China’s electric vehicle maker, BYD, has lowered its 2025 sales target to 4.6 million vehicles, down from 5.5 million. This revision was shared internally and with some suppliers last month. Even with this new target, it may still change based on market conditions. The reason for the reduction isn’t clear, but increased competition in the market is a likely factor. This lower sales target is seen as a negative sign, which could put pressure on BYD’s stock price. It might be wise to buy put options on BYD or consider bear call spreads to bet on a potential stock decline in the next month. This news is important since the electric vehicle (EV) sector already experienced slower growth in the first half of 2025. The mention of “tougher competition” highlights a trend we’ve been observing since the price wars in 2023 and 2024. Data from the China Passenger Car Association for July 2025 indicates that BYD’s domestic market share has dropped to 31.5%, down from over 34% last year. A pairs trade, such as buying calls on a competitor like Tesla while buying puts on BYD, could help manage this competitive situation. We should also think about the impact on the supply chain. Cutting nearly one million vehicles will directly affect orders for battery and raw material suppliers. Lithium carbonate prices have been stable around $14,500 per tonne for most of this year, and reduced demand from a major player like BYD won’t help. This announcement is likely to raise implied volatility in BYD options, as we’ve already seen it jump from 40% to nearly 50% in overnight trading. While this makes buying options pricier, it also gives an opportunity for those who expect the stock to remain stable after an initial drop. Selling options, using strategies like an iron condor, could be a smart move if the stock settles into a new, lower range. This action from BYD raises concerns about the overall health of the EV market. Global EV sales growth slowed to just 15% year-over-year in the second quarter of 2025, a significant drop from previous years. Traders might consider buying puts on broader EV-related ETFs to protect their portfolios against possible sector-wide setbacks.

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