BYD's 'Evergrande Moment' Arrives? Analyst Cites 2 Warnings: Zero Profit Without Subsidies

Chinese auto giant BYD is facing a looming "Evergrande moment," according to財信傳媒集團董事長 (Chairman of Formosa Wealth Media Group) Hsieh Chin-ho. He points to two major warning signs: regulatory action against BYD's "Di-chain" supply chain finance system and a significant reduction in government subsidies.

Previously, BYD used its "Di-chain" system, which involved internal electronic certificates akin to IOUs, to delay payments to suppliers. Some suppliers waited over 300 days for cash after delivering goods. Now, Beijing's crackdown on this system has caused BYD's liabilities to skyrocket. Hsieh notes that BYD can no longer rely on substantial central government subsidies due to China's fiscal challenges. This comes as Chinese auto stocks hit new lows.

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BYD's Evergrande moment is gradually descending!

Hsieh recalls that a year ago, BYD initiated a price war, cutting prices on all its models by 30%. The cheapest model, the "Seagull," was priced at just 57,600 yuan (approximately $267,800 NTD). This move led to widespread criticism from other Chinese automakers. Geely Automobile Chairman Li Shufu accused BYD Chairman Wang Chuanfu of being a "king of involution," suggesting that price cuts would lead to corner-cutting and hinder industry upgrades. Great Wall Motor Chairman Wei Jianjun even likened BYD to "the next Evergrande." The dispute was only settled after intervention from China's State Administration for Market Regulation.

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price cuts will only lead to shoddy work and are not conducive to industrial upgrading

Now, a year later, Wei Jianjun's prediction of BYD's "Evergrande moment" appears to be materializing. Hsieh explains that BYD had treated dealerships as "banks without interest," allowing them extended payment terms of up to 300 days. BYD then used this interest-free capital for global expansion, price wars, and cash generation. However, Beijing has now mandated that payment terms cannot exceed 60 days. This sudden change has shifted BYD's hidden liabilities within dealerships back onto its own balance sheet, causing a significant increase in its first-quarter financial figures. Furthermore, with China's national finances strained, the substantial subsidies previously available for new energy vehicles have been drastically reduced. In 2025, BYD received approximately 13.47 billion yuan (about 62.62 billion NTD) in subsidies. Excluding this subsidy, BYD would have reported no profit last year.

Hsieh adds that BYD's debt is substantial, with estimates varying widely from 600 billion yuan to 2.4 trillion yuan. He asserts that while large debts were once manageable, Beijing is now tightening its grip, and BYD's true challenges are just beginning. He also observes that this year, the stock markets in Shanghai, Shenzhen, and Hong Kong have focused on artificial intelligence and semiconductor industries. Many auto stocks, including Xiaomi, Li Auto, Nio, Leapmotor, and Xpeng, have hit new lows. This reinforces his belief that Wei Jianjun's warning about BYD's "Evergrande moment" is rapidly approaching.

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the next Evergrande