The dynamics of competition in the Chinese electric vehicle market: Insights from BYD’s market evolution
研究了比亚迪在西安市场份额下降74.6个百分点的情况下，如何通过成本领先维持19-23%的稳定利润率，发现消费者偏好变化是份额下降的主因，补贴退出的影响较小。
We study how BYD sustained stable price-cost margins of 19–23% despite losing 74.6 percentage points of market share in Xi’an between 2014 and 2020—a pattern that diverges from standard IO theory predicting entry compresses both share and markups. Using transaction-level microdata, we estimate a structural model and develop a sequential counterfactual decomposition isolating seven drivers of market-share change. We find three core results. First, markup resilience stems from cost leadership: BYD’s vertically integrated battery production enabled aggressive price competition while maintaining profitability. Second, unobserved consumer preference shifts explain 47.9% of the decline, vastly exceeding subsidy phase-outs (6.5%). Third, the modest subsidy effect indicates successful infant-industry transition: by policy phase-out, BYD’s dependence had substantially waned. Our findings demonstrate that cost efficiency can decouple market share from profitability in technology-intensive industries.