Source: GlobalData
BYD’s growth hinges on EV demand stability and financial transparency, says GlobalData
Posted in Business Fundamentals
Following the news that China-based electric vehicle (EV) giant BYD Co Ltd is under scrutiny as its rapidly rising accounts payables raise concerns over a potential hidden debt burden;
Murthy Grandhi, Company Profiles Analyst at GlobalData, a leading data and analytics company, offers his view:
“BYD posted record 2024 results with revenues of $108.1 billion (CNY777.1 billion) (+29% year-on-year (YoY)) and net profit of $5.6 billion (CNY40.2 billion) (+34% YoY). However, experts warn that the company’s growing reliance on supply chain financing could expose it to serious financial risks if market conditions deteriorate.
“Despite holding $17.8 billion (CNY102.5 billion) in cash and reducing total debt to $5.8 billion (CNY194.2 billion), BYD’s accounts payables rose 24.3% YoY to $33.6 billion (CNY241.6 billion) in 2024, reaching $34.9 billion (CNY250.8 billion) by March 2025. Over five years, this figure has grown at a CAGR of 41.2%, outpacing both revenue and profit growth.
“BYD’s financing method involves issuing commercial paper to suppliers, who then sell it to banks. These are treated as trade finance, not corporate debt. However, if credit sentiment shifts, this paper could trade below par. Banks may demand cash, suppliers may go unpaid, and production lines could stall—like Evergrande’s liquidity crisis.
“The broader risk is systemic. BYD anchors a vast ecosystem of parts suppliers, particularly in Guangdong and Hunan provinces, employing over 900,000 people. A disruption in payments could trigger a liquidity shock across the supply chain.
“GlobalData emphasizes that this model is only vulnerable under significant market stress. If EV demand drops or credit tightens, BYD may need to accelerate supplier payments or seek external funding—both of which could strain its liquidity. BYD’s capacity to sustain growth while ensuring financial transparency will be vital to preserving investor confidence amid its increasingly leveraged expansion.”