BYD - the new Evergrande, but in the automotive market ?

[WillyAp]

The talks of immediate collapse is a FUD. But there are good signs that the fall of BYD is nearing. But not just due to subsidies.
Subsidies are applicable to EVs sold inside China only while BYD had been selling good number of EVs outside of China as well.

Where do you see here the immediate collaps being announced?

My question to the esteemed community is: how likely do you think it is that the Chinese automotive industry could experience a situation similar to that in the construction market? It is also worth considering the “tariff war” with both the US and the EU, as it is these markets (with high purchasing power) that can consume “surplus overproduction” so that the Chinese automotive industry can continue to stay afloat.

[slapper]

You know that feeling when the house is too quiet, and you know, you just know, that something is going on? That’s the current “everything is fine!” energy of BYD and the Chinese automobile world. If you’ve ever watched a magician, you know the trick works because your eyes are being led somewhere comfortable, while the real action is out of sight. The trick, in this case, is a river of state money and a mountain of unsold cars, which are silently accumulating in the background

Evergrande is THE case study. Same ingredients: easy money, inflated figures, and a belief that the future will always be greater than the past. The warehouses of BYD are starting to look less like a sales pipeline, but rather a time bomb, slowly ticking away under the layers of planned targets and market capturing

But let’s talk people, not numbers. Since, after all, markets are not only graphs, they are belief systems. A layoff crisis is something that the Chinese government cannot afford (imagine 570,000 workers out on the street). Thus, they balance between moral hazard and bubble-blowing, hoping that no one will yell out the emperor has no clothes before they can find the next escape door

On tariffs: yes, that is the door being shut. Should the US/EU lock out Chinese EVs, then all that overproduction comes right back to bite them. Consider a dam breaking, not a something slow and gradual. And these new miracle exports? Often nothing more than moving the pile between warehouses, with trade press releases to disguise it

The “official” BYD debt is the stuff for the tourists, peek under the hood, and you’ll see a tangled mess of IOUs, supplier arm-twisting, and accounting acrobatics worthy of the 2008 Wall Street Olympics

So, will China’s car bubble pop like the construction one? Not tomorrow, maybe not this year. But every time a state tries to replace real demand with wishful thinking and “just one more round of subsidies", the music eventually stops. Only question: Who’s left holding the bag when it does?

Anyone else feel a chill, or is that just the aircon working overtime in BYD’s unsold car lots?

[davis196]

My question to the esteemed community is: how likely do you think it is that the Chinese automotive industry could experience a situation similar to that in the construction market? It is also worth considering the “tariff war” with both the US and the EU, as it is these markets (with high purchasing power) that can consume “surplus overproduction” so that the Chinese automotive industry can continue to stay afloat.

I don't have enough verified data to prove the claims about BYD car sales declining or BYD having financial difficulties.
Even if BYD gets in a difficult situation, they will simply cut the production quantities and sell less. The government must also reduce the subsidies to the Chinese automotive sector. Government subsidies must be a temporary measure. No industry must continue to exist on government subsidies for decades.
What happened to Evergrande? This company was mentioned all over the place in the last 2 or 3 years, but I haven't heard anything about Evergrande in the last few months. Did the Chinese government bail out this corporation?

[Dogedegen]

The talks of immediate collapse is a FUD. But there are good signs that the fall of BYD is nearing. But not just due to subsidies.
Subsidies are applicable to EVs sold inside China only while BYD had been selling good number of EVs outside of China as well.
BYD mostly had been a battery company and they built a car around that battery. This vertical integration of components made the prices of BYD cars cheaper and they sold cars with small profit margins. But the battery dominance of BYD seems to be fading as the home rival CATL captures the battery market. The products form CATL are so cheap and good that there are news of newer BYD cars having CATL battery instead of BYD's own. This means BYD is turning into just the car manufacturer which is not what they excel for. In coming years, we could see CATL take over the battery market and companies that makes the best bodies with good overall software would win the EV race.

Alright this has my interest, unlike most of the useless replies to this thread. Can you share some links about this if you have any? I mean I can find some myself, but I want to read what you have read. I'm interested also in how the tech is better as battery technology will be one of the new frontiers of innovation once real breakthroughs start happening. Further there is a huge difference between peaking, falling and collapsing. Surely if things are true as you portray them, BYD will lose an advantage and its growth will be stunted or it could even completely stop. However, the people that are calling out a collapse at all are terribly simple.

On tariffs: yes, that is the door being shut. Should the US/EU lock out Chinese EVs, then all that overproduction comes right back to bite them. Consider a dam breaking, not a something slow and gradual. And these new miracle exports? Often nothing more than moving the pile between warehouses, with trade press releases to disguise it

Maybe your time is better spent actually looking up where BYD is selling a lot of cars. I've seen this brand of cars in every single country that I have traveled to in recent years, and in some I have seen them very often. I guess all of that was my imagination and they are just trading them between their warehouses. 

[DrBeer]

Overproduction is the main problem facing the Chinese economy as a whole, and the automotive industry in particular. An export-oriented economy cannot survive without comfortable sales markets. The domestic market is oversaturated, and the European market is closing due to tariffs...

"Huge discounts are no longer helping: car stocks are growing, BYD is cutting shifts and slowing down production
The BYD brand has sold 1,151,919 cars in China since the beginning of the year
China's largest car manufacturer BYD is slowing down production in China due to growing stocks.
In May 2025, BYD announced big discounts on 22 models. Prices were reduced to 53,000 yuan ($7,390). This move was motivated by growing car inventories at dealers. Despite the aggressive pricing strategy, inventories continued to grow. As a result, BYD slowed down production in China.
Insiders told Reuters that BYD had cut night shifts at some of its factories across China. The automaker also postponed plans to add new production lines. These measures reduced the output of at least four factories by a third."

[Dogedegen]

Overproduction is the main problem facing the Chinese economy as a whole, and the automotive industry in particular. An export-oriented economy cannot survive without comfortable sales markets. The domestic market is oversaturated, and the European market is closing due to tariffs...

That is just not true. BYD could compete with European over-managed and overpriced trash cars even with tariffs of 500% which are never going to happen as China will retaliate. European manufacturers losing access to China hurts them more than chinese manufacturers losing access to Europe.

"Huge discounts are no longer helping: car stocks are growing, BYD is cutting shifts and slowing down production
The BYD brand has sold 1,151,919 cars in China since the beginning of the year
China's largest car manufacturer BYD is slowing down production in China due to growing stocks.

Adjusting production to lower demand is a sign of collapse if we are talking about BYD, but a sign of proper management if we are talking about a western company?  

[EFS]

If there's a tax involved and there's a big price difference between similar cars, people naturally go for the cheaper option, that's a fact. We're also closely watching BYD's growth here. In my country, there are heavy taxes on cars and people prefer to buy electric cars because the tax difference is significant. To buy a gasoline car, we have to pay 4-5 times the prices in Europe. For electric cars, the difference is smaller. Of course, cars are still expensive compared to Europe or elsewhere, but this huge tax gap strongly influences people's choices.

If the US also imposes difficulties on foreign brands in terms of taxes, their sales could drop significantly. But this wouldn't hurt foreign car brands too much because there are plenty of big markets worldwide. Nobody is dependent solely on US buyers. Last year BYD sold 4.2 million cars worldwide and it's clear from the figures that they don't have to go in the US market.

[blockman]

As for the fall of it? I think it will be related to the minerals that are just limited for the battery creation. But that might take time as China has got a lot of friends if it's about these natural resources needed in producing these BYD and other chinese brand of cars. Tariffs will certainly impact that a lot but they don't care about for the likes of US, they won't just go into their market unless there's a strong demand there. I am seeing this brand of car in the road everyday and it's got a strong sales here in the Philippines. But if God blesses me with some extra money I am not yet sure if this is the kind of car that I'll purchase.

[Dogedegen]

As for the fall of it? I think it will be related to the minerals that are just limited for the battery creation. But that might take time as China has got a lot of friends if it's about these natural resources needed in producing these BYD and other chinese brand of cars. Tariffs will certainly impact that a lot but they don't care about for the likes of US, they won't just go into their market unless there's a strong demand there. I am seeing this brand of car in the road everyday and it's got a strong sales here in the Philippines. But if God blesses me with some extra money I am not yet sure if this is the kind of car that I'll purchase.

China is the leader in many minerals that are needed in battery creation and leader in their processing, I am sure they are better positioned that any other country. You can observe their power when they threaten to limit rare metal exports, the west gets quite spooked.

[WillyAp]

China is the leader in many minerals that are needed in battery creation and leader in their processing, I am sure they are better positioned that any other country. You can observe their power when they threaten to limit rare metal exports, the west gets quite spooked.

Not entirely though, many of those minerals are imported and China build up the processing factories.
Most of those refinement factories could not exist in the 1st world.

[Dogedegen]

China is the leader in many minerals that are needed in battery creation and leader in their processing, I am sure they are better positioned that any other country. You can observe their power when they threaten to limit rare metal exports, the west gets quite spooked.

Not entirely though, many of those minerals are imported and China build up the processing factories.
Most of those refinement factories could not exist in the 1st world.

Yes really. Unless you are talking about some individual things that are more common somewhere else like lithium.

[khiholangkang]

As for the fall of it? I think it will be related to the minerals that are just limited for the battery creation. But that might take time as China has got a lot of friends if it's about these natural resources needed in producing these BYD and other chinese brand of cars. Tariffs will certainly impact that a lot but they don't care about for the likes of US, they won't just go into their market unless there's a strong demand there. I am seeing this brand of car in the road everyday and it's got a strong sales here in the Philippines. But if God blesses me with some extra money I am not yet sure if this is the kind of car that I'll purchase.

China has many friends, including Indonesia, which consistently provides resources for battery manufacturing. Nickel is a key ingredient in battery manufacturing, and by 2022, 85% of our nickel exports were going to China, partly to meet battery manufacturing needs.

This may not only apply to BYD, but also to other companies like Wuling, Xpeng, Chery, and others. They manufacture a wide range of products. So I believe China has a significant opportunity in the EV industry, offering both lower prices and better performance. By the way, Tesla's sales have declined since BYD entered the global market.

[WillyAp]

China has many friends, including Indonesia, which consistently provides resources for battery manufacturing. Nickel is a key ingredient in battery manufacturing, and by 2022, 85% of our nickel exports were going to China, partly to meet battery manufacturing needs.

Countries don't have friends.
You might need a little insight what was: https://en.wikipedia.org/wiki/May_1998_riots_of_Indonesia

[blockman]

As for the fall of it? I think it will be related to the minerals that are just limited for the battery creation. But that might take time as China has got a lot of friends if it's about these natural resources needed in producing these BYD and other chinese brand of cars. Tariffs will certainly impact that a lot but they don't care about for the likes of US, they won't just go into their market unless there's a strong demand there. I am seeing this brand of car in the road everyday and it's got a strong sales here in the Philippines. But if God blesses me with some extra money I am not yet sure if this is the kind of car that I'll purchase.

China is the leader in many minerals that are needed in battery creation and leader in their processing, I am sure they are better positioned that any other country. You can observe their power when they threaten to limit rare metal exports, the west gets quite spooked.

I agree, that they're in a better position than most of the countries who are also in the industry. They've got allies and not just from their country they get their minerals but I think also in many African countries where they've injected their debt trap. And this is also one of the reasons why there is tension between China and Taiwan. Taiwan is known for semi conductors and this tension has made it even stronger because of the EV market.

As for the fall of it? I think it will be related to the minerals that are just limited for the battery creation. But that might take time as China has got a lot of friends if it's about these natural resources needed in producing these BYD and other chinese brand of cars. Tariffs will certainly impact that a lot but they don't care about for the likes of US, they won't just go into their market unless there's a strong demand there. I am seeing this brand of car in the road everyday and it's got a strong sales here in the Philippines. But if God blesses me with some extra money I am not yet sure if this is the kind of car that I'll purchase.

China has many friends, including Indonesia, which consistently provides resources for battery manufacturing. Nickel is a key ingredient in battery manufacturing, and by 2022, 85% of our nickel exports were going to China, partly to meet battery manufacturing needs.

This may not only apply to BYD, but also to other companies like Wuling, Xpeng, Chery, and others. They manufacture a wide range of products. So I believe China has a significant opportunity in the EV industry, offering both lower prices and better performance. By the way, Tesla's sales have declined since BYD entered the global market.

So aside from the other African countries, they also have Indonesia on their back. They're really taking over the market and this is why Uncle Sam is mad at them. They're taking over the EV industry and not just that even in smartphones too provided all of the resources needed for manufacturing.

[khiholangkang]

China has many friends, including Indonesia, which consistently provides resources for battery manufacturing. Nickel is a key ingredient in battery manufacturing, and by 2022, 85% of our nickel exports were going to China, partly to meet battery manufacturing needs.

Countries don't have friends.
You might need a little insight what was: https://en.wikipedia.org/wiki/May_1998_riots_of_Indonesia

I understand the history quite well, but the main point is that it was a tragedy in the past and has nothing to do with what we are talking about here, even if it is offensive, it is over, so what do you want to convey?

[WillyAp]

I understand the history quite well, but the main point is that it was a tragedy in the past and has nothing to do with what we are talking about here, even if it is offensive, it is over, so what do you want to convey?

People don't forget that easily.
Why is Ukraine fighting and not giving in?
Due to a pogrom called holodomor https://en.wikipedia.org/wiki/Holodomor

From the outside people ask; but why are they not just getting to understand each other.
After those happenings people carry grudges.

Do you know why German people are popular in northern Africa? Not for their wokeness,

Governments might make peace, their people less so.

[DrBeer]

Overproduction is the main problem facing the Chinese economy as a whole, and the automotive industry in particular. An export-oriented economy cannot survive without comfortable sales markets. The domestic market is oversaturated, and the European market is closing due to tariffs...

That is just not true. BYD could compete with European over-managed and overpriced trash cars even with tariffs of 500% which are never going to happen as China will retaliate. European manufacturers losing access to China hurts them more than chinese manufacturers losing access to Europe.

"Huge discounts are no longer helping: car stocks are growing, BYD is cutting shifts and slowing down production
The BYD brand has sold 1,151,919 cars in China since the beginning of the year
China's largest car manufacturer BYD is slowing down production in China due to growing stocks.

Adjusting production to lower demand is a sign of collapse if we are talking about BYD, but a sign of proper management if we are talking about a western company?  

Excuse me, but you are simply trying to pass off your desired state of affairs as reality. But everyone knows, and it's easy to verify, that a significant part of the Chinese economy survives only thanks to huge government subsidies. And the automotive industry is one of the key recipients of subsidies. And you are making all your subsequent conclusions based on deliberately or unintentionally distorted information. But once we return to reality, the problems will turn out to be very real. The European auto industry can survive without the Chinese market. The Chinese auto industry cannot survive without the European and other markets in developed countries! The state cannot constantly subsidize something that does not sell and will then slowly rot away in lots for unsold cars.

Plus, don't forget the real price war between BYD and other Chinese automakers. In order to sell off their stocks and keep the production cycle going, BYD cut the prices of its cars by up to 34% in May this year! Are you talking about the high margins on their cars?

[justdimin]

everyone knows, and it's easy to verify, that a significant part of the Chinese economy survives only thanks to huge government subsidies. And the automotive industry is one of the key recipients of subsidies. And you are making all your subsequent conclusions based on deliberately or unintentionally distorted information. But once we return to reality, the problems will turn out to be very real. The European auto industry can survive without the Chinese market. The Chinese auto industry cannot survive without the European and other markets in developed countries! The state cannot constantly subsidize something that does not sell and will then slowly rot away in lots for unsold cars.

It's a communist nation, they help with subsidies, because they tax based on that. To be fair, that is a method that could never work anyways. Not that American liberal methods are any better, "let it be" showed how people were getting screwed too, you pay taxes too but get nothing in return. Maybe a big military? Lol.

Whenever there is a "look how bad west is" or "look how bad east is" topic, I laugh, because you both do not realize how bad both of you are. In this BYD case, of course it will not be growing like this at all, it will slow down, they can't go construction level, if they do, they will bankrupt too. They just need to find that sweet spot where they can sell, and they produce accordingly .If they keep producing more, that would be bad, and they will bankrupt.

[Ultegra134]

It is a large problem for a lot of car dealers all over the world.

More people want something affordable that works well. So high profit margin cars do not have the demand they once had.

Many just want a decent car that does not break and does not use a lot of fuel.

BYD cars have recently entered the European market, it's only a few years now that they entered the Greek market and it's quite booming if you ask me, I keep stumbling upon quite a few the past few months, for a company that's that new in the market. BYD is a huge manufacturer, and if I'm not mistaken, it's the leading manufacturer in EV vehicles. So far, BYD is delivering what consumers are requesting, affordable, stylish cars, rendering EV's a lot more approachable in the general public. We're yet to see their reliability, as they're quite new in the market, this will only be demonstrated in a few years.

[karabiber]

The Chinese automotive industry is likely to enter a financial squeeze cycle of overcapacity, lack of demand, the kind that the construction industry is experiencing, but there are differences between the two sectors. Cars can be sold faster, brand and product strategy can change easily, but it is not easy to demolish a building and build another one. In car production, it is possible to move from one model to another.

Also, the Chinese government sees electric vehicles as strategic to gain technology leadership. The construction sector was a sector that managed domestic demand and did not offer a chance to compete. Perhaps the vehicles produced may lack competition for now, but if EV’s become widespread in the future, China will get its share.