The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Katrina Hamlin

HONG KONG, April 29 (Reuters Breakingviews) - BYD's 002594.SZ new strategy to revive growth will be a gear change. China's $130 billion electric-vehicle maker saw its earnings more than halve in the recent quarter. CEO Wang Chuanfu wants to focus on luxury cars, but the tools he used to engineer a lead in the mass market may not serve him so well this time.

The company on Tuesday reported earnings in the three months to March plunged 55% from a year ago to 4.1 billion yuan ($600 million). That's largely driven by a 12% fall in sales, reflecting feeble demand and relentless price wars at home.

Against this backdrop, BYD is betting on higher-margin premium models. Its sporty Denza Z9 GT, for example, costs around 300,000 yuan in China, more than four times its popular budget models like the Seagull. At the Beijing auto show this week, the company also showed off a new supercar, which launches in Europe later this year, that aims to take on established marques Porsche and Maserati.

It's a sensible pivot that rivals like Geely Auto's 0175.HK Zeekr and Nio 9866.HK are also pursuing. Sales of BYD's higher-end models made up about 12% of its total vehicle sales in January to March, twice their contribution last year, per Sunwah Kingsway analysts. Meanwhile, the gross profit per car rose 18% from a year earlier, Citi calculated. That might explain why, despite the overall slump in profitability, BYD’s Hong Kong and Shenzhen-listed shares both rose around 3% in morning trade on Wednesday.

But Wang won't be able to deploy the same cost controls as effectively upmarket. Lower volumes mean lesser economies of scale. Moreover, building a luxury brand will require ingenious marketing and investment, particularly for a company best known to consumers for its value-for-money products. BYD confirmed earlier this week that it is in discussions to participate in Formula One racing, a move that might see the world's largest EV maker be an F1 team owner, power unit supplier or sponsor. That would help elevate BYD's brand visibility globally – and shows Wang is ready to get creative.

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CONTEXT NEWS

Chinese car and battery maker BYD reported net profit fell 55% year-on-year to 4.1 billion yuan ($600 million) in the first three months of 2026, the company said on April 28. Revenue fell 11.8% to 150 billion yuan over the same period.

BYD displayed multiple new and updated models at Auto China in Beijing, which opened to the public on April 28, including the Yangwang U9 Xtreme, the Denza Z, the Formula S and Formula SL sedan series from the Fangchengbao brand, and a concept sports car.