Will BYD be more like "Huawei" than Huawei?
Text | Chinese merchants Tao Strategy Ze Liang
【01】
In 2021, BYD's products have successfully entered the first-line luxury camp of the BBA (BMW, Mercedes-Benz, Audi) for many times.
As the first attempt in the high-end new energy car market, the BYD Han EV equipped with blade batteries has become one of BYD's best-selling models.
In terms of the amount of insurance closer to the actual delivery volume, BYD "Han" beat mercedes-Benz E-class and Audi A6L, ranking second in the insurance volume in November 2021, only 166 units less than the top BMW 5 Series.
According to the data, BYD sold 730093 cars in 2021, a year-on-year surge of 75.4%; the annual sales of new energy passenger cars 593745 units, a year-on-year surge of 231.6%
BYD is brilliant again, in the same way that Huawei has broken through the siege of the smartphone market - self-developed core (battery, motor, electronic control) components, aimed at the high-end market, and improper foreign "assembly workshop".
However, Wang Chuanfu's BYD is more radical than Ren Zhengfei's Huawei - "it can do batteries, motors, and electronic controls, and at present, there is only BYD in the world" (Wang Chuanfu).
In 2021, self-developed super hybrid DM-i, blade batteries, and vehicle-grade semiconductors will support each other, paving the fast track for BYD's production and sales growth.
In a speech, Wang Chuanfu mentioned that "due to the lack of cores, about 7 million electric vehicles in the world are not produced." When other manufacturers had to slow down, BYD also claimed that it not only ensured that the chips were produced and sold themselves, but also supplied externally.
BYD is not only an "automaker", but also covers materials research, electronics, batteries, automobiles, new energy, rail transit, semiconductors, minerals and other fields, such as the recent bid for a lithium mining contract in Chile for $61 million.
In addition to the self-sufficiency of core components, BYD will also open blade batteries, IGBT chips, etc. to the industry, and win customers such as Hongqi, and oem pure electric models for Toyota, the originator of global electrification.
It is reported that BYD's other parts, on-board software, molds and other departments have the possibility of independent operation in the future.
Such BYD is more like the "Samsung" of the automobile industry.
Samsung is involved in more than ten industries such as flat panel display panels, sensors, LED lighting, batteries, tablet computers, and smart phones, and has not only developed and produced itself, but also become an important supplier in the industry. At that time, the Xiaomi supply chain team offended a senior executive of Samsung Semiconductor, and the company did not get Samsung's most advanced AMOLED screen supply for two years.
This model of doing your own work and making some money with your peers is called vertical integration, and Japanese and Korean companies mostly use this model. But the difference is that Japan's "vertical integration", too insistent on developing its own set of standards, its own industry is wasted, but Samsung has made world-class dominance.
【02】
More than enough is too much! Such troubles have also befallen BYD.
"Vertical integration" helped Wang Chuanfu reach the peak, and also let BYD fall into a deep valley, and even almost fell behind in the domestic new energy tide.
In 2003, Wang Chuanfu acquired the Qinchuan Automobile Factory in Xi'an for 270 million yuan and officially entered the automotive industry.
At that time, except for tires and glass, all the other parts were produced and sold in-house.
At that time, the self-control rate of mainstream car companies' parts was basically between 30% and 40%, and it showed a trend of decreasing year by year, while BYD's was floating above 80%.
Although BYD's way of "making cars behind closed doors" is contrary to mainstream car companies, it relies on the manufacturing "demographic dividend" (people + fixtures = manipulators) to force back foreign investment, bringing high cost performance and high efficiency - the F3 mold cost from the Beijing Mold Center costs 150 million yuan, which is only 1/6 of foreign manufacturers.
In 2007, with the outstanding performance of F3, BYD became the independent brand enterprise that broke through the 100,000 mark with a single model in the shortest time, and since then, BYD has also won the domestic independent brand sales championship in 2009.
In 2009, when Wang Chuanfu became China's richest man, BYD recruited aggressively to further strengthen its vertical integration capabilities, and within a year, the total number of employees soared from 97,000 to 183,000, and shouted out the slogan of "BYD plans to sell more than 10 million vehicles in 2025, surpassing Toyota to become the world's first".
However, the closure of self-sufficiency eventually led to unenterprising and internal corruption, and some enterprises in the upstream and downstream of the industrial chain formed an offensive and defensive alliance, dragging DOWN BYD.
"In order to achieve the goal of the first (in fact, the number of firsts), companies must do some very strange things, such as price wars, such as quality problems caused by too much rush to quantity, etc. I have not seen the cost advantage can become a 'moat', few companies can maintain low costs for a long time, and the manufacturing industry seems to have never seen it. And it is difficult for companies that rely on their own products to sell low prices for a long time, at least I have not seen it. That's my point of view, it has nothing to do with BYD."
Duan Yongping's answer on the snowball became a slur. In 2011, BYD's annual sales volume was 448,500 units, and in 2012, it increased slightly to 456,000 units, far lower than the 520,000 units in 2010. BYD's net profit plummeted from 4.08 billion yuan in 2009 to 210 million yuan in 2012.
BYD hasn't changed, but its consumers have changed, and they no longer need just a car, but a good car.
Wang Chuanfu, who has eaten the dividends of "vertical integration" for more than ten years, took a heavy blow and experienced a 3-year model adjustment before returning to stability.
But the stubborn Wang Chuanfu still refused to give up this foundation of his life, only this time, "he" and "it" had changed.
【03】
"Closed things will lag behind, and then they will always be compared with the past, not with the market." Once the marketization is opened, it is necessary to compare with the past and with peers. Wang Chuanfu painstakingly thought about pulling reform.
Since 2012, Wang Chuanfu has promoted BYD to access external suppliers in a large area, and even clarified the external matching rate by model, such as pure electric power to reach a minimum of more than 50%, and the price is better than 75%.
In the same period, BYD began to integrate the internal organizational structure, the implementation of "business unit corporatization", some business to the whole industry supporting, and others sold or closed, such as seats, molds, rubber and so on. In 2015, BYD also sold flexible circuit boards, LCD screens, modules, cameras and other businesses (formerly the fourth business unit) to Jiangxi Helitai for 2.3 billion yuan.
Limited funds and resources were injected into more core projects, and in 2013, Wang Chuanfu decided not to entangle with joint venture brands on traditional fuel vehicles, and the core strategy shifted to new energy vehicles.
In the traditional automobile manufacturing industry, the development of the industry has entered a mature period, the professional division of labor is more efficient, and better management, quality and cost requirements can be obtained.
However, products such as new energy vehicles that are in the market development period, parts and components companies may not be able to keep up with the manufacturers to master the technology. Moreover, the market size of the products in the pioneering period is small, the prospects are uncertain, the industrial support is lacking, and there are few adventurers. The size of the market determines the price of parts suppliers, a market with few players, and the cost of parts is higher, or it cannot be built.
Enterprises devote themselves to vertical integration, and only by doing parts can they promote product landing, which is a helpless choice. When developing some parts by themselves, enterprises will have a deeper understanding of their own products and know how to improve it, and the tribulations experienced by self-research will become a huge wealth of enterprises.
So, the fault is not vertical integration, but how.
Toyota dominated the era of fuel vehicles, relying on the peak of internal combustion engine technology, and who provided the glass and tires was not enough to affect the war situation. Obsessed with "vertical integration", Wang Chuanfu still focuses on the "whole industry chain" track, but "specialized and refined" - focusing on core technologies such as "three electricity" and self-made.
At the beginning of the 21st century, BYD, which saved sales by imitating Toyota's corolla to create F3, has been able to output "three electricity" technology to Toyota in reverse, from apprentice to master.
After focusing, BYD seems to be having a better life. On May 19, Wang Chuanfu personally watched BYD roll off the production line of the 1 millionth new energy vehicle in Shenzhen, becoming the first Chinese car company to achieve this milestone. However, this victory is a bit regrettable, relying on the blessing of the Shanghai Super Factory, Tesla reached the off-line of 1 million new energy vehicles as early as March 2020, becoming the world's first.
This transcendence seems to be a metaphor for the fate of industrial competition.
Tesla, known as the "Apple of the Car Circle", has taken a path that runs counter to BYD - self-developed system + chip, outsourcing manufacturing industry chain. But in the early days, Tesla also spent a lot of effort to develop its own products, even including the factory's instrument arm, to figure out how to build a car.
It can be seen that outsourcing or vertical integration is not the only correct path.
Wang Chuanfu wants to do more, "If I myself have achieved a little success, our goal is to make every subsidiary a 'little Wang Chuanfu'." This means that BYD may become a more open car-making system, doing it itself and helping others.
Without Samsung's technical prowess and historical opportunities, it is difficult to have two identities at the same time.
There is a controversy over the "soul" theory of car companies, how many powerful companies dare to fake their key projects in the hands of others, and those brands that dare to let go of BYD, and how many brands have won over consumers, will it become an embarrassing combination of Huawei and Xiaokang?
Buying a car is not buying a mobile phone, and the cottage machine can raise MediaTek, but the "old man's music" may not be.
However, from the perspective of the market environment, BYD has a calm space for advancement and retreat - taking a step back is to sell its own goods like the Huawei mobile phone of the year; further or it can become Samsung, taking into account the service of friends.
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