helped the automaker win fresh customers with its affordable, high-performing EVs.

In the UK, for example, sales in September surged by 880% year-on-year, making the country BYD’s largest international market for the first time.

However, in China — its biggest market by far — BYD has struggled to attract new buyers. In the three months to the end of September, the company experienced its first year-on-year fall in total sales since 2020.

Seasonal weakness played a role, but competitors such as Geely Automobile Holdings, Zhejiang Leapmotor Technology and Xiaomi Corp have also been gaining market share.

The slowdown in deliveries has forced BYD to scale back its ambitious targets. Instead of an original goal of 5.5mn cars for 2025, it now expects to sell 4.6mn vehicles, according to Li Yunfei, a senior company executive.

The higher prices that BYD can charge abroad is helping to absorb some, but not all, of the pressures to the business.

In August, BYD — an acronym for Build Your Dreams — reported its first quarterly decline in profit in more than three years with a 30% slump in net income. In October, the company posted its second consecutive quarterly decline, with net income falling 33% in the three months to the end of September.

Since May, BYD has been facing the full force of regulatory intervention in its home market. Chinese officials have cracked down on the domestic price war driven by excessive competition that kicked off in early 2023.

One of BYD’s main problems is that a major overhaul of its lineup — featuring models with new technologies and capabilities — won’t hit the market until 2026, putting it at a disadvantage to rivals currently rolling out more appealing vehicles.

China now has tens of millions of electric cars on its roads, and sales are rising at a rapid clip.

BYD shares neared the lowest in almost nine months on Monday after the automaker posted its second consecutive drop in sales, again falling to No 2 in the Chinese market.

October sales fell 12% from a year earlier to 441,706 vehicles, the Shenzhen-based manufacturer said Sunday.

Since BYD’s market capitalisation peaked at $175bn in late May, its shares have tumbled on the back of regulatory curbs and the summer sales slowdown.

There are other challenges that lie ahead.

A number of overseas markets, such as Europe and Mexico, are now seeking to limit the rapid expansion of cheaper Chinese EV imports. That’s already on top of Chinese carmakers being effectively shut out of the US market by high tariffs, as well as restrictions on Chinese-made technology in cars that are due to come into effect in 2027.