Shareholders lost value after BYD reported a first-half profit drop that knocked its Hong Kong stock nearly 5% lower on Monday. The interim numbers showed a mixed quarter, with second-quarter net profit rising while full-period results reflected weakening domestic momentum and margin pressure.

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BYD logged second-quarter net profit of 8.2 billion yuan ($1.2 billion), up 30% from a year earlier, while second-quarter revenue fell 3% year on year to 194.6 billion yuan, Citi said after the company released results. For the first half the company reported revenue of 344.8 billion yuan, down 7.1% from a year earlier, and net profit attributable to shareholders fell 20.5% to 12.3 billion yuan, the company said.

The automaker pointed to a polarised market, saying China’s auto industry faced "sluggish domestic demand and robust export growth" in the first half. BYD added that fierce competition and rising costs for commodities, raw materials and chips squeezed automakers’ profit margins, a dynamic that shows up in the contrast between stronger quarterly profit and weaker cumulative results.

Exports provided the clearest offset to domestic weakness, rising 67.8% year on year to 792,000 vehicles in the first half. At home, combined sales of newer lines such as FANGCHENGBAO, Denza and Yangwang expanded 61% year on year and accounted for 12.8% of the group’s passenger vehicle sales, evidence the company is shifting its mix even as overall demand softens.

Analysts are parsing whether the export momentum and brand diversification will be enough to restore margin tailwinds. Citi expects BYD’s third-quarter core earnings to reach 13.5 billion yuan and projects full-year net profit of 41.2 billion yuan, a figure Citi says could come in 8% above consensus.

The near-term picture is clear, earnings remain under two-way pressure as export growth competes with cooling domestic sales and higher input costs. Market attention will focus on whether BYD can sustain export gains and translate them into margin recovery through the rest of the year.