Can BYD Survive An EV Downturn With Its Risky Debt Strategy?

BYD, the world’s second-largest electric vehicle (EV) manufacturer, recently reported a record-breaking performance for 2024. The company posted revenue of $108.1 billion and net profit of $5.6 billion, growing 29 per cent and 34 per cent year-on-year respectively. However, behind the impressive numbers lies a growing concern about how BYD is managing its finances, particularly its rising accounts payables and the increasing use of supply chain financing.

According to Murthy Grandhi, a company profiles analyst at GlobalData, the core issue lies in BYD’s financing model, which allows it to delay payments to suppliers by issuing commercial paper. These papers are then sold to banks by suppliers, which provides quick cash to suppliers but keeps debt off BYD’s balance sheet. While this is technically not corporate debt, the model is fragile if market sentiment changes.

“If credit conditions tighten or investor confidence in BYD weakens, these commercial papers may trade at a discount,” Grandhi explains. “Banks may refuse to buy more, suppliers may not get paid on time, and production lines could stop, similar to what happened during China’s Evergrande crisis.”

Warning Signs in the Numbers

The concern comes as BYD’s accounts payables surged 24.3 per cent in 2024 to $33.6 billion. By March 2025, that figure had already touched $34.9 billion. In just five years, BYD’s accounts payables have grown at an annual rate of 41.2 per cent, far faster than its revenue or profits.

Meanwhile, BYD holds $17.8 billion in cash and has reduced total debt to $5.8 billion, which seems like a strong position. But analysts suggest that the company’s liquidity could come under pressure if the EV market slows down or credit becomes harder to access.

Why It Matters

BYD is not just any company in China’s EV industry. It anchors a massive ecosystem of suppliers, particularly in the provinces of Guangdong and Hunan. Over 9,00,000 jobs depend on this ecosystem. A disruption in BYD’s ability to pay suppliers could create ripple effects across the Chinese economy, potentially leading to a widespread supply chain crisis.

GlobalData stresses that the current financing model is not inherently flawed, but it is vulnerable to sudden changes in market demand or financing conditions. If EV demand remains strong and credit stays stable, BYD’s model may continue to work. However, any disruption could force the company to either pay suppliers faster or raise external capital—both of which would strain its finances.

Investor Outlook

As BYD continues its aggressive growth strategy, maintaining financial transparency and managing supplier relationships will be key. With increasing scrutiny from analysts and potential regulatory attention, BYD’s next steps will be closely watched by investors and industry observers alike.

In short, BYD’s future depends not only on its ability to sell EVs but also on how it manages its books and its obligations to the vast network of partners who support its success.