BYD reported its earnings results for the final quarter of 2025 last Friday, disclosing its first annual profit decline since 2021.
In the annual report that followed the results, the world’s largest electric vehicle maker said that it received 12.47 billion yuan ($1.8 billion) in government subsidies related to its daily operations in 2025.
Government subsidies for Chinese automakers have become a flashpoint in the industry for years.
In October 2024, the European Union imposed provisional tariffs on Chinese-made EVs in 2024, citing what it described as unfair state subsidies.
The United States maintains a 100% tariff on Chinese EVs and a ban on Chinese software over connected vehicles and data concerns.
Canada levied a 100% tariff on Chinese EV imports before reducing it to 6.1% last January under a quota system that allows up to 49,000 imported vehicles to benefit from the much lower duty.
According to the company’s annual report filed with the Hong Kong and Shenzhen stock exchanges on Friday, the subsidies represent 31.4% of BYD‘s total pretax profit of 39.73 billion yuan, and 38.2% of net profit attributable to shareholders of 32.6 billion yuan ($4.71 billion).
‘Daily Activities’
The subsidy figure was first highlighted by investment researcher AJ Investment Research (@alojoh) on X, and the payments were attributed to “Government subsidy related to daily activities.”
The 12.47 billion yuan figure marks a 19.8% increase from the 10.41 billion yuan ($1.5 billion) BYD received in 2024.
The direct subsidy excludes emissions-related credits.
Stripping out the subsidies entirely, BYD‘s adjusted net profit would be approximately 20.1 billion yuan, implying a roughly 50% decline from the 2024 figure of 40.25 billion yuan (which itself included 10.41 billion yuan in subsidies).
Scale of State Support
The subsidies are classified in the annual report as “government subsidy related to daily activities” under other income.
They exclude asset-related government grants, which are recorded separately as deferred income and amortised over the useful life of the assets they fund.
The 12.47 billion yuan figure covers operational subsidies — typically tied to EV production incentives, technology development grants, and local government support for manufacturing activity.
BYD does not provide a detailed breakdown of the subsidy sources in its annual report.
For context, BYD‘s government subsidies in 2025 exceeded its total investment income of 2.86 billion yuan by more than four times. They also exceeded the combined annual sales of Yangwang, Denza, and Fangchengbao — BYD‘s three premium brands.
Last year, sales of the three sub-brands “approached 400,000 units” but whose profit contribution was not disclosed separately.
Subsidies Versus Tax
Chairman Wang Chuanfu disclosed in his annual letter to shareholders that BYD paid 53.3 billion yuan in domestic taxes in 2025 — more than 10 billion yuan above the company’s net profit.
On a net basis, BYD paid roughly 40.8 billion yuan more in taxes than it received in subsidies.
Growing Subsidy Dependence
The subsidy-to-profit ratio has increased as BYD‘s profitability has come under pressure from the domestic price war.
In 2024, government subsidies of 10.41 billion yuan represented approximately 25.9% of net profit of 40.25 billion yuan.
In 2025, that ratio jumped to 38.2% as profits fell while subsidies grew.
The trend raises questions about the sustainability of BYD‘s earnings in a scenario where government support is reduced.
China phased out its national EV purchase subsidies at the end of 2022, but production-side incentives, R&D grants, and local government support have continued to flow to major manufacturers.
BYD spent 63.4 billion yuan on research and development in 2025 — a 17% increase year-on-year — bringing cumulative R&D investment above 240 billion yuan.
The automaker’s overseas revenue surged 40% to 310.74 billion yuan in 2025, now representing 38.7% of total revenue — up from 28.6% in 2024.
As international scrutiny of Chinese state support intensifies, the subsidy figures disclosed in BYD’s annual report will likely draw attention from trade regulators in Europe, North America, and other markets where BYD is expanding.
The company exported more than one million vehicles for the first time in 2025 and has set a target of 1.5 million overseas sales in 2026 — a number raised from 1.3 million units earlier this Monday.
It is building or operating factories in Brazil, Hungary, Indonesia, Thailand, Turkey, and Uzbekistan — a strategy designed in part to localise production and reduce exposure to import tariffs linked to Chinese state support.
Gross Margin Compression
The subsidy growth came against a backdrop of deteriorating margins.
BYD’s gross profit fell 5.6% to 142.66 billion yuan, with the gross margin declining from 19.4% to 17.7%.
The company attributed the compression to “change of product structure” — a reference to the growing share of lower-margin vehicles in its sales mix as the price war forces BYD to compete more aggressively at lower price points.
Net profit margin fell from 5.2% to 4.1%.
BYD’s gearing ratio swung from -36% in 2024 (indicating a net cash position) to 25% in 2025, reflecting the capital demands of its global expansion and the $5.6 billion share placement completed in March 2025.
The company employed 869,600 people at year-end, with staff costs accounting for 15.9% of revenue.
