Summary
- BYD’s leverage is structurally understated: Extended supplier payables mask approximately US$60B in adjusted net debt.
- Vertical integration has flipped from moat to constraint as competitors replicate scale with lower capital intensity.
- Energy storage is no longer optional upside — it is a necessary release valve for battery oversupply and inventory risk.
- Cash flow, not volume, is now the governing variable as interest coverage deteriorates and pricing power erodes.
Bernstein has doubled down on its bullish call, valuing BYD’s battery division at $110 billion — nearly equal to the company’s entire market cap. The market loves BYD’s Blade battery and its new Haohan energy storage system. But beneath the headlines, the numbers tell a different story: BYD is carrying hidden debt, facing tougher competition, and struggling to turn volume growth into healthy margins.
The Hidden Leverage: Bernstein vs. Reality
On paper, BYD’s debt looks manageable, with a debt‑to‑equity ratio of about 34%. But independent analysts say the company is disguising much larger borrowings.
- The forensic truth: GMT Research estimates BYD’s real net debt at CN¥323 billion (~US$60B) once supply‑chain financing is included.
- How it works: BYD stretches out payments to suppliers far longer than industry norms, effectively borrowing from them without paying interest.
- The risk: This makes the company look liquid, but masks a massive build‑up of liabilities that could strain cash flow if demand slows.
Hunter Becomes Hunted
BYD’s vertical integration — making its own batteries, chips, and chassis — was once its moat. Now rivals have caught up. We have analysed this in, The Hunter Becomes the Hunted.
- Competition: CATL dominates the battery market with 43.4% share, while BYD slipped to 21.6% in 2025. EV makers like Nio, Xpeng, Li Auto, and Xiaomi are matching BYD’s integrated model with leaner costs and faster design cycles.
- Margins under siege: BYD’s Q3 2025 profits fell 33% year‑on‑year. Shipments are rising, but margins are shrinking.
- The shift: BYD is no longer the disruptor; it’s the incumbent defending ground against hungrier competitors.
The Energy Storage Pivot
Bernstein points to BYD’s Haohan storage system as a hidden asset. But the pivot looks more like necessity than opportunity.
- Inventory pressures: Reports in late 2025 flagged rising stockpiles and debt stress. With China’s overall car market projected to grow just 1%, BYD is leaning on utility‑grade storage to absorb excess battery output.
- External clients: Toyota is already a customer, and talks with Ford for hybrid batteries were reported but remain unconfirmed. These deals highlight BYD’s urgency to find new buyers as its own vehicle sales growth moderates.
Forensic Snapshot: The Capital Stress Test
- Interest coverage gap: BYD’s profits are no longer enough to cover its interest payments — a clear red flag.
- Cash buffer: The company is relying on its CN¥175B cash reserves to stay ahead in China’s price war.
- Refinancing risk: If export expansion stalls due to tariffs or design fatigue, that buffer could evaporate quickly.
Conclusion
Bernstein is selling a story of value. Our audit shows a story of fragility.
BYD remains a global leader, but its “sovereign innovator” status is being repriced as a “legacy incumbent.” For investors, headline shipment growth is a distraction. The real metric is margin survival. If BYD cannot turn its Haohan storage system and external battery deals into high‑yield cash flow, its US$60B adjusted debt will shift from a strategic lever to a structural anchor. Volume does not equal value. The winners will be those who survive the margin war.
Further reading: