Raising over 220 billion yuan, BYD launches a new round of expansion

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Source: Finance Magazine

BYD is expanding counter-cyclically—taking on large amounts of debt and heavily investing in high-end brands and overseas-market-facing capacity

By | Finance Magazine Researcher Yin Lu

Edited by | Mark

On March 27, BYD (002594.SZ/01211.HK) released its 2025 annual report: revenue grew 3.46%, breaking through 800 billion yuan for the first time; attributable net profit was 32.619 billion yuan, down 18.97%; overseas revenue was strong, rising to account for 38.65% of total revenue, up 10.1 percentage points year over year.

While both revenue and overseas business hit records, BYD’s profit side was under tremendous pressure. In addition to overseas gross margin, all other profit indicators and the average selling price per vehicle declined to varying degrees. This “increased revenue but not increased profit” phenomenon stems from the brutal competition in China’s domestic auto market in 2025.

In 2025, the “involution” trend in China’s auto market shows no sign of easing. BYD protects its market share through price cuts, and this strategy of trading price for volume lowers the average selling price per vehicle. Even if revenue hits a new high, it is still difficult to offset the profit loss caused by falling gross margin. That is also why BYD is stepping up its push into overseas markets, since overseas gross margins are significantly higher than in the domestic market.

In BYD’s 2025 annual report, the data showing the biggest change is “cash flows from financing activities.”

In 2025, BYD’s total cash inflows from financing activities exceeded 220 billion yuan. Of this, “cash received from obtaining borrowings” was as high as 134 billion yuan. Both figures set historical records, and the amount is close to the sum of the previous four years. This scale of capital raising already goes beyond what is needed for day-to-day operations—it is a strategic capital reserve.

More than 220 billion yuan of financing cash flow is mainly made up of two segments.

First, cash absorbed from investments exceeding 40 billion yuan. This funding mainly came from BYD’s placing in the Hong Kong stock market in early March 2025. BYD issued 129.8 million H shares at 335.2 Hong Kong dollars per share, raising as much as 43.5 billion Hong Kong dollars. This placing attracted subscriptions from global top long-term capital and sovereign funds. Middle East strategic investors entered heavily, represented by the Al-Futtaim family office of the UAE.

Compared with the amount of this placing, the “foreign-exchange cash” characteristic is even more important—this funding can be used directly to support the construction of BYD’s overseas factories in Europe, Southeast Asia, Latin America, and other regions, avoiding cross-border transaction costs and time losses.

Second, bank borrowing cash of up to 134 billion yuan. Increasing interest-bearing liabilities on a large scale in a year when profits are under pressure is often seen as a risk signal. But BYD’s move this time is an optimization of its liability structure.

In 2025, several large state-owned commercial banks provided BYD with large amounts of low-interest funding based on targeted policies such as technology innovation re-lending and re-lending for equipment updates in manufacturing. At points when the cost of interest-bearing liabilities was relatively low, BYD locked in large volumes of long-term low-interest capital. In 2025, BYD’s balance of long-term borrowings exceeded 60 billion yuan—almost equal to the total of the previous six years.

The main uses of this more than 220 billion yuan financing cash flow are: first, “the purchase/construction of fixed assets, intangible assets, and other long-term assets.” In 2025, this spending reached a record-breaking 150 billion-plus yuan. Second, for construction in progress: in 2025, new investment added more than 75 billion yuan, exceeding the investment intensity during the large-scale expansion of 2022–2023. At that time, to absorb the explosive order growth, BYD raised annual production capacity from under one million vehicles to more than three million.

Compared with the previous round, the “structural upgrade” features of the current expansion started in 2025 are evident. In 2025, BYD’s spending direction was highly concentrated on the “East China Industrial Park” and the “South China Industrial Park.”

In East China, Changzhou and Hefei are BYD’s two major bases. The Changzhou production base not only covers the Yangtze River Delta market, but is also BYD’s “export hub base.” The Hefei manufacturing base, meanwhile, is BYD’s “super factory” with the most complete supporting supply chain and the highest degree of vertical integration. Complete supporting factories are available for the whole vehicle, batteries, motors, electronic control units, chassis, and even interior components, and it is also the mass production base for the “second-generation Blade battery.”

Both the Changzhou and Hefei bases commenced construction in 2021 and began operations in 2022. During the construction peaks in 2022 and 2023, new investment exceeded 20 billion yuan per year. In 2025, the East China Industrial Park again saw new investment exceed 20 billion yuan, balancing overseas demand, supply-chain integration, and second-generation Blade battery production capacity.

The South China Industrial Park’s main components are the Shenzhen Pingshan headquarters base and the “BYD Super Auto Industrial Park” located in the Shenzhen-Shantou Special Cooperation Zone. The Shenshan base is BYD’s main production base for its high-end brands Yangwang, Denza, and Fangchengbao. In 2026, BYD’s high-end products are expected to fully ramp up. The high-end products’ strong pricing premium capability is expected to help restore the profits that BYD saw sharply decline in 2025. In addition, leveraging the natural advantages of the Shenshan intelligent logistics park and the port, the Shenshan base is also an export hub serving the Southeast Asian market.

When the industry is in a low point of price wars and declining profit per vehicle, the approach that best aligns with commercial interests is to shut down and consolidate, cut jobs and reduce production, and trim expenses to protect the profit statement. In recent years, automotive giants from Germany, the U.S., and Japan have been repeating this scene. But BYD is expanding counter-cyclically, taking on large amounts of debt and heavily investing in high-end brands and overseas-market-facing capacity.

Expansion has always been a double-edged sword with both opportunities and risks, and counter-cyclical expansion is truly “seeking wealth in danger.”

On the one hand, replacing accounts payable with interest-bearing liabilities may stabilize the supply chain, but it also increases the company’s financial leverage. If the interest rate environment turns around, or if the high-end brands and export businesses that were placed high hopes on fail to meet expectations and cannot provide sufficient profits, then debt interest will become a heavy burden.

On the other hand, rising global geopolitical games and trade barriers bring uncertainty. If high tariffs are encountered in target overseas markets, or if localization expansion is hindered, the新增 production capacity in 2025 could turn into a “bleeding point” that drains corporate profits.

In 2025, BYD’s total accounts payable and notes payable amounted to 209.206 billion yuan, down 14.27% year over year. This is the first time since 2019 that this line item shows a year-over-year decline, and it is also the first time in BYD’s history that operating revenue grows while accounts payable and notes payable actually decline.

In manufacturing, accounts payable and notes typically represent how much capital core companies hold from upstream suppliers. In the brutal price wars of the auto industry, most automakers’ instinctive response is to extend supplier payment terms, passing financial pressure upstream. But in 2025, BYD went the other way: it accelerated paying suppliers off using its advantage in low-cost financing. At the same time, BYD’s asset-liability ratio fell from 74.64% in 2024 to 70.74%.

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