BYD, hit the ceiling?

Produced by丨Miaotou app

Author丨Li Geng.

Header picture丨Visual China.

Key Points::BYD's scale advantage in the first three quarters of 2023 has become more and more obvious, and the strongest production and sales capacity of a single brand of Chinese automobiles has continued to improve its financial performance

The divergence between the stock price performance and the operating fundamentals is due to the intensification of competition in China's auto industry and multiple headwinds for BYD to continue to promote scale expansion

BYD's strong efforts have promoted all-round cooperation with other car companies, including in-depth cooperation with Huawei. At the moment when the new energy vehicle revolution is far from over, there are still variables in the deep-seated product and technology competition, and BYD has not really succeeded.

In the process of lower stock prices in the second half of the year, the fastest and most ruthless was in late November, and the source of the cause was not car companies, but Huawei further deepened cooperation with other independent car companies. At present, BYD has not yet recovered its pre-event stock price level, and its market capitalization level has directly returned to the level at the end of 2020.

Corresponding to such a poor performance, BYD continues to "play a triumphant song" in China's overall auto market. Since September last year, it has firmly locked the first position in the sales volume of domestic passenger car brands. After entering 2023, it can basically do twice as much as SAIC Volkswagen, which is in second place.

The surge in sales also led to an improvement in financial performance. In the first three quarters of this year, BYD's auto business achieved revenue of 330.1 billion yuan and net profit income of 18.3 billion yuan. Among them, the net profit performance in the third quarter was the best, with a total revenue of 1261900 million yuan, net profit reached 88900 million yuan, in one fell swoop, BYD's auto business net profit margin soared to 7% in a single quarter.

Compared with the beginning of this year, the divergence between BYD's market value and fundamental trends has intensified significantly. On various investment platforms, investors can be seen to be puzzled by this phenomenon.

Under BYD's macro sales figures, is there a business trend that is not easy for ordinary investors to perceive?How far has BYD's scale expansion strategy progressed now, and can it be continued?Why did Huawei's changes affect BYD to such a large extent?To what extent will the new trends in China's automotive industry in 2023 affect BYD's operating and market value performance in 2024?

Standing at this critical juncture at the end of 2023, we might as well conduct a re-analysis of BYD.

BYD's continuous growth in "sales", why is the market not recognized?

In the BYD Shenzhen case at the beginning of this year, Miaotou gave ** to BYD's annual results.

At the beginning of the year, Miaotou related**.

According to BYD's official monthly sales figures, as of the end of November, BYD has completed 267 for the whole yearThe sales of 20,000 passenger cars are only 32 million units away from the annual sales of 3 million units80,000 units. This is basically in line with the sales volume we gave at the beginning of the year**.

Referring to BYD's sales and financial results in the first three quarters of 2023, its sales in December are likely to remain at the level of 300,000 units, even if it cannot exceed 3 million units for the whole year, and it is not difficult to achieve total sales of more than 900,000 units in the fourth quarter.

According to the third quarter 8220,000 units, 126.2 billion yuan in revenue, 88Based on the reference value of 900 million yuan of net profit, BYD's revenue for the whole year of 2023 will be roughly close to 470 billion yuan, and the net profit will exceed 28 billion yuan, and the annual net profit level is expected to hit 6%.

As a result of this speculation, compared with the most pessimistic file at the beginning of the year, the revenue was about 80 billion yuan less, and the net profit was about 2 billion yuan less.

Although there is a gap in net profit, compared with the reduced revenue and sharply declining net profit of other car companies, BYD has obviously performed better.

Compared with the excellent net profit performance, the large deviation between the revenue and the estimated value of 80 billion yuan is obviously more worthy of in-depth study. The reasons are not complicated either:The fierce competition in the domestic auto market has made all car companies, including BYD, need to frequently reduce product prices to maintain market competitiveness.

Simply doing two divisions, the average selling price of BYD in 2022 is about 2250,000 yuan, and in 2023, it will only be 15 according to the estimate70,000 yuan. The drop is as high as 50,000 yuan, a range of up to 22%.

Substituting BYD's specific models, the most important and most popular Dynasty series DM-i price drop is extremely obvious. Among them, Qin Plus, which is positioned at the lowest end, has the largest decline in proportion, and the initial listing price is 1138－16.580,000 yuan, now counting the comprehensive subsidy of manufacturers, only 898－13.580,000 yuan.

Its price reduction range of up to 30,000 yuan, calculated according to the old **, is 18 26%, which just covers 22% of BYD's revenue reduction (even the middle point).

Although the price reduction phenomenon of all product lines is obvious, it is also an indisputable fact that BYD's overall sales are more dependent on low-end models.

BYD's main commercial models will be 15The key node of 70,000 yuan is divided into two batches: less than 15Typical models of 70,000 yuan include Qin plus, Seagull, Dolphin, Yuan plus, and Destroyer 05;Above 15The 70,000-yuan model includes the Song Plus (starting at just under 15.).70,000 yuan, but the average selling price is higher), seals, Han, Tang, frigates 07.

Through the specific sales changes of the two batches of products and the changes in the ratio of the two, it can be seen very clearly that BYD has transformed from "high and low end go hand in hand" in the middle of last year to "impact the high-end" at the end of 2022, and finally reverse to the process of "low-end support" in 2023.

Compared with the failure of this round of high-end attempts, the transformation of the competitive pattern of the market in a few major models deserves more attention.

The key to BYD's "big turnaround" from 2020 to the present lies in its explosion in the hybrid (DM) market. In particular, the all-new DM-i series, which will be launched in the second half of 2021, has surpassed the driving performance of conventional combustion engine vehicles (strong electric drive performance) and surpassed the fuel consumption and range of all fuel vehicles (including fuel-efficient Japanese cars).

Since the birth of this series, other independent car companies have realized the seriousness of the problem, and have successively released their own hybrid platforms and models with similar positioning in 2022. At this point in time at the end of 2023, other independent car companies have already shown signs of catching up with their own R&D innovation and the help of the domestic automotive chain.

Let's take BYD's 2021 compact SUV fist product "Song Plus" in the range of 15 200,000 yuan as an example, which sold 36. in one go in 202250,000 units, even maintaining a year-on-year growth of more than 200% at the end of 2022. However, after entering 2023, sales have declined rapidly, and from May onwards, they have fallen sharply year-on-year.

The transformation of such a star product is not a problem with the quality"Only" is its product positioning, but it has been "encircled and suppressed" by other independent car companies.

At the end of 2022, Chang'an Deep Blue S7 was "exposed";In February 2023, pre-orders for the Geely Galaxy L7 will beginIn June 2023, the Great Wall Haval Thunder MAX was also officially released. From the size positioning, to the plug-in hybrid attributes, to the final price, these three products completely go straight to the Song Plus.

In addition, BYD will launch the "Champion Edition" of "cheaper and more beautiful" products in all products in 2023, and Song Plus also encountered users' "wait-and-see" before the launch of the new model before the Champion Edition was launched in June. With the final launch of competing models from other independent car companies, a considerable number of domestic consumers (without any disparagement) who are already watching the show and even applaud for their own car companies (without any disparagement) finally choose to jump to other brands.

Taking the sales data of the four models from May 2023 to the present as an example, the sales volume of the three models except the Song Plus is still not as good as the previous one, but the loss of overall customers is very obvious. In August of this year, for example, the total sales of the three competing models reached 2630,000 units, while the sales volume of Song Plus in the same period was only 3290,000 units. The four models totaled 5The sales volume of 920,000 units is "just right" close to the monthly sales record of Song Plus at the end of 2022.

Figuratively speaking, the cake that BYD ate alone in the past is now squeezed in three new forks in one go.

Although BYD currently "eats" more cakes, the "fall" of Song Plus,It is enough to prove that the users who can jump from the joint venture car company to BYD still have not formed an absolute brand inclination towards BYD, and BYD can also win.

In addition to the struggle for specific products and market segments, other independent car companies that are not afraid of competition and competition have already set their sights on other "cakes" that BYD has at hand. The all-round cake "battle" is slowly unfolding.

In the list of domestic car sales in October this year, BYD ranked first, accounting for 20170,000 units, followed by Geely and Changan, both with 1.08 million units. The latter two are precisely the most ferocious car companies in the new energy market for BYD.

At present, Geely and Changan have tacitly offered two sub-brands, "Geely Galaxy" and "Changan Qiyuan", and replaced all the products with new energy power, plug-in hybrid, extended range, and pure electric. The biggest feature of these two sub-brands is that they take the initiative to compete with BYD in the mainstream market.

Taking Geely Galaxy as an example, in addition to the concept car "Galaxy Light", the three products currently on the market have similar BYD products in terms of positioning: Galaxy L6 corresponds to Qin Plus;Galaxy L7 corresponds to Song Pro Plus;The upcoming Galaxy E8 corresponds to the BYD Han.

According to the plan officially revealed by Geely Galaxy, the follow-up Galaxy L5 (plug-in hybrid + pure electric SUV) and Galaxy E7 (pure electric SUV) will be launched in the second quarter of 2024The Galaxy E6 (electric sedan) will be launched in the third quarter of 2024, and the Galaxy L9 (plug-in hybrid + pure electric SUV) will be launched in 2025. A total of 7 new energy products are likely to form a comprehensive coverage of the market.

Once these new products enter the market, even if BYD cannot be killed in the short term in terms of fuel economy, batteries and other hard products, it will also give the latter sufficient competitive pressure in the first battle.

Under this industry trend of "no limits", it is not easy for BYD to achieve self-growth through high gross profit margins in China.

This is why the market is most concerned about BYD two points:Whether BYD can continue the growth momentum of sales, or continue to achieve technological and product leadership in the new energy revolution.

Scale is great, but it can't last forever.

As early as 2021, in Miaotou's first in-depth case about BYD, it deeply analyzed the root causes of its shortcomings in controlling costs.

According to reliable sources, the number of 19 business divisions disclosed around 2021 has risen to 23.

Different from other car companies, BYD in the industrial chain and sales network links, long-term adhere to the "buy foreign is better than their own", many internal business divisions, covering all aspects of new energy vehicle parts, in the era of fuel and new energy products in parallel, everything is their own route, once seriously affected BYD's operating efficiency.

In the last 3 years of BYD's business development, this set of infrastructure has not changed, and BYD's method of reducing manufacturing costs is "simple and crude".Scale-up

The automotive industry has a huge system and a lengthy industrial chain, and scale has always been the key to the competition of car companies. Because the variety of products produced is limited after all, as long as the quantity is larger, a considerable amount of input in the early stage of production can be infinitely diluted, resulting in a decrease in production costs in the later stage of the product life cycle, which is converted into real profits.

Taking the Song PLUS we focused on above as an example, referring to the experience summary of the automotive industry, it has sold a total of 70450,000 units, if the production cost in the first month is set at 1 unit, then the production cost will probably drop to 0 by June 202344 unit cost or so, 70The overall cost of 450,000 vehicles can be reduced to 055 units cost or so.

In practice, car companies will set specific products according to the relationship between sales expectations and market competition. For a product like Song Plus, which aims at the volume of the mainstream market, it is completely possible to set the price at 0 in the early stage7. The unit cost is about 100,000 units, that is, about 100,000 units are sold, and the first revenue balance is achieved.

In the follow-up sales process, as long as the selling price remains the same, the profit margin will continue to expand with the total output.

Even if you really want to improve product power like BYD needs to keep cutting prices in reality, 07. After the pricing per unit cost is reduced by 25%, the selling price is also 0525 unit cost, corresponding to 0At 44 unit cost points, it can still maintain a gross profit margin of 20%, which is very close to BYD's current overall gross profit level.

The power of the scale is so great, and the effectiveness of solving the shortcomings of BYD's "self-production and self-sales" structure has made it "extremely aggressive" in the matter of "expanding scale" in the past three years. According to the official financial figures, BYD's "fixed assets + projects under construction" alone has risen from 81.5 billion yuan in 2021 to 249 billion yuan in 2023.

The sheer scale has also inevitably increased BYD's fixed asset depreciation limit, with its production-related fixed asset depreciation reaching 13.6 billion yuan in the first half of 2023 alone. In the first three quarters, it is estimated that it will exceed 20 billion yuan. This figure has exceeded the total net profit of BYD in the first three quarters of this year.

Even though it has achieved an annual production and sales volume of 3 million vehicles, BYD still has a clear desire for scale. Unfortunately, "growth at scale" doesn't last forever.

Not long ago, Miaotou published another deep case "Chinese cars reshuffle, who will play the table?".In this article, we have analyzed the trend of the overall demand of China's auto market in the future. And it is concluded that "the trend of transformation of China's local automobile market to a model of continuous shrinkage of stock and total volume has been established." Conclusion. It is precisely because there is no room for new demand in China that there have been rumors in the market since July last year that BYD has ordered ro-ro ships (for automobile transportation, which can be driven directly in large quantities and has high loading and unloading efficiency). Although BYD officials have never confirmed the relevant purchase information, the official announcement of the "rented" car ro-ro ship with the BYD logo directly painted on the chimney has just completed its first sea trial in the waters of Yantai, Shandong Province in early December.

If the previous rumors are true, BYD may form a maximum of 8 10 vehicles in 2024 and 2025, with a total of 680,000 vehicles per month. In this context, the theoretical export capacity for the full year is expected to reach 701 million units.

The numbers look quite rosy, but in the case of China's large-scale car exports, the shortage of ships is only a short-term contradiction, and how to complete sales in overseas markets is the key.

Taking the auto export situation in the first half of 2023 as an example, among the top 10 export destinations, only the UK has entered the top 10 global auto markets in 2022 (also because SAIC's overseas main business of Roewe and MG are all British brands).

The United States, India, Japan, Germany, France, South Korea and other major global automobile consumer markets all have all-round strong local car companies, and have always had a very high threshold in terms of policies related to automobile imports. Chinese automakers, including BYD, are unlikely to drain the country's already overbuilt capacity and other inputs, whether they are carrying high tariffs, rushing into the market, or trying to build production capacity in their home country for a long time.

Although BYD is likely to be able to ensure that the investment in ro-ro ships will not be lost by providing capacity to other domestic car companies. However, under the current market trend, it is still very challenging to rely on overseas export data to support BYD's overall sales and revenue growth.

Under the background of the full "Red Sea" at home and the lack of low-hanging fruit opportunities overseas, it is difficult to expand the scale according to the normal "operation-profit-reinvestment" route.

BYD, which was eager to give full play to its own product and technological advantages, finally came up with its own solution: borrowing.

In order to achieve rapid expansion in just 2 years, BYD's overall debt ratio has increased from 64 at the end of 202174%, further to 77. in the third quarter of 202337%。The overall debt soared from 160.7 billion yuan to 482.2 billion yuan.

From the perspective of cash flow, since mid-2021, BYD's operating cash flow totaling 304 billion yuan in two and a half years has finally been used to repay 23.6 billion yuan of debt and up to 255.6 billion yuan of new investment. It is equivalent to every time you make money, leaving only a very small part of the turnover cash flow required for larger sales, and directly throwing the money away to buy new plants and new equipment.

The continuous "re-injection", and the continued "borrowing" when the debt itself has not been paid off, inevitably makes BYD's financial risk continue to grow. Take, for example, the current ratio and the quick ratio, two key indicators that measure the health of a company's debtBYD's figure for the third quarter of 2023 is only 066 and 044, which is much lower than the average corporate health of 15 2 and 10 near the health range.

These two indicators can be explained in human terms: borrowing for several consecutive years compresses the stability of BYD in the future when it performs poorly. However, if the business declines and earnings decrease, some of the short-term debt will generate huge repayment pressure, further squeezing the company's cash flow reserves, and then affecting the company's normal operation.

In the face of such obvious financial risks, BYD, which has bright sales, also has to slow down the pace of expansion. The total fixed assets of projects under construction have dropped from 56 billion yuan in the first quarter to 41 billion yuan in the third quarterThis indicates that BYD's crazy expansion of domestic production capacity in the past three years will usher in a suspension or even termination in 2024.

At that time, BYD will most likely no longer have the growth brought by the continuous expansion of scale, and the growth of profits and revenues needs to be achieved under relatively stable production capacity conditions with the improvement of products and production efficiency.

The worst-case scenario is that BYD loses its product and technology leadership, and eventually cannot use its existing production capacity, resulting in the vacancy of equipment and personnel.

In other words, BYD wants to maintain the balance of power at the level of enterprise development, or wants to further develop and growThere is only one way to stay ahead of the curve with products and technologies.

Joining forces against BYD, the only option for other companies

In the same way, in the face of BYD's current "product + technology + scale" advantage, other independent car companies can only catch up in products and technologies.

According to the past logic of the automotive industry, it is the car companies themselves that lead R&D and innovation. Once car companies lag behind, it is equivalent to falling into a vicious circle of "declining revenue, reduced profits, no money for R&D and new products, and then it is impossible to catch up with the leader". BYD, which is now ahead of the curve, may be able to celebrate its success.

However, it should be noted that in this era of new energy for automobiles, BYD has achieved change and rise through technological innovation, and the final product form and industrial structure have not yet been determined. BYD's current achievements cannot be directly used as a reference for the future status of the industry in accordance with the era of traditional fuel vehicles.

The recent "Huawei car joint venture" new move that caused BYD's stock price to plummet is the best proof of this situation.

Previously, Huawei has used three cooperation models with car companies: component mode, HI mode (HUAWEI inside), and smart selection mode.

In the component model, Huawei sells its self-developed parts to car companies, such as electric drives, lidars, NFC, and car keys.

Hi mode is to put the whole set of intelligent electric solutions into your car, mainly including Hongmeng cockpit plus Huawei intelligent driving, etc.

Smart mode is HI mode Pro Plus, not only to help you get "intelligent cockpit + intelligent driving", etc., but also to help you with exterior design, help you do marketing, and even directly put the car in the store of Huawei mobile phone.

This problem has been unsolvable for quite some time. But with BYD's "efforts,The "life" of other car companies is almost gone, and it naturally does not matter whether the "soul" is lost or not. After all, traditional car companies should not only PK directly with BYD in their own product series, but also use the strongest internal and external assistance in the industry in BYD's non-strong fields to fight for vitality.

Obviously, for car companies, Huawei is the best choice in the middle of nowhere.

Take the new joint venture between Huawei and Chang'an as an example, it will be the original directlyHuawei's businesses, assets, and personnel, including intelligent driving solutions, automotive intelligent cockpits, intelligent vehicle digital platforms, intelligent vehicle clouds, AR-HUD, and smart lights, will be injected into the new joint venture. This kind of business and asset structure has surpassed many partnerships and models in the traditional automotive industry chain.

The further in-depth co-creation and manufacturing with car companies marks Huawei's attempt to move closer to the role of Bosch, the global automotive chain giant similar to that in the era of fuel vehicles. If it can be successful, this will also be the role that is most in line with the interests of all parties in the Chinese car company.

Compared with car companies, Huawei has always been good at innovating according to user needs and user experience, so other independent car companies are expected to pull China's auto industry into the intelligent stage that BYD is not too good at to compete.

The current product composition of China's passenger cars can be basically divided into three parts: automobile basic hardware, automobile experience software, and automobile future capabilities.

The basic hardware of the car is the basic hardware of the car, such as the body, engine, motor, three electrics, battery, and suspensionThe car experience software includes the overall design of the interior, the software upgrade of various digital display screens, and a variety of sofas, color TVs, and refrigeratorsFuture capabilities mainly refer to high-level intelligent driving functions.

BYD's strength lies in the basic hardware layer, and at the same time, it has a sufficient understanding of domestic consumers. Huawei's strength lies in the deep technology accumulation and rich manufacturing experience brought by IT giants and consumer electronics giants over the years.

According to Huawei's 2022 annual report, the BU R&D team has a total of 7,000 people, and as of 2022, Huawei has invested a total of US$3 billion in the BU and generated 20 percent of its business revenue7.7 billion yuan. At present, Huawei has been able to provide a basket of solutions, including LiDAR, the core MDC platform responsible for intelligent computing, and HarmonyOS to meet user application requirements and connect with a wide range of ecosystems.

The large model used in the cloud to realize autonomous driving can be used at 0The speed of 5 eflops increases computing power, allowing computers to "Xi" more than 12 million kilometers on the cloud every day.

Although BYD is a predecessor in the automotive industry, it is not easy to defeat Huawei, the "volume king" of the IT industry, with its own strength.

But the corresponding investment is already increasing. According to internal news in the industry, BYD has rapidly expanded the intelligent driving team to 5,000 people through high salaries this year, directly selecting the horizon on the core hardware, and providing computing chips and tool chains by the other party.

This determination is worthy of recognition, but how BYD can shorten the gap with Huawei, and even other new forces that have been working in the field of intelligence earlier, is still a big question mark.

If this problem is not dealt with in the next 1 to 3 years, BYD's product competitiveness can also "lag behind again" and even lose the favor of users.

Write at the end. Another year has passed, and once again to take a complete look at BYD, we might as well give a general conclusion first-China's new energy vehicle revolution is far from reaching a stable plateau, the past three years through its own strategy to achieve rapid rise of BYD, there is a glamorous side, there is also the price to pay behind, there are new opponents.

It's too early to open champagne for BYD.

Short-term volatility** cannot be asserted as a downward inflection point. But more and more uncertainty is enough to affect the secondary market, which is based on the expected performance, and BYD's share price fluctuations are normal.

Combined with the above new analysis of BYD's current situation, the latest version of BYD's market value factor list is output, in order of most important to most minor:

Sales of key models, market competition trends, BYD's overall capacity utilization rate;

The ability to reasonably reduce costs in exchange for profits while the overall sales volume remains unchanged;

The investment in intelligence can be output as a leading product and technology in a timely manner

Progress of cooperation on the industrial chain side of other independent car companies;

Changes in BYD's performance in overseas markets.

End of full text.

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