BYD’s Dirty Secret Just Leaked

Financial Performance

🔍 Q: How does BYD's gross profit margin compare to other automakers?
A: BYD's gross profit margin of 20.1% is above average compared to Toyota (18.9%), Ford (17.8%), and Nissan (12.1%), but below GM (25.4%) and BMW (23.4%).

💰 Q: What's the state of BYD's operating margin?
A: BYD's operating margin of 3.3% is below average compared to GM (10.4%), BMW (9.4%), and Toyota (8.4%), and is decreasing.

📊 Q: How have BYD's R&D expenses changed recently?
A: BYD's R&D expenses as a percentage of revenue have more than doubled from 3.5% in Q1 2022 to 8.3% in Q1 2025, driving operating expense inefficiency.

Market Position and Growth

📈 Q: What's the trend in BYD's sales growth?
A: BYD's sales growth has slowed from 74% in 2022 to 12% in 2024, then picked up to 16% in Q2 2025, but overall sales are slowing down.

🇨🇳 Q: Where is BYD's revenue primarily concentrated?
A: BYD's revenue is highly concentrated in China auto and battery at 67% of total revenue.

🚗 Q: How do BYD's EV models compare to Tesla's in terms of revenue generation?
A: BYD's 26 models generate only 2% of revenue due to low-margin products, while Tesla's 2 models generate 50% of revenue with high-margin products.

Cash Flow and Subsidies

💸 Q: How does BYD's cumulative free cash flow compare to Tesla's?
A: BYD's cumulative free cash flow since 2010 is negative, trailing Tesla's $6.1 billion of cumulative free cash flow.

🏦 Q: What's the trend in BYD's government subsidies?
A: BYD's government subsidies have grown from 110m in 2013 to 4.2b over the past decade, with 1.5b received in 2024 alone.

🔄 Q: How has BYD's operating cash flow been affected by supplier payments?
A: BYD's operating cash flow was driven by not paying suppliers, with average days payable outstanding increasing from 63 to 163 days, compared to 72 days for Tesla.

Profitability and Pricing

📉 Q: How has BYD's operating margin changed recently?
A: BYD's operating margin dropped from 9% to 5.1% in Q1, a 40% loss in profitability.

💲 Q: What's happening with BYD's EV pricing in China?
A: BYD's average selling price for EVs in China has dropped by 9.3% this year, putting pressure on margins.

🏭 Q: How do BYD's production plans reflect market conditions?
A: BYD has scaled-down production plans and announced factory closures, possibly due to government pressure to reduce growth.

Autonomous Driving and Future Prospects

🚘 Q: How does BYD's autonomous driving system compare to Tesla's?
A: BYD's "God's Eye" system may be a game-changer in the Chinese market, but Tesla's FSD is still far ahead in talent, difficulty, and timeline.

💼 Q: What's the main challenge for BYD's profitability?
A: BYD's profitability is affected by high tooling costs and low-margin products, while Tesla benefits from high-margin products and efficient manufacturing.

Capital Structure and Financing

💵 Q: How has BYD's capital structure been influenced by its growth?
A: BYD raised 56b in Q1 2025, the largest ever capital raise, with positive net financing cash flow in recent quarters.

🏭 Q: How does BYD's supplier payment timeline compare to industry standards?
A: BYD's 72-day payable outstanding to suppliers is more than double Tesla's, indicating cash flow concerns and potential supplier dissatisfaction.

🔍 Q: How do government subsidies affect BYD's reported cash flow?
A: Stripping out $4 billion in direct subsidies since 2013 reveals a nearly $10 billion negative cash flow for BYD, while Tesla's positive cash flow is not affected by subsidies.

Financial Concerns

1. 📉 BYD's cumulative free cash flow since 2010 is negative, contrasting with Tesla's $6.1 billion positive cash flow.
2. 🚨 BYD's operating margin is 3.3%, much lower than its 20.1% gross margin, indicating financial inefficiency.
3. 📊 Government subsidies for BYD soared to 4.2 billion, accounting for 23% of its pre-tax profit.
4. 🏦 BYD's operating cash flow fluctuates wildly due to increased days payable outstanding to 163 days.
5. 🔍 If subsidies are stripped, BYD's negative cash flow would be nearly $10 billion.

Market and Sales

1. 🚗 BYD's Seal model sales dropped by 72%, raising concerns about market reception.
2. 🌐 BYD's revenue is 80% concentrated in the China auto and battery sector.
3. 📉 BYD's battery electric vehicle sales growth dropped from 74% to 12% year-over-year in 2024.
4. 📉 Average selling price for BYD vehicles fell by 9.3% in 2025.

Operational Challenges

1. 📊 BYD's days payable outstanding increased from 63 to 163 days, higher than Tesla's 72 days.
2. 🏭 BYD's R&D expenses are a major driver of operational inefficiency as the company scales.
3. 📉 BYD's sales growth slowed, with total vehicle sales slightly increasing from 1.9 million in 2022 to 2 million in the first half of 2025.
4. 🏭 BYD's low-margin products, like the Seagull, are unprofitable compared to Tesla's premium products.

Strategic Concerns

1. 📈 BYD raised 56 billion in Q1 2025 due to 19.4 billion in trade payables debt.
2. ⚠️ BYD's management is delaying payments and requesting 10% price reductions from suppliers.
3. 🚙 God's Eye autonomous system announced in June is not expected to resolve BYD's cash flow issues.

Market and Strategy

1. 🌍 BYD's market is heavily dependent on China, limiting its global growth aspirations.
2. 🚗 BYD's 26 models dominate China, but only 2% of revenue is from successful models like Model 3 and Model Y.

• 00:00 🚗 BYD's unsustainable growth strategy and slowing electric vehicle sales may lead to failure in market share chase, contrasting with Tesla's strength.
  • Financial expert AJ analyzes BYD's imminent challenges, citing unsustainable dumping strategy, lifetime negative cash flow, and questionable reporting, which may lead to failure in market share chase, contrasting with Tesla's strength.
  • Tesla's current share price implies a very high multiple of 315, making it expensive compared to other tech stocks like Nvidia and Apple, which have multiples around 35.
  • When evaluating investments in the EV market, consider valuation levels and earnings outlook, and be aware that BYD has taken the number one position in volume, with Chinese companies growing quickly and changing the market landscape.
  • BYD's rapid growth in electric vehicle sales, with over 2 million vehicles sold in the first six months of the year, is slowing down, with quarterly year-on-year growth decreasing significantly from 59-60% to 16%.
  • BYD's electric vehicle sales growth has slowed down massively in 2024, with a year-on-year quarterly growth rate dropping from 74% to 12%, despite still achieving impressive sales numbers.
  • The data speaks for itself, allowing listeners to draw their own conclusions without needing to believe the speaker.
• 16:22 💸 BYD's profitability is artificially inflated by non-operating items, and its operating margin is relatively low at 3.3% despite high R&D expenses.
  • BYD's gross margin is around 20%, slightly above the median, and comparable to or better than major automakers like Mercedes-Benz, Toyota, Ford, and Tesla.
  • The global automotive industry, including major players like Nissan, BYD's competitors, and others, is experiencing a downward trend, with many underperforming, exemplified by stock percentages such as 12.1%, 7.6%, and a drop from 20.5% to 20%.
  • BYD's operating expense efficiency decreased as revenue grew, with overhead expenses increasing from 10.7% to 16.8% of revenue, contradicting the typical expectation of economies of scale.
  • BYD's operating margin is only 3.3% due to high R&D expenses, which have more than doubled to 8.3% of revenue, driving up operating expenses to 16.8%.
  • BYD's operating margin of 3.3% is relatively low compared to other automakers, such as Tesla, Honda, and Ford, with even loss-making companies like NEO being part of a larger industry picture.
  • BYD's profitability appears to be artificially inflated by large and rapidly growing non-operating items, which have increased exponentially since 2023 and now account for a significant portion of the company's profits.
• 27:21 💸 BYD's financials reveal large government subsidies, questionable income, and delayed supplier payments, raising concerns about their profitability and cash flow.
  • BYD's non-operating income has large and rapidly growing "other income" category, which has reached almost $500 million this year, but the contents of this category are unclear.
  • BYD received almost $4.2 billion in government subsidies from 2013 to 2024, with $1.5 billion in 2023 and $1.447 billion in 2024, significantly impacting their profit margins.
  • BYD's financials show amazing growth but worsening efficiency, poor bottom-line profitability, and volatile free cash flow, with large swings between strong cash flow and massive cash burn.
  • BYD's operating cash flow swings are largely due to delaying payments to suppliers, artificially inflating their cash flow numbers.
  • BYD generated cash flow by delaying payments to suppliers, effectively forcing them to finance the company, which allowed BYD to show a positive cash flow.
  • BYD pays its suppliers on average after 163 days, significantly longer than industry peers such as Tesla (72 days), GM (70 days), and BMW (49 days).
• 38:49 💸 BYD's financials are misleading due to delayed supplier payments, hiding $5.5 billion in losses and showing a $20 billion cash flow delta with Tesla.
  • BYD's suppliers often wait almost half a year, with some possibly waiting up to 10 months, to get paid due to the company's extended payment terms.
  • BYD's cumulative cash flow of $13.9 billion may be misleading due to its practice of delaying payments to suppliers for 163 days, effectively hiding debt in trade payables.
  • BYD has never generated positive free cash flows on a cumulative basis since going public, with losses of at least $5.5 billion pushed onto suppliers.
  • When adjusting BYD's cumulative free cash flow by a $19 billion supplier deficit, the company's financial performance shows a significant difference compared to Tesla's.
  • BYD and Tesla have a $20 billion cash flow delta, with Tesla generating $16 billion in cash and BYD having a negative $5.5 billion, despite BYD selling more vehicles and receiving subsidies.
  • BYD's poor performance despite huge growth and support is due to its highly concentrated presence in a challenging market, specifically China.
• 46:19 💸 BYD's rapid expansion and low-priced models have led to poor profitability, shrinking margins, and misleadingly high revenue, putting the company's financial health into question.
  • A chart shows the EV landscape as of January 2024, about one and a half years ago.
  • BYD's rapid model expansion led to a 9.3% drop in average selling price and shrinking margins, forcing the company to raise capital, which was done by presenting misleading information to investors.
  • BYD dominates the Chinese battery electric vehicle market in sales and number of models (26), but Tesla leads in revenue, generating $5.5 billion in the trailing three months, as the second largest player.
  • BYD's profitability is poor and cash generation is hindered due to its large number of models, requiring significant tooling, dies, and injection molds.
  • BYD's revenue and vehicle volume are misleadingly high due to a large product portfolio, with only one model, the Seagull, generating over $1 billion in revenue, significantly less than Tesla's top models.
  • BYD's top-selling vehicles, priced between $10,000 to $20,000, generate low margins, with most of their product portfolio underperforming, making it difficult for the company to generate significant profits.
• 55:23 💸 BYD's financials are artificially propped up by government subsidies and delayed supplier payments, masking a potentially catastrophic cash flow situation that may require government intervention.
  • The speaker thanks AJ for compiling an in-depth analysis and invites reaction to the information presented.
  • BYD received government subsidies for daily activities, which is different from and in addition to Tesla's subsidies, and these subsidies are cash items that helped hide BYD's cash flow negativity.
  • BYD has received over $4 billion in direct government subsidies since 2013 and is delaying payments to suppliers, with an average payment term of 163 days, while also requesting a 10% price reduction from them.
  • BYD's financials appear artificially positive due to delayed supplier payments, but if they paid suppliers as promptly as Tesla, they would have a negative cash position of around $19.4 billion.
  • BYD, a major Chinese automaker, is teetering on bankruptcy but is likely to be saved by the Chinese government because it is considered too big to fail.
  • The speaker believes BYD is overvalued due to questionable management practices and thinks the Chinese government may intervene to limit the company's growth, potentially capping vehicle production at 4.5 million units.
• 01:02:20 🚗 BYD's growth and competitive advantages are threatened by other Chinese car companies, while Tesla is likely to maintain its market share in autonomous vehicles and have an edge over BYD in scalability and technology.
  • BYD's biggest enemies are other Chinese car companies, not foreign ones, as they feel threatened by BYD's rapid growth and government connections.
  • The speaker believes Tesla will maintain its market share in autonomous vehicles in China and doubts that BYD or other Chinese companies will have significant market share in the US or Europe due to geopolitical reasons.
  • When Elon Musk makes a statement, even if it seems outlandish, people take it seriously and immediately start working on making it a reality, prompting others to follow suit.
  • If Tesla were to start developing Full Self-Driving technology today, it could likely create a comparable version in 12 months with less data, not 6-7 years like it took initially.
  • Tesla's ability to profitably manufacture and scale its products gives it a significant advantage over competitors like BYD, which may be hiding its true scalability.
  • Autonomous driving features will become standard in cars, leading to a shift towards ride-hailing and reduced car ownership, with luxury exceptions.
• 01:10:59 📊 A data analyst shares insights on BYD, emphasizing the importance of digging deeper into data to understand the market and spot trends ahead of time.

WatchUrl: https://www.youtube.com/watch?v=BaoVtU4t8w0