Rumors are swirling that BYD owes its suppliers 500 billion RMB, though the truth remains uncertain. BYD has its own construction company with high qualifications, and most of its parts are self-produced. It is said that BYD's payment terms range from 9 to 12 months, during which suppliers have to advance funds, pushing BYD’s total debt to 520 billion RMB, causing significant payment delays. Many business partners have ceased dealings with BYD due to slow payment and commercial acceptance issues. As equipment suppliers, we are owed billions, and BYD has been known to buy equipment and then reverse-engineer it. With 400 billion RMB in just half-year gross profits, banks are still eager to lend. Warren Buffett’s recent stock sell-off resembles Li Ka-shing’s crisis foresight and retreat. This rapid expansion resembles a "Great Leap Forward" strategy with a fragile business chain.
It is reported that BYD's payment terms are between 9 and 12 months, requiring suppliers to advance funds, with total debts reaching 520 billion RMB, leading to severe payment delays.
Just recently, there were reports that BYD made early payments to suppliers, indicating ample funds. The amount of loans depends on the scale of the business. Chinese companies struggle without foreign trade, and domestic upstream suppliers squeeze their partners. While foreign trade profits are low, payments are made on time, unlike in domestic manufacturing, where profits are lower and long payment cycles can strangle businesses. BYD's rapid and unstable expansion lacks solid technological barriers. The company should avoid excessive price wars. Chinese businesses often use promissory notes to settle payments, with long-term deadlines, reflecting an unhealthy supply and demand relationship. BYD’s per capita annual output is less than one million RMB, earning it the title of “the king of internal competition.” Hearing about BYD’s supplier chain for the first time is alarming, though BYD seems to have some advantages. Evergrande once sold properties at a 30% discount before collapsing under debt. Now, with the price wars in the new energy vehicle market, suppliers are struggling. In the next five years, there may be an oversupply, and automaker collapses could follow, with BYD particularly at risk. BYD's debt-to-asset ratio exceeds 80%, which is alarmingly high. A collapse would drag down many companies. Assets may not hold value, but debts are real.
The new forces in the market also owe suppliers a lot of money. Just days ago, it was reported that BYD has 900.000 employees, possibly indicating tight cash flow. As long as employees continue to receive their salaries, that’s the main concern. Volkswagen currently holds the title of the most indebted automaker globally, with debts totaling $445.2 billion as of September 30. 2023. Toyota, Ford, and BMW also have high debt levels, with Toyota at approximately $340.4 billion, Ford at $223.8 billion, and BMW at $171.8 billion. As of September 30. 2023. BYD’s debt stood at 482.2 billion RMB.
