The unravelling of profitability at China’s electric-vehicle champion BYD reached a critical juncture this week, as first-quarter net income slumped 55 per cent to a three-year low of 4.09 billion yuan ($590 million) and short-term borrowings surged 72 per cent in just three months, to 66.3 billion yuan. Revenue, too, contracted by nearly 12 per cent to 150.2 billion yuan—the weakest quarterly figure in three years—despite a steady rise in exports that provided only a partial cushion against the wreckage at home. The numbers confirm that even the world’s largest EV maker is now scrambling for liquidity, tapping credit markets and, by some accounts, leaning more heavily on a familiar tactic of delaying payments to suppliers. Viewed from Beijing, it is a sobering measure of a price war that regulators have repeatedly tried to tame, yet which continues to force manufacturers to sacrifice margins for market share.

From the factory floors of Shenzhen, where BYD is based, the picture is one of breakneck growth colliding with brutal economics. The company’s operating cash flow sank by more than half, drained by the same competitive frenzy that has pushed domestic EV prices down relentlessly. That pressure is now accelerating a geographic pivot: BYD’s overseas business has become its most dynamic engine, and rival Li Auto is openly targeting premium car buyers in the Middle East and Asia-Pacific with sport-utility vehicles designed to compete against BMW and Mercedes. For Chinese manufacturers, going abroad is fast shifting from opportunistic expansion to an existential necessity. Analysts in Shanghai note that the race to cut charging times to under 10 minutes, showcased at the recent Beijing Auto Show, further illustrates how technological one-upmanship is being weaponised in the fight for survival.

At the same time, the green energy supply chain that underpins the EV sector is telling a sharply different story. In Hong Kong, battery behemoth CATL just raised HK$39.2 billion ($5 billion) in a share placement—the city’s largest equity deal since May 2025—riding a wave of investor enthusiasm for clean energy stocks. The catalyst, viewed from Middle Eastern trading floors, is the oil price shock triggered by the Iran war, which is accelerating the global shift away from fossil fuels and driving record Chinese exports of solar products, batteries and electric vehicles. CATL, which supplies Tesla, BMW, Volkswagen and a host of Chinese startups, will channel the proceeds into overseas factories, extending China’s dominance of the global battery supply chain even as its carmakers bleed.

For seasoned observers in London, the duality is instructive. The ferocious price war is imposing a Darwinian consolidation on China’s crowded EV field, but the state’s strategic commitment to green technology ensures that systemic collapse is unlikely. Instead, a period of lean years for automakers is fuelling a simultaneous boom for upstream suppliers and a rapid push into international markets. The ultimate shape of the industry will be determined by which companies can survive the squeeze long enough to reap the rewards of a global transition that shows no sign of slowing. China’s EV makers are learning a harsh lesson in overcapacity, yet the country’s grip on the electrification of transport is, if anything, tightening.