BYD's Commitment to Supplier Payment Transparency: A Catalyst for Long-Term Investor Confidence

In an era where supply chain governance is increasingly tied to corporate resilience, BYD's recent pledge to standardize supplier payments within 60 days of delivery has positioned the Chinese automaker at the center of a broader industry transformation. This initiative, part of a government-mandated effort to curb exploitative payment practices, reflects not only regulatory compliance but also a strategic move to stabilize its supply chain amid rapid global expansion. For investors, the question remains: Can such transparency translate into measurable confidence, or does BYD's aggressive financial strategies—such as its reliance on supply chain financing—undermine these efforts?

A Regulatory-Driven Shift in Payment Practices

According to a report by Reuters, BYD has committed to aligning with a 60-day supplier payment initiative spearheaded by the China Association of Automobile Manufacturers (CAAM), alongside peers like Geely and ChanganChina's BYD says to 'actively respond' to supplier payment initiative^[1]. This pledge aims to eliminate opaque practices such as the use of promissory notes, which have historically strained liquidity for smaller suppliersWhy BYD's 60-Day Supplier Payment Pledge Could...^[2]. The initiative, mandated by the Ministry of Industry and Information Technology (MIIT) in March 2025, requires large enterprises to settle payments within 60 daysChina Parts Suppliers Are Wary of Carmakers' Bill Payment Pledge^[3]. BYD's emphasis on operational links like order confirmation and delivery acceptance underscores its focus on enforceable timelinesBYD reports its financial results in 2024: revenue hits 777.1 billion yuan, up 29 year-on-year^[4].

While this move aligns with global trends toward ethical supply chain management, skepticism persists. Bloomberg notes that BYD's Dilian platform, which facilitates promissory notes, had issued 400 billion yuan in such instruments as of May 2023China Parts Suppliers Are Wary of Carmakers' Bill Payment Pledge^[5]. Analysts warn that workarounds—such as delayed acceptance processes or ambiguous invoicing—could dilute the initiative's impactFor China's auto suppliers, a 60-day pledge may still mean waiting months for payment^[6].

Financial Performance and Liquidity Risks

BYD's 2024 financial results, reported by its official media outlet, highlight a 29% year-on-year revenue increase to 777.1 billion yuan and a 34% rise in net profit to 40.25 billion yuanBYD reports its financial results in 2024: revenue hits 777.1 billion yuan, up 29 year-on-year^[7]. However, these gains are shadowed by a 24.3% surge in accounts payable to $33.6 billion (CNY241.6 billion), raising concerns about liquidity risksBYD's growth hinges on EV demand stability and financial transparency, says GlobalData^[8]. GlobalData analysts caution that BYD's reliance on supply chain financing could expose it to systemic vulnerabilities if market conditions deteriorateCan BYD Survive An EV Downturn With Its Risky Debt Strategy?^[9].

Despite maintaining a BBB credit rating—a testament to its ability to meet obligations—BYD's stock has faced volatility. Yahoo Finance reports that its H shares dropped 31.4% from their May 2025 peakBYD executives buy shares in a show of confidence in the EV...^[10]. This volatility contrasts with the company's strong cash reserves (154.9 billion yuan in 2024)BYD reports its financial results in 2024: revenue hits 777.1 billion yuan, up 29 year-on-year^[11], suggesting a disconnect between operational strength and market sentiment.

ESG Momentum and Investor Sentiment

The intersection of ESG performance and financial outcomes offers further nuance. Sustainalytics ranks BYD 48th out of 84 in the automobile industry for ESG risk, indicating room for improvementBYD Co., Ltd. ESG Risk Rating^[12]. Academic studies suggest that ESG momentum—improvements in scores over time—correlates with higher stock returns and lower volatilityThe Effects of ESG Scores and ESG Momentum on Stock Returns and Risk^[13]. While BYD's 60-day payment pledge could enhance its ESG profile, its current reliance on promissory notes may hinder progressChina Parts Suppliers Are Wary of Carmakers' Bill Payment Pledge^[14].

Investor reactions are mixed. Executives spent 52.3 million yuan purchasing shares in 2025, signaling optimismBYD executives buy shares in a show of confidence in the EV...^[15]. Yet, the company reduced its 2025 sales target from 5.5 million to 4.6 million units, reflecting market challengesBYD Slashes Entry EV Prices as Chinese Market Faces...^[16]. This duality—internal confidence versus external caution—highlights the delicate balance between strategic commitments and operational execution.

Challenges and the Path Forward

For BYD, the success of its supplier payment initiative hinges on enforcement. GMT Research notes that its true net debt, influenced by delayed supplier payments, is over 10 times higher than officially reportedGMT Research report on BYD’s net debt^[17]. If the 60-day pledge reduces reliance on non-cash instruments, it could improve liquidity and ESG metrics, bolstering investor trust. However, suppliers remain wary, given historical delaysFor China's auto suppliers, a 60-day pledge may still mean waiting months for payment^[18].

Conclusion

BYD's supplier payment transparency initiatives represent a critical step in aligning supply chain governance with investor expectations. While regulatory pressures and strategic imperatives drive these efforts, the company's financial risks—particularly its reliance on supply chain financing—pose challenges. For investors, the key metrics to watch include ESG score improvements, credit rating stability, and the effective implementation of 60-day payment terms. If BYD can navigate these hurdles, its commitment to transparency may well become a cornerstone of long-term investor confidence.