Chinese automaker BYD is “addicted” to supply chain financing, masking a huge debt load, but it’s selling cars like mad.
$44 Billion in Debt
Bloomberg reports BYD’s Supply Chain Financing Masks Ballooning Debt
BYD Co.’s reliance on financing from working capital has masked surging debt levels at the Chinese electric vehicle giant, according to calculations from Hong Kong-based GMT Research.
While it’s common for fast-growing firms to use debt to fuel expansion, BYD appears “addicted” to supply chain financing, GMT, an accounting consultancy that previously raised the alarm about China Evergrande Group, said.
When adjusted to reflect receivables that have been removed from the balance sheet because they’ve been sold or borrowed against, and treating excess payables — any amount over 90 days — as a liability, BYD’s true net debt was more like 323 billion yuan ($44.1 billion) as of June 30, GMT said in a Jan. 10 research report. The company’s market value in Hong Kong is about $105 billion.
BYD itself put its net debt at 27.7 billion yuan as of mid-2024. Representatives for BYD declined to comment.
“However it’s structured, it’s clearly a form of financing, or hidden debt,” GMT analyst Nigel Stevenson said. “It’s using sleight of hand to present these liabilities as part of working capital.”
The hidden debt makes it harder for investors to get a handle on BYD’s actual financial situation as competition in China’s EV market intensifies. A bruising price war, spearheaded in part by the carmaker, has crushed weaker rivals and delivered a boom in business for the bigger players. It’s also left suppliers increasingly reliant on a smaller pool of manufacturers that have the power to command ever tougher terms.
For BYD, and other Chinese EV makers like Nio Inc. and Xpeng Inc., extended payment periods can stretch to hundreds of days. BYD took an average 275 days to pay suppliers in 2023, Bloomberg-compiled data show.
While long payment terms are becoming standard in China, they’re far more than the 45- to 60-day payment cycle for automakers in other parts of the world. Tesla Inc.’s Global Vice President Grace Tao has said the US EV maker typically pays suppliers within 90 days.
China’s BYD Overtakes Tesla Revenue
Please note China’s BYD Overtakes Tesla Revenue in the third quarter of 2024.
The Chinese electric vehicle giant BYD has seen its quarterly revenues soar, beating Tesla’s for the first time.
It posted more than 200bn yuan ($28.2bn, £21.8bn) in revenues between July and September. This is a 24% jump from the same period last year, and more than Elon Musk’s company whose quarterly revenue was $25.2bn.
However, Tesla still sold more electric vehicle (EVs) than BYD in the third quarter.
It comes as EV sales in China have been getting a boost from government subsidies to encourage consumers to trade their petrol-powered cars for EVs or hybrids.
BYD also notched a monthly sales record in the last month of the quarter, in a sign that momentum continues to build for China’s bestselling car maker.
But there is a growing backlash abroad against the Chinese government’s support for domestic car makers like BYD.
Earlier this week, European Union tariffs of up to 45.3% on imports of Chinese made EVs came into force across the bloc.
Chinese EV makers were already facing a 100% tax from the United States and Canada.
BYD vs Tesla
BYD sold 500,000 cars in the month of October.
BYD makes little profit so Tesla clobbers BYD on that score. But BYD believe profit will come later, a common model.
BYD Revenue
Up 400 percent since 2020. BYD is spent20.3 percent of revenue on capital expenditures, an enormous percentage. Tesla’s capex was 9.2 percent. Those were 2023 numbers.
BYD has the largest workforce of any auto manufacturer and is poaching talent globally, pouring resources into AI because it knows it lags badly in that area.
It’s an interesting video discussion.
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China is producing more cars than it can possibly sell externally. And China’s balance of trade surplus hit $1 trillion for the first time ever.
Both Trump and the EU will react.
A trade war with Canada does not help Trump if his primary concern is China. And Trump would be breaking his own “best in history” trade deal to do so, without having any legal grounds.
Well, who cares about laws or the constitution anymore? On February 1, we will see if he backs down from his USMCA threat.
We are on the verge of a huge global trade war, financed by debt, that no one will win.
OT. On the H1B topic, it looks like Biden changed some rules in order to favor H1B over citizens. Now there is huge backlash because of the methods that are being allowed. Much of this has already been escalated to Stephen Miller. I would be scared if I were a company employing H1B that I didn’t commit fraud during the Biden administration. It is obviously they are clearly doing everything they can do prevent citizens from even applying for these jobs.
https://substack.com/home/post/p-154290148
I highly recommend reading Amanda Louise’s twitter feed (@amandalouise416)for these issues. There is a growing number of people who aren’t with Trump where he currently stands on H1B. There is a fight now between the forces of big tech Trump has taken support from and Stephen Miller and Tom Holman.
@Mish I think you need a separate post on this after doing your own due diligence. This is going to come to a head soon.
This book is based on the lecture series on finance capitalism Michael Hudson presented for the Global University for Sustainability. The book explains why the U.S. and other Western economies have lost their former momentum: A narrow rentier class has gained control and become the new central planner, using its power to drain income from increasingly indebted and high-cost labor and industry. https://www.amazon.com/Destiny-Civilization-Capitalism-Industrial-Socialism/dp/3949546065
Since Aug 5 SPX is up 1,000 points. SPX is still foraging. It finished all the
raspberries and the blackberries in the forest. Blackberries and raspberries
inhibit Iron absorption. No Iron ==> no hemoglobin that carry oxygen to the
cells. If SPX tests July/Aug and popup a little eventually it might drop 2,000
points to the Anti: May 12/17 2022, hibernating.
We owned a Hybrid that gave up the Ghost with a failed drive battery. We traded it in for a 2025 Subaru Forester LTD Combustion Engine (A fine auto). The price was right. This Subaru will be my last vehicle in my life as I am old.
Subarus are excellent vehicles. They are safe and last a long time if you maintain them. Ours is almost 9 years old. We’ve had minimal repairs other than routine maintenance.
IT is inane, this Trump Trade War. He makes no distinctions between ENEMY FORCES (China) and Friendly allies (Canada and Mexico). Senseless posturing.
Trump is using the Machiavelli approach: is it better to use LOVE or FORCE. If one makes a Choice: FORCE (Fear) is what Machiavelli said.
Don’t give him so much credit the buffoon is only going after soft targets I haven’t heard him targeting North Korea.
Well, if we must steal resources from others, which path would you choose? Steal them from nuclear-armed Russia? Or from pathetic, wimpy vassal states like Canada and Denmark (the so-called owner of Greenland)?
Xi would agree
Machiavelli called the strategy, raiding the vassals.
I’ll take that internal combustion Toyota Corolla thank you.
Why nobody mention that. Tesla cars are ,made of Chinese made parts .
After the RE collapse BYD filled the vacuum, doing something big for China, conquering the world, BYD has 700,000 employees. They hired 200,0000 in 2024. GM has 160,000 employees. Ford: 175,000. VW: 700,000 and Toyota: 380,000. BYD is a bad bad payer. They torture suppliers. Invincible and arrogant. One day they will settle their debt.
I completely agree BYD filled the deflating RE bubble. Military build-up may be another bubble in China’s economy.
I was in South America and took Ubers in two Chinese cars, Chery and DFSK. I thought they were actually nicer than their non Chinese competitors.
Chery is exploding. This video claims Chery’s growth for 2024 was 38% year over year and Chery can produce cars at half the cost of its non Chinese competitors. https://www.youtube.com/watch?v=AyDkSdXhRYY
A BYD SUV going for $30,200 in Mexico is sold in China for $17,200. That Mexican price is not that great a deal. The reason given is import duties and market adjustments. The price is not even that much better in Chile. BYD markups are too high IMO.
Then you look at Chery cars in Chile. It is about 1,000 Chilean pesos per dollar so you just click on modelos and divide the amount by 1,000. https://chery.cl/
Look at what you get for $10,000. That is insane! The lowest priced new car in the USA is $20,000.
We have stubborn inflation and a national debt where interest payments are through the roof. For most people, a car is the second most expensive thing they buy. How much inflation do we have if car prices are cut in half and then how quickly can interest rates be lowered after that?
Yes, I think we should allow Chinese vehicles *if, and only if* they are high quality/built to last and hold up to the rough roads, weather, bad drivers here. But inflation is not “stubborn” as the govt and mainstream media propaganda likes to say. It’s doing exactly what it will do if you print money out of thin air. You can’t get something for nothing.
Lots of Chinese Vehicles in Australia where roads and conditions are probably worse than the U.S.
There are an army of Chinese engineers here checking out the wear and quality issues with their cars. Don’t worry, they’ll come up to scratch – remember when Japanese and South Korean cars originally came out on the market? – they were crap, look at them now.
The C.C.P. is behind the export of Chinese vehicles. They wont care about anti dumping regulations – if export market share declines watch the price come down.
Chery cars – take away the “R” in the name and substitute with a “V”. Then you’ll know where the I.P. was purloined from.
I have no skin in this game being a confirmed and happy ICE customer. I live in a country where BYD is doing very well indeed and where Chinese car makers are well and truly kicking Tesla’s butt, by being a half to a third of the cost, and having truly great looking cars like the Seal and the Atto. Tesla’s cars remind me of when the Prius came out and had those stupid looking rear tyres that were half covered ie they looked like garbage (and hardly anyone bought them). Anyway, where I like Tesla’s are as rare as hen’s teeth, and the whole car market belongs to Toyota and the Chinese.
Where do you live?
China, and it’s largest companies, tend to plan for the long term. That doesn’t guarantee they will be successful. But they have certainly achieved some success so far. I do not know if BYD will be successful in the long run, but they are having some success right now.
China is not blessed with much oil and gas, so they must import a lot of both (some from the US). They are the largest importer of oil in the world at over 11 mbpd.
They have a fair bit of coal, but not enough to meet their present needs, so they must import some coal as well.
They do not like to be dependent on others for their energy for strategic reasons. Which is why they are working so hard to build massive hydro projects, nuclear reactors, and renewable energy. Their long term goal is to electrify as much of their economy as possible, in order to reduce their dependence on foreign coal, oil and gas imports. The side benefit would be a reduction in air pollution, smog, and greenhouse gasses.
One example of China’s electric push, is 25,000 miles of high speed electric train tracks and trains that can travel at over 250 mph.
A second example is the fact that they are now selling more EV and PHEV vehicles domestically than ICE.
Yes, the majority of their electricity is still generated by coal (60%), but this has dropped from 77% in the last 2 decades and will continue to decline.
They are adding more solar and wind capacity each year than the rest of the world combined. They already produce three times the amount of electricity from wind and solar than the US does. They are currently building 29 nuclear reactors and have many more planned. We are trying to reopen a couple of old reactors, like three mile island, but we are not building or planning any new large nuclear reactors.
They are now dominating the renewable energy sector worldwide. We cannot compete with them in solar, wind, EVs, high speed electric trains, rare earth minerals, etc.
Their class 8 semi-trucks are moving away from diesel. In 2025 sales of diesel semi-trucks in China should be 45% diesel, 45% CNG, 9% EV, and 1% FCV.
This is all part of their long term plan. How it all ends up, I do not know. But it appears to me that they are skating toward where they “think” the puck will be. Only time will tell if they are correct.
I watch this all with great interest, as I look for investment opportunities.
Are they doing thorium reactors?
Yes. They are currently building one thorium reactor in the Gobi desert. It should be online by 2030. It’s an experimental unit to evaluate the effectiveness of their design. It will produce heat, electricity and hydrogen.
China has also been working on several different SMR designs for the last 5 years. None are operational yet.
They are also working on fusion reactors, just like everyone else has for decades.
These are all part of their long term plans. Though whether these designs will pan out is still unknown.
So in the meantime they are currently building 29 conventional nuclear reactors, which are at varying stages of completion. They already have 58 working reactors. They intend to complete around 10 per year and reach 150 reactors by 2035.
And China often reaches their goals ahead of their projected timelines. They had planned on achieving 1200 GW of solar and wind by 2030. They achieved that level in 2024.
Their manufacturers have the capability of producing 400 GW of solar panels per year, half of which are exported.
They dominate the world in all renewables, batteries, EVs etc. And it’s all part of their long term plan.
“China, and it’s largest companies, tend to plan for the long term.”
Explain all their environmental pollution then………..
Sure. There is a direct correlation between economic growth, living standard increases, and energy consumed. You can’t have growth without more energy. And China needed more and more energy every year to meet their growth goals. In the early days, they didn’t care where the energy came from.
In the last two decades, China has used whatever energy was available, which includes coal, oil, and natural gas, whether it is domestic or imported. Because they knew that they could not build enough hydro, nuclear, and renewables fast enough to satisfy their rapidly growing demand. Their per capita use of electricity has grown from 10000 kwh per person to 35000 kwh per person in that time frame.
The result has been a lot of air and water pollution, especially from coal. Which they accepted while they continued to build out more hydro, nuclear and renewable.
They have now reached the point where they are building enough hydro, nuclear, and renewable to finally reduce their use of fossil fuels. You can read my first post again with the numbers.
As result, their use of oil is declining, partly thanks to EVs. Their coal use is about to start declining, and coal is now generating 60% of their electricity, down from 77%. Only their use of natural gas is still increasing. Partly because they are replacing diesel with natural gas in their trucks.
Again, this is a long term plan that they are executing over a period of many decades. Their pollution problems are not eliminated yet, but they are moving in the right direction.
Elliot waves for BYD and TSLA indicate weak challenges to new highs over the next 12 months. There are 3 more smaller degree wave 5’s (up) to complete in TSLA, I believe BYD is in wave 4(down) of an ending diagonal (up). Investors are not bidding BYD’s price up even though sales are rising sharply, a divergence.
Did they sell 500k cars or did they manufacture 500k cars — and how many are counted as sold even though they are parked in giant parking lots somewhere in China?
And is all this debt actually being used to subsidize the sale price of the cars that they do sell?
Some years ago I held a big stake in a company that manufactured air purification machines in China. We sold to the China market but we also exported … we received a subsidy from the China government on every single unit we exported.
I suspect BYD is smoke and mirrors… if you subsidize the daylights out of a product… you obviously can dramatically increase your sales volumes…. but this is obviously not a long term viable business model….
The entire Chinese economy is fake… and a house of cards
“Ghost Cities”
China is predatory in every market they are in.
There comes a time when only considering cost becomes costly.
and a house of pollution
I lived in Hong Kong for nearly two decades… the serious waves of pollution would roll across the border every morning when the factories got underway… much of the time it was not possible to see across the harbour — a distance of maybe 1km…
It worsened over the years… and I was experiencing respiratory issues … so I moved to Bali …
I would make regular trips to Beijing and Shanghai when I lived in HK and it was far worse there… I recall the first time in Beijing … pulling into the city and thinking it was snowing … the street lights were hard to make out as if it was a snow storm… you literally could not see across the street due what turned out to be thick smog….
China is a disgusting hell hole…
But hey – this is a product of civilization and capitalism… we exported all of this pollution to China … and because China supplies ‘clean’ western countries with ‘stuff’… we are complicit in this ecological disaster
Recall how until recently we sent our plastic waste to China to be disposed of… that stopped – I will assume because the air pollution was completely out of control … not sure where that waste goes these days
Any dedicated electric car is going to fail long term.
Yup
Millions of golf carts beg to differ. For the right use cases, EVs have a big role.
Perhaps. But what is the market for golf carts and similar use cases? How many golf carts could they sell to recoup their initial investment and earn a profit?
BYD is not just dedicated electric. They have what is called PHEV technology which eliminates a lot of problems with EVs. What that means is you use both gasoline AND electricity to generate power. That allows you to use the less sophisticated electrical drive train but not have to wait hours to charge your car. You can just fill it up with gasoline. Here is a video of a guy going over 1,000 miles on a tank of gas and full charge. Car gets 53 MPG and can run as cheap as $14,000 in China. https://www.youtube.com/watch?v=PW6u-inDpas
Geo Metro’s got 53 mpg 43 years ago.
Most of BYD’s sales come from low-end cars that are either plug-in hybrids or BEVs. They do have upper scale brands that you can compare to Tesla’s but the bulk is low-margin cars which are good for sales figures but bad for profits but since they probably can roll over their debts to infinity profits do not matter. Their object is to obtain overwhelming market share. Unfortunately for them everyone is on to their game.
Yes. Everyone is on to their game. Whether it is EVs, solar panels, windmills, batteries, rare earths, nuclear reactors, etc. We are all on to their game. And we are all watching them win the game. And now in the US, since we can’t compete, we don’t even want to play the game anymore.
The game is only beginning.
An interesting point of view. The game may be beginning for the US. But China has been playing for a while now. For example, China is currently building 29 nuclear reactors. The US is currently building zero. How many do you think Trump is going to announce? When are we going to get into the game?
China is building more solar and wind generation per year, than the total capacity of US solar and wind so far. And Trump talks about stopping the buildout of renewables. He doesn’t even want to play the game.
China is selling more EV and PHEVs than ICE now. Trump doesn’t want EVs.
Let me know when we are going to start playing the game.
BYD debt might be higher than face value, but creative accounting is not confined to it.
In the meantime, the current leaders VW and Toyota both have debt of almost 200B US at face value, and they cannot compete with BYD in EVs.
Time to worry about those two.
Funny – the big boys are losing money hand over fist on EVs… and discontinuing many models…
Yet BYD continues to ‘prosper’… (on the back of a massive run up in debt).
Something is wrong with this picture…
What cannot continue. Will stop.
I understand that BYD’s electric cars are vastly superior to Tesla (which is the most accident-prone car on America’s roads). Thus, the only reason why Musk is worth $400 billion is that BYD faces trade insurmountable trade barriers. I guess that’s what our oligarch class likes to call competitive capitalism.
Did you even read the article? They basically lose money on every car bc of subsidies by China
Exactly.
Now if Toyota etc… could get their governments to loan them hundreds of billions of dollars… relentlessly… they could sell cheap EVs… and they too could prosper!!!!!
They need to adopt the BYD business model… it’s the way forward.
It is absolute genius
No worries, Midnight. They’re going to make it up on volume. 😉
You don’t get it. Tesla is as highly (if not higher) subsidized as BYD. The 100 percent Biden tariff rate on Chinese EVs is an equivalent subsidy to American producers of EVs. That’s why tariffs are not only a tax on consumers but also a screw up on the supply side. We now have to drive around in second-rate, overpriced EVs. But, on the bright side, Musk’s net worth is $350 billion.
All EVs are shit.
Coal powered vehicles are not green
correct!
And that’s what EVs are in China
China’s coal imports rose 14.4% in 2024 to a record high, official data showed on Monday, as lower international coal prices spurred buyers to substitute imports for domestic supply. https://www.reuters.com/business/energy/chinas-coal-imports-hit-record-high-2024-2025-01-13/
The more EVs on the road… the more coal you burn. Who would have thought!!!
Crazy… huh.
Yep. Crazy. Imagine importing more coal because you can buy it for less than your domestic companies can produce it. Crazy.
As I said above, the short term goal is to reduce smog in cities. EV’s do that.
The cost is more pollution from coal plants but that’s spread over a wider area so it’s an acceptable trade off.
The short term goal is to reduce smog in the big cities from cars. EV’s address that.
Of course that’s powered via coal plants but those aren’t located in the big cities.
With EV’s, China is following the old axiom of “The solution to pollution is dilution”.
It is also why they are replacing diesel trucks with CNG trucks, EV trucks and FCV trucks. Fewer emissions in cities.