Debunking the “BYD is the Next Evergrande” Myth: A Look Inside the Numbers of a $79B Debt Scare

Recently, headlines in Western media have been sounding the alarm about a “$79 billion debt pile” at Chinese EV giant BYD, with some even raising the specter of a potential collapse. It’s an easy narrative to sell, one that quickly evokes the memory of the spectacular implosion of real estate developer Evergrande and feeds into a general anxiety about the stability of Chinese corporations.

But from my perspective here on the ground, analyzing BYD’s financial data, this narrative is not just misleading; it’s fundamentally wrong. It stems from a misunderstanding of the quality of BYD’s debt. BYD’s liabilities are not the toxic, high-interest burden that sank Evergrande. In fact, they are a sign of its immense operational strength and efficiency.

Let’s break down the numbers and separate the fear from the facts.

1. The Truth About the Debt: It’s Not “Debt,” It’s “Working Capital”

BYD’s total liabilities do indeed stand at a massive 584.6 billion RMB (approx. $79 billion). The absolute number is headline-grabbing, but the composition of that number is what truly matters.

• The 90% Rule: Most of it is Interest-Free.
  A staggering 90% of BYD’s total liabilities are interest-free. The vast majority of this is “accounts payable”—money owed to its vast network of suppliers for parts and materials. The interest-bearing debt that typically sinks companies is a tiny fraction of the total: just 4.9%, or 28.58 billion RMB (approx. $3.9 billion).

• The Decisive Difference from Evergrande:
  Evergrande’s debt was the exact opposite. It was overwhelmingly high-interest loans from banks and bondholders. Their cash flow couldn’t even cover the interest payments. BYD’s interest-free debt, on the other hand, is a normal part of its operations, reflecting its powerful purchasing position and its ability to use its supply chain as a form of efficient financing.

• A Mountain of Cash:
  BYD is sitting on an enormous cash pile of 154.9 billion RMB (approx. $21 billion). This is more than five times the amount of its interest-bearing debt, demonstrating that it has zero issues with short-term solvency.

• Powerful Profit Engine:
  In 2024, BYD generated 777.1 billion RMB (approx. $106 billion) in revenue and a net profit of 40.2 billion RMB (approx. $5.5 billion), up 29% year-over-year. A company that generates over 100 million RMB in net profit per day has more than enough cash flow to support its operations.

Conclusion: To call BYD’s liabilities “debt” in the traditional sense is a misnomer. It is primarily working capital, a reflection of a vibrant, high-volume business with masterful financial management.

2. What About the Inventory? A Sign of Growth, Not Distress

The other eye-popping number is BYD’s inventory, which stood at 154.4 billion RMB (approx. $21 billion) at the end of 2024. Again, taken in isolation, this could seem alarming. But it must be viewed in the context of the company’s explosive growth.

• Fueling Explosive Sales: From January to May 2025, BYD’s sales surged by 38.7% year-over-year to 1.76 million units. You cannot support this level of growth without a significant amount of inventory in the pipeline.

• Global Expansion: BYD is aggressively expanding globally, with a factory operational in Thailand and another being fast-tracked in Mexico. This requires building up inventory for shipment to new plants and seeding new international markets.

• A Reasonable Level: By most calculations, BYD’s inventory equates to roughly 1.5 months of sales. For a rapidly growing global automaker, this is widely considered a healthy and reasonable level.

The inventory is not a sign of unsold cars piling up; it’s a strategic buffer required to feed a global manufacturing and sales machine.

3. The Shifting Supply Chain: A Short-Term Squeeze, A Long-Term Win

A recent policy change in China will require BYD and five other major OEMs to shorten their payment terms to suppliers from an average of 127 days to just 60 days.

• The Short-Term Impact: This will create an estimated annual cash outflow of around 20 billion RMB (approx. $2.7 billion) for BYD, putting some pressure on its cash management.

• The Ability to Absorb It: However, with over $21 billion in cash and massive operating cash flow, BYD can easily absorb this pressure.

• The Long-Term Benefit: This policy is part of a government push to ensure the health of the entire supply chain. For BYD, while it’s a short-term cost, the long-term effect will be positive. It will strengthen relationships with suppliers, build a more stable and resilient supply chain, reduce production risks, and improve quality control. It shifts the focus of competition from a pure “price war” to “supply chain health.”

Final Verdict: BYD is No Evergrande

When you compare BYD’s key financial metrics to those of Evergrande and the industry average, the picture becomes crystal clear.

With its incredibly low interest-bearing debt, vast cash reserves, and efficient inventory management, BYD’s financial health is in a different universe from Evergrande’s. Its massive revenue and profits prove it is a company with strong technology and a self-sustaining cash flow engine.

The “$79 billion debt” scare is a classic case of falling into the trap of big numbers without understanding the story behind them. Far from being a house of cards, BYD is proving to be a leader navigating the intense nèijuǎn of the Chinese auto market with remarkable financial strength.