The World's Biggest EV Maker Weans Itself Off Supply-Chain Finance¶
Source: The world's biggest EV maker weans itself off supply-chain finance (Financial Times)
Date Published: 2026-05-27
Author: Financial Times
TL;DR¶
BYD, the world's largest EV maker, abandoned its proprietary Dilian electronic promissory note system — and its borrowings have surged as a direct result. The shift away from in-house supplier financing, triggered by Beijing's crackdown on auto supply chains, has forced BYD to seek external debt, exposing the scale of its reliance on stretched payment terms to keep reported debt low.
The Shift in Payment Strategy¶
BYD has told some suppliers it wants to stop using in-house financial notes (Dilian) to pay them — a seismic shift away from a practice that helped power its rise but has been criticized for disadvantaging parts makers. Instead, BYD will use commercial paper or bank notes.
"BYD now wants to use commercial paper or bank notes to pay suppliers rather than promissory notes issued on Dilian, an electronic platform it launched in 2018."
How Dilian Worked (And Why BYD Loved It)¶
Launched in 2018, Dilian (short for "BYD supply chain") allowed BYD to keep a massive cash pile while delaying payments to suppliers. Key features:
- Suppliers received electronic IOUs instead of cash, payable months or even up to a year later
- Dilian notes could be circulated outside BYD's supply chain — suppliers used them to pay their own contractors
- This helped BYD identify lower-tier suppliers and increase bargaining power
- Reduced BYD's working capital costs and reliance on external financing
The Strain on Suppliers¶
| Metric | BYD | Industry Context |
|---|---|---|
| Days to pay suppliers (2023) | 127 days | China avg: 108 days; Global: <90 or <60 |
| Discount rate for early cash-in | ~6% (Dilian notes) | Bank notes: <2% |
| True net debt (GMT Research) | ~$45B (323B yuan) | Reported: 27.7B yuan |
Suppliers faced long payment delays on top of pressure to cut prices amid the brutal EV price war.
The Catalyst for Change¶
Three converging forces:
- New regulatory rules (effective June 2025): Automakers must pay suppliers within 60 days and cannot force suppliers to accept non-cash payments
- BYD's financial slowdown: October sales fell 12% YoY, domestic market share slid from 19.1% to 13.2%, revenue dropped 3% (first decline in 5+ years), profit tumbled 33%
- GMT Research spotlight: The accounting consultancy revealed BYD's true net debt was ~323B yuan vs. the 27.7B yuan officially reported — the gap achieved through delayed supplier payments and related financing structures
"BYD's use of supply chain financing meant the company's true net debt as of June 2024 was closer to 323 billion yuan ($45 billion), rather than the 27.7 billion yuan BYD reported in its earnings."
The Aftermath: Borrowings Surge¶
The FT's core finding: now that BYD has abandoned Dilian, its borrowings have surged. The charts in the article track:
- Total borrowings — sharply up after the supply-chain finance change
- Short-term borrowings — detailed breakdown of the new debt structure
- Bills payable — related to the shift away from the in-house system
- Net cash flow from operating activities — impact on operational liquidity
Without Dilian to delay payments, BYD must now finance its operations through conventional debt — revealing how much of its previously reported low debt was an artifact of its supplier financing system.
"BYD's borrowings have surged after abandoning in-house payments system for suppliers last year."
Loopholes Remain¶
While 17 major automakers pledged to abide by the new regulations, suppliers say loopholes remain. For example, automakers can delay payments by taking time to acknowledge receipt of goods.
"BYD statement: Its Dilian system falls within regulatory guidelines and it has sped up payments this year."
Key Takeaways¶
- BYD is abandoning its proprietary Dilian promissory note system for commercial paper and bank notes — a major shift in financing strategy
- New Chinese regulations (60-day payment rule, ban on forced non-cash payments) are driving the change
- BYD's financial slowdown — first revenue decline in 5+ years, 33% profit drop — adds urgency
- GMT Research estimated BYD's true net debt at 323B yuan vs. 27.7B yuan reported, highlighting the scale of off-balance-sheet supplier financing
- Despite pledges, loopholes remain that could allow automakers to continue delaying payments