BYD Profit Plummets 55% as EU Labor Abuse Claims Mount

Chinese electric vehicle giant BYD is confronting a deepening crisis as its first-quarter net profit plunged 55.4% to 4.1 billion yuan ($600 million), while the European Parliament began scrutinizing allegations of forced labor at its flagship factory in Hungary.

"Managers 'wanted to begin production of cars in January [2026], so they were rushing the project's timeline — they weren't letting workers leave,'" Li Qiang, founder of the New York-based watchdog China Labor Watch, said in translated remarks to CNBC.

The profit collapse follows a sharp 11.8% year-over-year revenue decline to 150.2 billion yuan and a 26% drop in cumulative vehicle sales in the first four months of 2026. The grim financials are compounded by a China Labor Watch report alleging contractors at BYD's Szeged, Hungary site forced thousands to work over 12 hours a day, seven days a week.

The twin crises of a domestic sales slump and serious overseas labor allegations threaten BYD's target of selling 1.5 million cars abroad in 2026. With EU tariffs already in place since 2024, the forced labor claims provide a powerful new weapon for European regulators and rival automakers, potentially derailing BYD's most critical growth strategy.

The automaker, which surpassed Tesla as the world's largest EV manufacturer in 2025, is grappling with fierce domestic price competition from rivals like Geely and Leapmotor and the scaling back of government subsidies. Its overall sales have declined for seven straight months through March, with April's sales of 321,123 units marking a 15.5% drop from the prior year, according to a company filing.

Hungary Factory Under Scrutiny

As its domestic market falters, BYD's pivot to international markets is hitting a significant political roadblock. A report published April 14 by China Labor Watch (CLW) detailed systemic labor abuses at the Szeged, Hungary factory, a cornerstone of BYD's European strategy. The report, based on interviews with 50 workers, alleges that contractors kept employees working 12+ hour shifts, seven days a week, in violation of Hungary's labor code.

The allegations have been formally raised by three members of the European Parliament to the European Commission, marking the first time a Chinese-owned auto business in the EU has faced such scrutiny. The situation is exacerbated by reports of worker deaths on site, with Hungary's National Ambulance Service confirming it was called to the factory 12 times since February 1, with one resulting in a death.

The controversy is amplified by the involvement of contractor AIM Construction Hungary, a subsidiary of Jinjiang Construction Group. The same parent company was linked by Brazilian labor authorities to conditions "analogous to slavery" at a BYD factory site in Brazil in 2024, a scandal that led to BYD being briefly added to a government blacklist.

Exports vs. Risks

Despite the headwinds, BYD is aggressively pushing overseas, with exports of 135,098 vehicles in April rising 12.5% from the previous month. Vincent Sun, an analyst at Morningstar, projected BYD’s exports would rise 25% to 30% this year. However, the political and reputational fallout from the labor allegations could jeopardize this growth, particularly in the brand-conscious European market where BYD's registrations had more than doubled in the first two months of the year.

This article is for informational purposes only and does not constitute investment advice.