Chinese electric vehicle (EV) giant BYD, a formidable rival to Tesla, faces serious allegations of falsifying its profitability and engaging in accounting malpractices. The accusations, which have sent ripples through the global EV market, suggest that BYD may have manipulated financial statements to inflate its success, raising concerns about transparency and corporate governance in one of China’s flagship companies.
The controversy began when a report from a prominent short-seller firm claimed that BYD’s reported profits were misleading. The firm alleged that BYD overstated revenues by recognizing sales prematurely and understated costs through questionable accounting practices. Specifically, the report pointed to discrepancies in BYD’s supply chain, where related-party transactions allegedly allowed the company to shift costs off its books. These transactions reportedly involved subsidiaries and affiliates, creating a complex web that obscured the true financial health of the company.
BYD, known for its aggressive expansion and government-backed growth, has posted impressive numbers in recent years, outpacing competitors in EV sales. In 2024, the company reported a net profit margin significantly higher than industry peers, fueling its meteoric rise. However, critics argue that these figures are too good to be true, especially given the intense price wars and shrinking margins in the EV sector. The short-seller report highlighted unusually high inventory levels and cash flow inconsistencies, suggesting that BYD may be stockpiling unsold vehicles to artificially boost sales figures.
The allegations have sparked scrutiny from investors and regulators alike. BYD’s stock took a hit following the report, with shares dropping sharply on major exchanges. Analysts warn that if the accusations are substantiated, BYD could face penalties, loss of investor confidence, and potential delisting risks in international markets. The company’s heavy reliance on government subsidies—estimated to account for a significant portion of its revenue—further complicates the picture, as critics question whether BYD’s business model is sustainable without state support.
In response, BYD has vehemently denied the claims, calling them “baseless” and accusing short-sellers of attempting to manipulate its stock price. The company issued a statement asserting that its financials are audited by reputable firms and comply with international standards. BYD also pledged to cooperate with any regulatory investigations to clear its name.
As the EV industry faces growing pains, the BYD saga underscores the importance of transparency. Investors and consumers will be watching closely to see whether these allegations hold water or if BYD can weather the storm and maintain its position as a global EV leader.