BYD's $100 billion EV success turns into a $10 billion cash outflow problem

Despite record EV sales and more than $100 billion in revenue, BYD is burning billions in cash as tighter competition, slower model upgrades and rising costs squeeze its margins at home and abroad

For much of the past five years, electric carmaker BYD has been the face of China’s electric-vehicle dominance — a vertically integrated powerhouse, a global export machine, and the company that toppled Tesla from the top of the EV sales leaderboard in 2024. Everything seemed on an upward trajectory for the EV giant. But 2025 has delivered an unexpected turn in BYD’s story. Despite selling millions of vehicles and generating more than $100 billion in annual revenue, the company is burning cash at an alarming speed, according to a Reuters report.

 

BYD also reported that in the third quarter its profit plunged nearly 33 per cent, while revenue fell three per cent year-on-year — the company’s first revenue decline in more than five years.

 

 

Over the first nine months of 2025, BYD is estimated to have recorded more than $10 billion in cash outflows, mainly by expanding manufacturing capacity, R&D infrastructure, and new energy ventures, the company’s financial statement showed. This figure indicates a cash-burning phase despite healthy profitability and financing inflows. That headline number has surprised even long-time China auto watchers. The dominant question now is: why is the world’s largest EV seller draining this much cash?

 

Why is BYD’s financial performance under strain?

 

The pressure points are visible across BYD’s financials. In October, its global deliveries fell 12 per cent year-on-year to 441,706 units, according to a Bloomberg report. BYD attributed the stumble to intensifying domestic competition and a stalling of growth momentum.

 

In September, with sales of 393,060 units in China, BYD lost the title of top-selling EV to SAIC Motor, which sold around 440,000 units. The following month, it posted a second consecutive quarterly profit drop — a rare occurrence since 2020.

 

The contrast with its blockbuster 2024 is striking. That year, the firm sold 4.27 million vehicles (a 41 per cent jump), generated RMB 777.1 billion ($109.1 billion) in revenue, and delivered RMB 40.25 billion ($5.65 billion) in net profit, beating Tesla on total revenue. Beneath those impressive headline figures, however, red flags had already begun to surface — shrinking margins, weaker cash generation, and rising investment costs.

 

Why is BYD struggling in its home market?

 

China remains BYD’s single largest source of volume and profitability, but it is also where its vulnerabilities are now most exposed. In the three months to end-September, BYD saw its first year-on-year decline in domestic sales since 2020, Bloomberg reported.

 

A major driver is the brutal competitiveness of China’s EV battleground, where new models from Geely, Leapmotor, and Xiaomi have captured significant market share. In the first half of 2025, Geely’s Xingyuan sold over 205,000 units and Xiaomi’s SU7 nearly 156,000 units — volumes large enough to squeeze BYD at both the mid-range and premium ends.

 

This saturation has forced BYD to cut its 2025 sales target from 5.5 million to 4.6 million units, according to Reuters. It has also raised questions about how much growth is left in China’s first-wave EV boom.

 

How are tighter regulations hurting BYD’s advantage?

 

One of BYD’s greatest strengths has long been its pricing power, supported by deep vertical integration — from batteries to chips — allowing it to cut prices without destroying margins. This strategy helped BYD become China’s largest automaker.

 

However, China’s tightening EV regulations, including new safety and software compliance standards, have increased costs and diluted BYD’s pricing advantage.

 

Is a delayed product refresh hurting BYD’s competitiveness?

 

BYD’s next major product refresh — featuring new software architecture, better batteries, and improved autonomous features — is not due until 2026. This delay leaves it vulnerable to rivals launching sleeker, more advanced models now, industry analysts say.

 

A slower refresh cycle in China’s hyper-competitive EV environment means one thing: inventory keeps piling up. Unsold stock ties up cash and triggers heavier dealer incentives, worsening the cash burn.

 

Can overseas markets offset weak sales in China?

 

Outside China, BYD continues to see rapid growth. In the UK, sales grew 880 per cent year-on-year in September 2025, making the country its biggest overseas market for the first time. Its export footprint across Southeast Asia, West Asia, Latin America, and Europe is expanding rapidly.

 

However, overseas gains cannot fully offset the drag from weakening home-market sales. International expansion comes with its own costs — localisation, logistics, dealership networks, and regulatory compliance. Europe and Mexico have already tightened their stance on Chinese EV imports. The US market remains effectively closed due to tariff and technology restrictions that will take effect from 2027.

 

Is BYD’s cash burn part of a larger EV industry problem?

 

BYD’s cash-flow paradox — high revenue but low free cash flow — is not unique in China’s EV sector, but the scale is striking. Peers such as NIO burned $2.23 billion in cash in Q1 2025 alone, while Xpeng has faced volatility in short-term investments amid heavy R&D spending.

 

The structural capital expenditure demands of batteries, semiconductors, EV platforms, and overseas gigafactories mean that even strong operating cash flow does not ensure free cash flow. As a result, BYD’s free-cash-flow growth over three years is negative, and over five years, just four per cent.

 

BYD is far from the brink, but the gap between sales growth and cash-flow health is widening. Unless it changes course, China’s EV behemoth may soon find that scale alone cannot keep the green in its favour.