I’ve been watching the electric vehicle space for years, and honestly, the rise of Chinese brands has been nothing short of meteoric. It felt like every other week, we’d hear about a new company with incredible tech and even more incredible prices. At the very top of that mountain was BYD, the company that even managed to knock Tesla off its perch as the world’s #1 EV seller for a time. But lately, the whispers have turned into concerned murmurs, and those murmurs are getting louder. It seems the unstoppable China EV giant might be standing on shakier ground than any of us thought. 😊
We’re not just talking about a few bad headlines. There are some genuinely worrying signs, from massive, unconventional debt to a cutthroat price war that’s sending shockwaves through the industry. So, how did BYD, the pride of China’s automotive ambitions, get here? Let’s unpack this, because it’s a wild ride that could change the car you buy next.
The $76 Billion Elephant in the Room: BYD’s IOU Problem 🐘
Alright, first things first, let’s talk about the money. Or, more accurately, the lack of it. One of the biggest red flags waving over BYD right now is its massive pile of unpaid bills. We’re talking about a jaw-dropping $76 billion (approximately 400 billion yuan) in outstanding promissory notes. Yikes.
Now, using promissory notes—basically an “I’ll pay you later” promise—isn’t unheard of in business-to-business transactions. It helps keep things moving when cash flow is tight. But BYD’s approach is… different, and not in a good way. They’ve created their own internal IOU system called the “Di-Lian” platform.
On the surface, it’s pitched as a sleek, digital way for BYD to settle accounts with its thousands of suppliers. The reality? It’s a system where BYD issues its own IOUs without any bank guarantee. Think about that. A normal promissory note is backed by a bank, which gives the supplier confidence they’ll eventually get paid. The Di-Lian notes are backed only by BYD’s own promise.
An industry insider compared this to a struggling gym. Imagine a gym that’s losing members. To get cash for today’s operating costs, they start selling super-discounted 1-year memberships. They’re basically pulling future revenue into the present just to keep the lights on. BYD is essentially paying its suppliers for today’s parts with a promise of money from cars it hopes to sell far down the road. It’s a high-stakes gamble on future success.
To make matters worse, the payback period for these notes is ridiculously long. Typical commercial notes mature in about three months. BYD’s notes? They can take 8 to 9 months, and some even up to a year to mature. This puts their suppliers—the smaller companies that make the nuts, bolts, and computer chips—in a terrible position. They’re forced to wait up to a year to get paid for parts they delivered today, creating a fragile chain of credit that could shatter if BYD stumbles.
Build It and They Will… Maybe Come? The Overproduction Dilemma 🏭
So why is BYD in such a cash crunch that it needs to resort to these kinds of financial gymnastics? The core of the problem is a classic business mistake: they built way too much, way too fast.
Fueled by explosive growth and an optimistic outlook, BYD went on an unprecedented expansion spree. Just get a load of these numbers: In just three months, from August to October 2024, they increased their monthly production capacity by about 200,000 units. In that same period, they hired an additional 200,000 workers for their automotive plants. That is absolutely insane growth.
They didn’t just expand at home. BYD has been aggressively building new factories all over the world—Thailand, Brazil, Hungary, Indonesia, you name it—each with plans to pump out another 150,000 cars per year. They were betting big that global demand would soak up every car they could make.
But the bet hasn’t paid off as expected. The Chinese domestic market, which was their bread and butter, is experiencing a major consumer slowdown. People just aren’t buying big-ticket items like they used to. And their international expansion, while ambitious, has been slower than hoped. Warehouses and lots are now filling up with unsold electric cars, and assembly lines are running at lower capacity, which is a killer for profitability.
A Tough Sell Abroad 📝
BYD’s famous price advantage isn’t landing as well as they’d hoped in foreign markets. Let’s look at the numbers:
- In South Korea, they aimed to sell 10,000 cars in 2025 but sold only 500 in the month of May. For comparison, Kia’s more expensive EV6 sold 1,866 units and Hyundai’s Ioniq 5 sold 1,255.
- In Europe, according to S&P Global Mobility, BYD sold about 83,000 cars in 2024. During the same period, Hyundai sold around 530,000 and Kia sold 520,000—that’s more than six times BYD’s sales.
It shows that brand recognition, dealer networks, and consumer trust still matter a whole lot, and simply being the cheapest option isn’t always enough.
Desperate Times: Price Wars and “0 km Used Cars” 📉
Faced with mountains of unsold cars and a looming financial crisis, BYD is doing what any cornered giant would do: they’re getting desperate. And their main weapon is the price tag.
As of June 2025, BYD has slashed prices on its lineup of 22 EV and plug-in hybrid models by as much as 34%. Most of their key models are seeing double-digit discounts. In the short term, this might move some metal and clear out inventory. But in the long run, it’s a dangerous game. It erodes profitability and, crucially, damages the brand’s value. Who wants to buy a car today if they think it’ll be 20% cheaper next month?
This move has triggered an all-out price war in the China EV market. It’s a classic “race to the bottom.” When BYD cut prices, its competitors had no choice but to follow. Chery Automobile is now offering discounts up to a staggering 47% on some models. Geely, the #2 player, is also offering hefty discounts. It’s become a brutal chicken game, where companies are bleeding cash just to stay in the fight.
This kind of cutthroat competition is unsustainable. It’s already driving smaller EV startups out of business. WM Motor, once hailed as a rising star and backed by tech giants like Baidu and Tencent, declared bankruptcy last year. Aiways, one of the first Chinese EV brands to enter Europe, also went bust. This isn’t just a market correction; it’s a full-blown shakeout.
The Weird World of “0 km Used Cars”
If the price wars weren’t strange enough, this supply glut has created one of the most bizarre market phenomena I’ve ever heard of: the rise of the “0 km used car.”
You read that right. These are brand new cars, with literally zero kilometers on the odometer, being sold in the used car market. Here’s how it works: to meet crushing sales targets and clear inventory, dealerships or the manufacturers themselves will register a car, get a license plate for it, and then—without it ever being driven—sell it immediately to a used car dealer. It’s a paper transaction to make a new car “sold.”
This accounting trick allows them to hit their quotas and move inventory off their books. But it completely wrecks market pricing. A new EV with a sticker price of, say, $30,000 might show up on a used car lot as a “0 km used car” for just $16,000. It’s madness!
This practice is now rampant, with an estimated 3,000 to 4,000 dealers in China specializing in these fake used cars. The Chinese government is aware of the problem and is reportedly investigating, but the damage is already being done. It erodes consumer trust, distorts the true picture of supply and demand, and is a glaring symptom of a deeply unhealthy market.
📋 Quick Summary: The Cracks in the Foundation
BYD owes suppliers ~$76 billion via a risky, self-guaranteed note system with long payment terms.
Aggressive expansion led to a huge glut of unsold cars as domestic and international demand slowed.
Deep discounts of up to 34% are hurting profitability and forcing the entire industry into a race to the bottom.
A bizarre practice of selling new cars as used to fake sales numbers and clear inventory, destroying market stability.
What This Means for the Global EV Market 🌍
So, what does this crisis in the China EV market mean for the rest of us? Well, what happens in China definitely doesn’t stay in China. The Chinese government is trying to help by launching policies to encourage EV sales in rural areas, but that’s like using a bucket to bail out a sinking ship. The oversupply problem is just too big.
The most likely outcome is that this wave of overproduced, heavily discounted Chinese EVs will start flooding international markets. Automakers like BYD will be desperate to offload their inventory anywhere they can. This could lead to a sharp drop in EV prices globally, which might sound great for consumers in the short term.
However, it could be devastating for automakers in the U.S., Europe, and South Korea. How can they compete with a flood of cheap cars being sold at or below cost? This could trigger trade disputes, tariffs, and a major realignment of the global auto industry.
The phenomenal growth of China’s EV industry was a sight to behold, but it seems it was built on a shaky foundation of over-investment and unsustainable practices. The coming months will be critical. We’re watching to see if BYD and the broader Chinese EV market can navigate this crisis or if the bubble is truly about to burst.
Frequently Asked Questions ❓
This whole situation is developing fast, and it’s a huge deal for the future of electric cars. What are your thoughts on the China EV situation? Do you think BYD will pull through? Let me know in the comments below! 😊
