Amid BYD's sharp decline in performance, the capitalized amount of R&D investment suddenly surged by 465%

As the “annual report season” overlaps with the end of the “quarterly report period,” BYD’s bizarre financial data has come to light.

China Fund News reporters found that in the first quarter of 2026, BYD’s R&D expenses decreased by over 20% year-on-year, while other listed automakers mostly saw year-on-year increases in R&D expenses.

In recent years, BYD’s R&D investment has continued to grow and has consistently ranked first among A-share companies. BYD stated in its 2025 annual report: “We will continue to increase R&D investment in the future, promoting the company’s supply chain to sustain independent innovation and development.”

The question arising from this is: Did BYD’s R&D investment increase in the first quarter of 2026? If R&D investment increased, why did R&D expenses decrease year-on-year?

A company’s R&D investment is mainly handled through expense recognition and capitalization. In recent years, regulators have focused on whether listed companies’ R&D investments are aggressively capitalized or used to manipulate profits through capitalization.

Although BYD did not disclose the amount of R&D capitalization in its first quarter 2026 report, its total R&D capitalization for 2025 increased by 465.43% year-on-year, while net profit attributable to shareholders decreased by 18.97%.

The sharp decline in R&D expenses in the first quarter of 2026 remains a mystery

Is there a contradiction in information disclosure?

In the first quarter of 2026, leading listed automakers such as SAIC Motor, Geely Auto, Great Wall Motors, and Seres all saw different degrees of year-on-year growth in R&D expenses.

An industry analyst said that most automakers’ R&D expenses increased year-on-year, highlighting that the era of low-price competition in China’s new energy vehicle market is quietly ending, and industry competition is shifting to a contest of technological strength.

As the “sales champion” of new energy vehicles and the “R&D king” among A-share companies, BYD’s R&D expenses in the first quarter of 2026 fell by 20.24% to 11.34B yuan.

Unlike other automakers, BYD has always emphasized its R&D advantages. BYD Chairman Wang Chuanfu recently stated: “BYD has invested over 8B yuan in R&D over more than 20 years. It is through long-term persistence and innovation that we have achieved today.”

Over the past six years, BYD’s R&D expenses in the first quarter have all increased year-on-year, with the last decline occurring in 2020.

In the first quarter of 2020, BYD’s R&D expenses decreased by 41.51% to 757 million yuan, with net profit attributable to shareholders and net profit after non-recurring gains and losses falling by 84.98% and 214.50%, respectively, to 113 million yuan and -472 million yuan.

A similar situation has occurred again. In the first quarter of 2026, BYD’s R&D expenses fell by 20.24% to 11.34B yuan; net profit attributable to shareholders and net profit after non-recurring gains and losses declined by 55.38% and 49.24%, to 4.09B yuan and 4.15B yuan.

Summarizing the situation from 2020 to the first quarter of 2026, BYD’s R&D expenses show a positive correlation with net profit attributable to shareholders and net profit after non-recurring gains and losses.

From the first quarter of 2021 to 2025, BYD’s R&D expenses increased year-on-year each year, and during the same period, net profit attributable to shareholders and net profit after non-recurring gains and losses also increased year-on-year.

BYD stated in its 2025 annual report that it will continue to increase R&D investment in the future. If the decline in R&D expenses in the first quarter of 2026 was caused by a decrease in R&D investment, does this contradict its previous disclosures?

If BYD’s R&D investment in the first quarter of 2026 still maintained year-on-year growth but R&D expenses decreased, does this indicate an increase in the amount of R&D capitalization?

Data shows that in previous first quarter reports, BYD did not disclose the total R&D investment or the amount of R&D capitalization for the period.

Sudden surge in annual R&D capitalization amount

Is this a way to offset poor performance?

In 2025, BYD’s total R&D investment increased by 17.13% to 8B yuan, with R&D capitalization amount soaring by 465.43% to 63.44B yuan.

At the same time, the proportion of R&D capitalization to total R&D investment increased from 1.78% in 2024 to 8.61% in 2025, a year-on-year increase of 6.83 percentage points.

Wind data shows that in 2025, BYD ranked third among A-share companies in R&D capitalization amount, and its year-on-year growth rate was the highest among A-share automakers, far surpassing Seres, which ranked second in the same category.

Comparing the 2025 annual reports of the two automakers, BYD did not mention the reason; Seres noted that the increase in its R&D capitalization amount for the full year of 2025 was mainly due to an increase in the amount of R&D projects in the development stage.

The last significant increase in BYD’s R&D capitalization amount and its high year-on-year growth occurred in 2021. At that time, BYD’s R&D capitalization increased by 141.56% to 5.46B yuan.

Meanwhile, the proportion of R&D capitalization to total R&D investment rose from 12.75% in 2020 to 24.80% in 2021, an increase of 12.05 percentage points.

Coincidentally, both 2021 and 2025 saw poor performance for BYD, with net profit attributable to shareholders decreasing by 28.08% and 18.97%, and net profit after non-recurring gains and losses decreasing by 57.53% and 20.38%, respectively.

An industry finance professional said that adjusting the amount of R&D capitalization and expense recognition is a matter of accounting policy choice, but if these policies are abused, they could become tools for profit manipulation.

Specifically, increasing R&D capitalization during a certain period will record the development expenses or intangible assets on the current period’s balance sheet, which not only does not “erode” current profits but also eases pressure on current performance.

From 2017 to 2019, BYD’s R&D capitalization proportion of total R&D investment was 40.32%, 41.55%, and 33.15%, with net profit attributable to shareholders decreasing by 19.51%, 31.63%, and 41.93%, respectively.

If a company increases R&D expenses during a certain period, it will be recognized in current profits and losses, thus reducing profits. The same industry finance professional said that hiding profits in R&D expenses can also reduce taxes.

From 2022 to 2024, BYD’s R&D capitalization proportion was 7.76%, 0.86%, and 1.78%, with net profit attributable to shareholders increasing by 445.86%, 80.72%, and 34.00%, respectively.

Market doubts continue

Future pressure for R&D capitalization amortization will surge

BYD’s R&D capitalization amount suddenly jumped from 966 million yuan in 2024 to 8B yuan in 2025, diverging from its previous trend of R&D capitalization changes.

From 2018 to 2020, BYD’s R&D capitalization amounts were 8B yuan, 2.64B yuan, and 8B yuan, showing a continuous decline.

Comparing these two periods, both coincide with the release of major technological breakthroughs by BYD at corresponding times.

In March 2020, BYD announced its first-generation blade battery, and in March 2026, it announced the second-generation blade battery and fast-charging technology.

The issue is that before releasing the first-generation blade battery, the annual R&D capitalization amount showed a steady decline; before releasing the second-generation blade battery and fast-charging tech, the R&D capitalization amount exploded.

“This suggests possible management manipulation of financial statements,” said the industry finance professional. “Financial reports must maintain consistency with accounting standards.”

Meanwhile, the sudden increase in R&D capitalization could pose significant hidden risks for future operations.

It is known that intangible assets formed from R&D capitalization need to be amortized annually over the coming years, increasing future amortization pressures.

From 2022 to 2024, BYD’s R&D capitalization amounts were relatively low at 5.46B yuan, 343 million yuan, and 966 million yuan, but in 2025, it suddenly surged to 3.55B yuan, greatly increasing amortization pressure in subsequent years.

2026 is a turning point for BYD. Since the second half of 2025, BYD’s monthly vehicle sales have been sluggish, mainly due to a significant year-on-year decline in domestic auto sales.

For example, in the first four months of 2026, BYD’s domestic monthly vehicle sales were 109.6k, 89.6k, 180.1k, and 186k units, respectively, down 53.22%, 64.98%, 40.88%, and 38.20% year-on-year.

In December 2025, Wang Chuanfu publicly mentioned that the sluggish sales were due to BYD’s current technological lead being less than in previous years, the market impact of technological achievements had diminished, and industry homogenization was becoming more apparent.

This indicates that BYD urgently needs to enhance its vehicle attractiveness through new technologies. The problem is that even after releasing the second-generation blade battery and fast-charging technology, its monthly sales still declined year-on-year.

This means BYD will not only face amortization pressures from R&D capitalization but also risks of project failures in R&D capitalization projects.

An industry finance professional said that if R&D projects capitalized fail, the related R&D expenses will be recognized as a one-time loss, which could significantly impact multiple operational indicators in the short term.

Based on these issues, China Fund News sent an interview letter to BYD’s securities department but had not received a response as of press time.

(Article source: China Fund News)