Looking at the probability of BYD's success from the high-end car road of Tesla and Toyota
Wen | Liu Ding Zhenghui
BYD (002594. SZ), 2022 will once again impact the high-end car market.
According to BYD's official information, in the price range of 300,000 to 500,000 yuan, BYD will rely on the Denza brand to launch three new models of pure electric utility vehicles from 2022 to 2023, including MPVs and SUVs.
In the price range of 50-1 million yuan, BYD will launch a new high-end brand of new energy in 2022, the first model is a hardcore off-road vehicle, plug-in hybrid or pure electricity has not yet been announced. The brand is new and independent in terms of products, sales and service network, operations team, etc.
On February 14, BYD's 100% shareholding, Denza Automobile Sales Service Co., Ltd., obtained a business license, and Zhao Changjiang, director of BYD Automobile's high-end brand preparation office, tweeted that this means that BYD will soon launch high-end products and open high-end services.
On February 18, BYD announced a new brand logo and announced the opening of a new brand upgrade.
Chinese brands have not lacked attempts to impact the high-end car market before, such as BYD and Daimler in 2010 to establish a joint venture with Daimler to impact high-end pure trams, Geely Automobile has launched a beauty leopard sports car, Chery has launched a high-end brand Ruiqi, and asked football superstar Messi to endorse, but all have not succeeded. BYD has once again impacted high-end cars this time, how is the situation different, and what is the probability of success?
BYD is fighting high-end cars again
The price of high-end cars is usually above 300,000 yuan. There are two brands for BYD to enter the high-end car market, one is the Denza brand, positioned in the price range of 300,000-500,000 yuan; the other is a newly created high-end brand, positioned in the price range of 50-1 million yuan.
In terms of newly created brands, online media such as Auto Dynamics and Renmin Automobile Market previously reported that BYD has been preparing high-end models since 2015, with the internal code name "R" model, including a hardcore off-road model and a large luxury coupe model. As of press time, BYD has not commented on the news.
In February 2021, BYD set up a high-end brand preparation office and appointed Zhao Changjiang, former general manager of automobile sales, as the director of the office.
In July 2021, Zhao Changjiang began to interact with riders through personal Weibo, soliciting riders' needs for high-end models and guiding discussions about BYD's high-end models.
In November 2021, Zhao Changjiang began to consult with riders on Weibo, including information on the seat layout, seat configuration, intelligent configuration, battery life, and other information for high-end models. On average, 4 to 5 inquiries are made per month.
ATD is also working hard to revitalize the Denza brand.
In 2010, BYD and Daimler established Shenzhen Denza New Energy Automobile Co., Ltd. (hereinafter referred to as Denza), which has a 50:50 share ratio, and launched Denza brand and pure electric vehicle products, with a pricing range of 300,000-400,000 yuan, but sales were dismal.
On December 24, 2021, BYD and Daimler announced that they and Daimler would increase their capital in Denza by 1 billion yuan in monetary terms; at the same time, BYD and Daimler signed an equity transfer agreement, Daimler transferred the equity of Denza to BYD, and after the completion of the transfer, the equity ratio of BYD and Daimler in Denza will change from the previous 50:50 to 90:10, and the transfer is subject to the approval of the relevant regulatory authorities and is scheduled to be completed in mid-2022.
The increase in control is conducive to BYD injecting technology and model resources into the Denza brand, allowing it to seize the high-end market in the pricing range of 300,000-500,000 yuan.
On February 14, 2022, BYD registered dentist Automobile Sales & Service Co., Ltd., which has a 100% share ratio, with Zhao Changjiang as general manager.
In the past few decades, the traditional high-end car brands represented by BMW Mercedes-Benz Audi have always prevailed, and the latecomers can seize the low-end market with cost performance, but it is difficult to stir up the high-end car market pattern, but there are two exceptions - Tesla and Toyota Lexus. Understanding the history of these two companies to catch up is very helpful for observing new latecomers such as BYD.
Tesla: Top-down, dimensionality-reducing strikes
In 2021, Tesla will become the highest-selling high-end car brand in the United States. According to Cox Automotive, Tesla sold 352,000 units in the U.S. that year, surpassing BMW's 337,000 units, Lexus's 304,000 units, and Mercedes's 276,000 units.
Tesla sold 936,000 units worldwide in 2021, surpassing Volvo's 700,000 units and Lexus' 760,000 units.
Tesla's success story is twofold.
First of all, Tesla, with its new technology, has led the boom in the replacement of electric vehicles with fuel vehicles.
Battery technology is the biggest obstacle to the development of electric vehicles. Early batteries are either expensive or poor in safety, Tesla chose to package Panasonic's 18650 cylindrical batteries in parallel into battery bricks, and then integrate energy through the original battery energy management system, breaking through technical limitations and promoting the development of electric vehicles.
In addition, Tesla has developed an exclusive chassis for electric vehicles, allowing the car to get rid of the shackles of fuel engines and transmissions, free up more internal space, balance the counterweight of the whole vehicle with a battery pack, and reduce the weight of the vehicle with an all-aluminum body.
Tesla's Model S model launched in 2012, the high-performance version of the 100-kilometer acceleration of only 3.4 seconds, became the world's fastest accelerated production four-door sedan at that time, not only in the acceleration race at the Palm Beach International Circuit in the United States, surpassed the previous record holder Dodge Viper model, and the price was only equivalent to 60% of the Dodge Viper model.
Second, Tesla has adopted a top-down promotion strategy, product release from high-end to low-end, from niche to public, first establish a high-end brand image, and then pursue sales.
Tesla's first Roadster model, which began mass production in 2008, accelerates 3.7 seconds per 100 kilometers and has a cruising range of 350 kilometers, which belongs to a niche sports car model; its Model S model is positioned in the price range of 50-1 million yuan, and Tesla President Musk actively creates topics as a startup star, selling electric vehicles beyond the driving experience and environmental label of fuel vehicles in high-end crowds.
But at this stage, Tesla's sales are not high, its Roadster model from the release to the discontinuation of only 2450 units, even after the launch of the Model S model and Model X model, but in 2016 Tesla's annual sales of only 76,000 vehicles.
Tesla began selling low-priced Model 3 models in 2017, and its global sales have also begun to climb rapidly, from 103,000 in 2017 to 500,000 in 2020 and 936,000 in 2021.
This top-down path is difficult for other car companies to replicate.
Lexus: Force out a hole, extreme investment
Toyota Motor's path of successfully impacting the high-end car market by building the Lexus brand is of great significance.
The Japanese automobile industry started late, and in the early days, it was mainly based on plagiarism and imitation, relying on the sale of low-cost cars to survive. From the launch of Toyota Motor's first model in 1935, and after World War II to the 1970s, the products of both Toyota Motor and other Japanese car companies were mainly based on imitations of European and American models. However, with its stable product quality and fuel economy, Toyota motor has laid a foundation in the global market and has accumulated its own technical and financial strength.
In 1983, Toyota Motor proposed to impact the high-end car market, started the development of Lexus models, proposed to create a model with extraordinary performance, and proposed that the top speed, fuel consumption, wind resistance coefficient, noise level and other indicators were better than the benchmark Mercedes-Benz and BMW models.
Although its R&D engineers felt it was impossible to meet these targets, Toyota still invested 6 years, 1400 engineers, $1 billion, and built 450 prototypes for testing.
In 1989, Toyota released its first Lexus model, and in just three years, Lexus surpassed Mercedes-Benz and BMW in the United States.
Toyota motor has at least three key points to impact the high-end car market.
First, the ultimate pursuit of products and investment regardless of cost. For latecomers, if you want to grab market share from traditional giants such as Mercedes-Benz and BMW, you must come up with truly extraordinary products, which means that you must come up with huge investment and determination to fight.
Second, technological innovation in a different way. In terms of traditional car-making technology, such as engine performance and vehicle safety, it is difficult for latecomers to significantly surpass giants such as BMW and Mercedes-Benz. However, the use of new technologies can create their own differentiated advantages, such as vehicle comfort, vehicle driving methods and so on. Lexus significantly improved comfort with electrical technology in its early days, and has since introduced hybrid technology to improve fuel economy and further increase competitiveness.
Third, conform to the trend of the times. The oil crisis of the 1970s led to the success of Japanese cars with outstanding fuel economy, and Japan became the third global automobile industry center after Europe and the United States, which laid the foundation for Japanese car companies to further move to the high-end.
Around 1929, the global automobile industry center in the United States, American brands accounted for 80% of the global passenger car production share; around 1960, the global automobile industry center in the United States and Europe, the two car brands almost equally divided the global share; the share of Japanese car brands continued to grow from 1960, reaching 10% around 1970, reaching 30% around 1980, and the United States and European brands were three points.
Therefore, Toyota Motor's successful impact on the high-end car market in 1989 is also the result of natural success.
BYD's strengths and weaknesses
Compared with 2010, when Denza was founded, BYD is more mature in the market to impact the high-end market, but it is still difficult to say that it will come to fruition.
Around 2010, Chinese auto brand passenger cars sold 6.15 million passenger cars worldwide, accounting for 11%, ranking behind Japanese, European and American brands, and about the same as Korean brands. Although the sales volume of china's automobile market ranks first in the world, the protagonist is a joint venture car, and the Chinese brand as a whole is in a sparring role.
In 2020, Chinese brand passenger car sales were 7.74 million units, with a global share of 14.4%, still ranked behind Japanese, European and American brands, but it has been significantly higher than Korean brands.
In 2021, the scale of the Chinese market still ranks first in the world, but the sales volume of local brands exceeded 40%, and the growth trend is strong. In the new energy vehicle market, Chinese car companies have led the way, and most of the names on the list of best-selling models are local brands. In the future, Chinese car companies may repeat the rise of Japanese car companies, and the global auto market is expected to change from three centers in Europe, America and Japan to four centers in Europe, America and Japan.
However, in comparison, after ten years of Japanese car companies and the United States and Europe, Toyota Motor has successfully impacted the high-end car market. At present, Chinese auto brands are still in the stage of strength accumulation, the market foundation is still weak, and the development momentum is still unstable.
BYD is a leader in China's new energy vehicles, but its auto business has long relied on fuel vehicles, with an average annual consolidated net profit of 2.8% from 2012 to 2020, far lower than Great Wall Motor's 9.14% and Toyota's 6.8%. Only in the wave of electric vehicles in the past two years, BYD has quickly completed the switch to the new energy track, and new energy vehicles have accounted for 82% of total sales in 2021.
In terms of extreme product building capabilities, BYD has obvious deficiencies.
BYD's past strategy was a multi-model strategy, lacking the successful experience of creating classic models.
At present, BYD is still a multi-model, multi-brand strategy, and its automotive business includes four sections: Dynasty.com, Ocean.com, Denza, and high-end brands.
In contrast, Tesla has entered the market from top to bottom by creating classic models and then deriving entry-level models; Toyota motor has successfully established a high-end image of the Lexus brand by concentrating resources and investing at any cost for ten years.
BYD's biggest advantage is that it has mastered the key technologies of the new era of automobiles. On batteries that account for about 40% of the total cost of electric vehicles, BYD's blade batteries have significant innovation advantages, attracting giants such as Toyota and Daimler to cooperate.
At the same time, relying on China, the world's largest automobile market, BYD can still enhance its brand image and promote the sales of its main mid-range models even if it cannot make a breakthrough in the high-end car market in the short term.
The author is a researcher at Caijing, editor: Mark
The Caijing Industry Research Center focuses on the capital market, discusses the success or failure of the company, explores the rise and fall of the industry, discovers value, and warns of risks
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