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

[DrBeer]

Just recently, the head of Great Wall Motor spoke about a possible crisis in the automotive industry similar to the situation with Evergrande.
And one of the “triggers” of the new crisis could be BYD.
The reasons are reminiscent of the problems in the construction sector (Evergrande) - huge overproduction and the inability to fulfill sales plans outside China, huge subsidies from the state budget, accumulation of debts and unsold cars, while costs remain constant.

Of course, BYD representatives were quick to respond, saying that “everything is actually fine, we will exceed our plans, we are capturing markets, and our competitors are doing very badly...”
But, as they say, “there's no smoke without fire.” It is enough to listen to the response of BYD representatives and double-check their “figures” to immediately notice manipulation, such as with Toyota's debt indicators. According to BYD representatives, this figure is $374 billion. You can find this figure, but if you dig deeper, you will find that it is one of the estimates based on one of the methodologies. At the same time, BYD chose the most “convenient figures” without showing its own figures based on the same methodology. Let me remind you that Toyota is one of the best-selling car brands in the world, and without huge subsidies from the state.

The bottom line is that state-subsidized companies that are ramping up production, as practice has shown, are running into the problem of not being able to sell their products. At the same time, huge amounts of state money keep pouring in because it's really expensive to support such a manufacturer (or, more accurately, a group of manufacturers), but without state support, these companies would just collapse from overproduction.

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.

[Dogedegen]

This is just FUD because BYD has been on fire in recent years. I have heard this conspiracy theory about illegal state subsidies, and many people keep repeating it without providing any data at all. This means that they just picked up this information online, without verifying it and without having an original source. A news article without real data is not a source. Also, did you know that most western companies also receive state subsidies in one form or another? Without the data, we can't tell how much of an impact it can have and because of that it is just a conspiracy theory.

https://d2xqcz296oofyv.cloudfront.net/wp-content/uploads/byd-sales-by-year-2025.webp

https://roadgenius.com/wp-content/uploads/2024/09/BYD-total-revenue-each-year-1024x576.jpg

It looks like it is gonna collapse any day now. 

[DrBeer]

This is just FUD because BYD has been on fire in recent years. I have heard this conspiracy theory about illegal state subsidies, and many people keep repeating it without providing any data at all. This means that they just picked up this information online, without verifying it and without having an original source. A news article without real data is not a source. Also, did you know that most western companies also receive state subsidies in one form or another? Without the data, we can't tell how much of an impact it can have and because of that it is just a conspiracy theory.

https://d2xqcz296oofyv.cloudfront.net/wp-content/uploads/byd-sales-by-year-2025.webp

https://roadgenius.com/wp-content/uploads/2024/09/BYD-total-revenue-each-year-1024x576.jpg

It looks like it is gonna collapse any day now. 

I agree, your opinion is valid. Even if we ignore the news, as we saw with Evergrande, everything was fine there not so long ago, with huge progress, billions in revenue, and prospects for decades to come... and then one day it all collapsed! And the market was VERY much in demand, certainly more in demand than cars in terms of value to people.
And let's be honest — the Chinese auto industry has real problems that it has so far managed to hide or contain:
- overproduction
- very strong dependence on state support
- limited demand within China
- subsidies can only be offset by high prices, which only the Western market can provide, never the market of third world countries.

[WillyAp]

A news article without real data is not a source. Also, did you know that most western companies also receive state subsidies in one form or another?

All companies rely on credits. You have to few banking connections and your company is in danger.
Just look at the crypto scene, on bank served as go between and once it dropped out the companies relying on it collapsed too.

Socialism is calling for revolution of the working class. Those are the lines of the communist manifesto

The manifesto was the political program of the Communist League, which had set itself the task of the worldwide liberation of the proletariat from oppression and exploitation.

In modern times it has kind of mellowed out. 
https://www.fraserinstitute.org/commentary/death-capitalism-schumpeters-prognosis-coming-true
Still the subsidies of the economy is present in a devalued currency, or even a better credit line.
When seeing the chinese road and belt initiative you see that not all is nice and peachy.

[DrBeer]

Subsidies are a tool often used to support and compensate domestic producers and products within the market when there is competition. But the Chinese government's “subsidies” are a form of unfair competition aimed at capturing foreign markets. And there is a huge difference. The EU has understood this perfectly well, realizing that it is not Chinese high-tech cars that are cheap, but that the Chinese government is simply driving local European manufacturers out of their own market. Without a real takeover of sales markets, we may well see “Evergrande Auto” in the near future.

[DeathAngel]

Could be but just seems like FUD to me. People always seem to want to try & predict when the next big crash will come & what will be the cause of it. The truth is, if or when there is a big depression it will be a result of many things, all together that cause such a financial disaster. Fiat currencies are being printed out of existence, rates are high, people are struggling to pay bills. There is a crash coming, be prepared.

[STT]

China has problems from its demographics, thats a long term decline they are trying to outrun by development of the country and things like AI perhaps will help replace the missing working population; losses of the 1 child policy over decades.
  BYD is successful mostly but car companies generally seem to have problems with their profitability vs development, this is true in many countries.    I'm more convinced of a wider story rather then just the 1 company as a problem

[philipma1957]

China has problems from its demographics, thats a long term decline they are trying to outrun by development of the country and things like AI perhaps will help replace the missing working population; losses of the 1 child policy over decades.
  BYD is successful mostly but car companies generally seem to have problems with their profitability vs development, this is true in many countries.    I'm more convinced of a wider story rather then just the 1 company as a problem

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.

[WillyAp]

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

That in itself is not a problem. The industry have grown fat. They carry an administrative overload, there is lower management, middle, the one above middle and upper and 30 others here an there. When you take twitter as a blueprint, you just shed 75% of their administration and it still works great.    
Plus lower the price accordingly.

Its like a web-presence. The digital make up is little but to make it known, cost.

[tabas]

With what I see myself, they're able to beat Tesla in terms of sales for how many years, 1 or 2? They're now dominating the EV industry and if they say that they're fine, they should be fine. The good thing about this company is that, they're also being supported by its own people in China. They have a huge population, and they're proving the worth of their product. I'm not sure if I'll have one in the future but it looks stylish, but I still prefer to have a gas/diesel engine car. They are making the cars quite cheaper but loaded with tech.

[₿itcoin]

Could be but just seems like FUD to me.

The main concerning matter is a long payment delay to suppliers, the delay near around 275 days although their cash pile remained strong!
Whatever, I actually don't think BYD would be the next Evergrande in any way. To me, it is not just a FUD, it is more of well funded sprint. I would say the aggressive and subsidized widening in CHI auto just creates a vulnerability, nothing else. Also, tariffs bite could be another concern, as hidden debt could create an evergrande moment situation.

[coolcoinz]

With what I see myself, they're able to beat Tesla in terms of sales for how many years, 1 or 2? They're now dominating the EV industry and if they say that they're fine, they should be fine. The good thing about this company is that, they're also being supported by its own people in China. They have a huge population, and they're proving the worth of their product. I'm not sure if I'll have one in the future but it looks stylish, but I still prefer to have a gas/diesel engine car. They are making the cars quite cheaper but loaded with tech.

If I had to choose an electric car, I'd rather go for BYD than Tesla.
I've seen BYD cars tested and they're pretty well made, which cannot be said about Tesla which was one of the brands that people have the most complaints about in the first year of use.
Also, Teslas are famous for their bad quality checks with huge gaps between the panels.

If someone is really into electric cars (which I am not) you might want to check out Zeekr.


As for BYD vs non-electric brands, I'd rather buy a Toyota or a Honda hybrid than a fully electric car, especially from China. Here in the EU everybody knows how to fix a gasoline car, or a hybrid and parts are easy to get. You get an issue with your BYD and 90% of mechanics will tell you to go to authorized service which will most likely be out of town. For instance I've run a quick search for a BYD service and the closest one is 250km away. Imagine going there for a routine checkup every year. That's half a day wasted to get your car serviced.

[shinratensei_]

I've seen surge of people driving BYD these days, I don't think it will be the next evergrande, the company itself also expands to countries so fast. Maybe had to do with the fact that it's state subsidized company so they got stack of cash to do that.
The rapid expansion might be concerning and can possibly cause collapse, but so far I see nothing that can cause worry from their side.

As long as there's no real proof that indicate BYD to be the new evergrande, I won't put too much thoughts about it. Instead, it'd be great if the competition like tesla can reduce their price.

[Fortify]

Just recently, the head of Great Wall Motor spoke about a possible crisis in the automotive industry similar to the situation with Evergrande.
And one of the “triggers” of the new crisis could be BYD.
The reasons are reminiscent of the problems in the construction sector (Evergrande) - huge overproduction and the inability to fulfill sales plans outside China, huge subsidies from the state budget, accumulation of debts and unsold cars, while costs remain constant..

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.

You compare it to Evergrande, which is fair enough, but what really was the fallout that they suffered? Besides getting liquidated and a bunch of local Chinese companies having to accept losses/going bankrupt, the tsunami outside of China appeared as barely a ripple. In fact it was probably positive for other countries as Evergrande had to sell off some overseas assets they'd acquired in the good times. Lots of Chinese investors got burned but the CCP used their usual repression tactics to contain that.

BYD has to navigate delicately and is somewhat at the whims of government policy. They have an advantage of being near the source of many rare metals required for manufacturing but they're increasingly being targeted by Europe/USA with tariffs for dumping and flooding the market, which offsets certain advantages. There are still many other places in the world that will benefit from cheaper electric cars and don't feel the need to protect against Chinese car manufacturers.

With the amount of money the Chinese government has been pulling out of US treasuries, it's possible that some of the debt can be paid off with that.

[retreat]

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?

I don't think such cases will happen again, because unlike their real estate sector, the Chinese automotive sector gets government support to expand internationally, meaning they get government subsidies to export globally, and they can target developing countries and some European markets to market their products. The Chinese government also seems to have learned from their mistakes in the Evergrande case, so if they see weak local brands, they will intervene and encourage them to merge with stronger brands, that way they can avoid bigger problems. So even though the auto industry in China is facing serious structural risks, it is still under the full control of the Chinese government, and I think it is a normal domestic problem, not a very critical issue..

[Dogedegen]

I agree, your opinion is valid. Even if we ignore the news, as we saw with Evergrande, everything was fine there not so long ago, with huge progress, billions in revenue, and prospects for decades to come... and then one day it all collapsed! And the market was VERY much in demand, certainly more in demand than cars in terms of value to people.

You can't compare these two situations at all. It is as if saying everything was fine with Bitconnect until it wasn't, that is why the same thing may happen with Bitcoin.  

And let's be honest — the Chinese auto industry has real problems that it has so far managed to hide or contain:
- overproduction
- very strong dependence on state support
- limited demand within China
- subsidies can only be offset by high prices, which only the Western market can provide, never the market of third world countries.

Claims, without any single real source. Such a thing is what you would call propaganda. If you can bring up verifiable data for those claims, do it and let's discuss it. To make matters worse, limited demand is a global problem for all western car manufacturers. So how is this a point against BYD, why single out this company? Besides, such arguments don't make sense. Look how people that have a predetermined stance argue.

• BYD has strong demand in China, most of its revenue is in China. Bad for some reasons.
• BYD has limited demand in China, most of its revenue is global. Also bad because of reasons.

If you have predetermined positions, no argument will satisfy you and you will continue to find rationalizations to justify your wrong position.

[STT]

This argument could be made very simple, the product is good or not.   I dont really see an oversupply situation in a new market, there are fair reasons for electric car as a sector to expand parabolically beyond just the green situation.  However that does rely on the quality being there with this company and maybe it is or isnt.
  
In contrast wasnt the Evergrande problem due to diabolical corruption in the housing market also it was just reliant on one nation for its market for that product to justify the debt also the company itself printed false figures.

[WillyAp]

 
In contrast wasnt the Evergrande problem due to diabolical corruption in the housing market also it was just reliant on one nation for its market for that product to justify the debt also the company itself printed false figures.

There are certain similarities between those 2 companies.
Evergrande over spent their capital and defaulted thus failed to to deliver, the over-spending became possible due to local governments who where able to create a bubble. The system was geared that local governments to make more in order to get more. Not uncommon in the west to have similar set ups. 

https://www.bbc.com/news/business-58579833

[JeffBrad12]

In contrast wasnt the Evergrande problem due to diabolical corruption in the housing market also it was just reliant on one nation for its market for that product to justify the debt also the company itself printed false figures.

Exactly, evergrande disaster was caused by combination of excessive debt and liquidity crisis, now on top of that we add the slowing economic caused by covid-19 pandemic.
Although BYD might seem to be doing the same exact thing but the company itself as I've observed got strong cash flow.
The market is entirely different as well, housing is always risky in time of economic crisis like pandemic but automotive industry is different.

[tsaroz]

This is just FUD because BYD has been on fire in recent years. I have heard this conspiracy theory about illegal state subsidies, and many people keep repeating it without providing any data at all. This means that they just picked up this information online, without verifying it and without having an original source. A news article without real data is not a source. Also, did you know that most western companies also receive state subsidies in one form or another? Without the data, we can't tell how much of an impact it can have and because of that it is just a conspiracy theory.

https://d2xqcz296oofyv.cloudfront.net/wp-content/uploads/byd-sales-by-year-2025.webp

https://roadgenius.com/wp-content/uploads/2024/09/BYD-total-revenue-each-year-1024x576.jpg

It looks like it is gonna collapse any day now. 

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.