BYD: China’s EV industry is going through a turning point
1.
How do you measure whether a company is generating its revenue efficiently?
One metric stand out - Revenue per employee.
What is it?
To put it broadly, it is the total revenue of a company divided by how many employees it has.
For example, if company A has 100 employees and generated SG$10 million, then the revenue per employee is SG$100,000.
How is it useful?
It enables investors to determine whether a company is being productive and efficient at using its labour force to generate revenue.
A low revenue per employee shows that the company might be hiring too many.
A high revenue per employee shows that it is being efficient at doing so.
However, this is just one way of looking at this.
There are companies which have low revenue per employee but actually generate high profits. They could be food & beverage companies that prioritises the service to a customer.
There are also companies with high revenue per employee but with thin profit margins. Think of companies which doesn’t employ much employees but spend a big amount of money on their machineries and equipment.
2.
$BYD Co., Ltd.(BYDDY)$ is becoming something like a meme this month.
The Chinese EV player has seen its share price drop by 16.3% from its peak of HKD130.90 in May 2025.
China’s EV industry is going through a turning point.
Price wars are eroding profit margins of every EV player
It is a battle to the bottom
And BYD is not spared from this also.
Its September sales showed that not all is well with a 6.3% decline in sales - the first-every time it happened in 2025.
Its latest profit in 2Q 2025 also declined by 32%.
Profit margin which is already thin in the past couple of years, have declined even further to 3.1% in 2Q 2025.
Historically, in 2023 and 2024, BYD achieved about 5.0% margin.
It is unclear whether the current price war in the EV industry would calm down. The Chinese authorities have already sound the alarm bells warning Chinese companies to stop initiating price cuts and wars.
However, it does present an interesting opportunity.
BYD is currently trading at a price-to-earnings ratio of 24 times, lower than its historical average of 95 times.
Investors are probably circling around now to see how much further it would fall.
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