Impact of the US-Israel War on China's Electric Vehicle Market

The ongoing US-Israel war on Iran has led to surging oil prices, which may accelerate the global adoption of electric vehicles (EVs). This shift is particularly significant for China, which has emerged as the world's largest seller of automobiles, surpassing Japan last year. However, the Chinese electric vehicle market is facing challenges, as evidenced by BYD's recent financial performance.

South China Morning PostThe Straits Times

BYD, China's leading electric vehicle manufacturer, reported a net profit of 32.6 billion yuan (approximately US$4.72 billion) for 2025, marking an 18.97% decline from the previous year. This downturn represents BYD's first annual profit drop in four years, attributed to intense competition within the domestic market. The company experienced a 38% decrease in fourth-quarter net income, falling short of analyst expectations. Despite these challenges, BYD has maintained its position as a global leader in EV sales, even outselling Tesla.

The Straits Times

BYD's chairman, Wang Chuanfu, noted that competition in the EV sector has reached a "fever pitch," indicating a brutal "knockout stage" among manufacturers. The company is now facing increased pressure from rivals, including Geely Automobile Holdings, which has recently overtaken BYD in domestic sales. As a result, BYD is shifting its focus towards international markets, aiming to sell 1.3 million cars outside China in 2026. However, analysts predict that rising inflation and supply chain costs may render domestic sales unprofitable in the near term.

The Straits Times

BYD's ambitious technology initiatives, such as the God’s Eye system designed for autonomous driving, have faced criticism from consumers. Issues with this system have highlighted the challenges of integrating advanced technology into vehicles before resolving potential flaws. In response, BYD is pivoting towards enhancing battery technology, unveiling new "blade batteries" capable of rapid charging. Despite these setbacks, BYD's stock has seen a resurgence, rising nearly 12% in March 2026, partly due to the favorable market conditions created by the Iran conflict.

The Straits Times

The war's impact on oil prices is expected to boost consumer interest in electric vehicles, particularly in China, where EVs and plug-in hybrids account for over half of all auto sales. Southeast Asian countries are also experiencing significant EV adoption rates, with levels around 40%, surpassing those in Britain and Europe. However, sustaining this momentum will require substantial investments in charging infrastructure to meet the growing demand.

The Straits TimesSouth China Morning Post

Analysts and industry experts have expressed concerns about the sustainability of BYD's recent stock performance and the overall health of the EV market. Joanna Chen, an analyst at Bloomberg Intelligence, emphasized the need for massive infrastructure investments to support the anticipated surge in EV sales.

The Straits Times

While BYD's international sales have shown resilience, domestic sales have slumped significantly. There is a discrepancy in forecasts regarding the profitability of BYD's car sales in China, with some sources suggesting that the company may rely entirely on exports to remain profitable.

The Straits Times

• “has reached a fever pitch and is undergoing a brutal ‘knockout stage’” — Wang Chuanfu, Chairman of BYD

The Straits Times

• “But sustaining this spike in consumer interest in EVs will require the industry to make massive infrastructure investments to bridge the current shortfall in charging stations, according to Bloomberg Intelligence analyst Joanna Chen.” — Joanna Chen, Analyst at Bloomberg Intelligence

The Straits Times