"Mainland new energy vehicle purchase subsidies, purchase tax reductions and other policies will be withdrawn by the end of this year." Considering that product development takes 3 to 5 years, it is proposed that the purchase tax reduction policy can be extended. At the meeting of 100 electric vehicles, Wang Chuanfu, chairman of BYD, suggested maintaining the existing preferential policies.
A few days later, BYD released its 2021 financial report. For the whole year of 2021, BYD's revenue was 216.142 billion yuan, an increase of 38% year-on-year, while its non-net profit attributable to the mother was only 1.255 billion yuan in the same period, down 57.5% year-on-year. If the new energy subsidy of 5.867 billion yuan is not included, the loss recorded is more than 4.6 billion yuan.
In 2021, BYD's cumulative sales of 740,100 vehicles, an increase of 73% year-on-year, of which 603,800 new energy vehicles, a year-on-year surge of 218%, the market share is close to 1/5, which means that for every five new energy vehicles sold in the Chinese market, one is BYD.
The sharp increase in revenue and sales and the sharp decline in profits are in stark contrast, behind this seemingly incomprehensible phenomenon and data, there are hidden pains and helplessness, challenges and opportunities, perseverance and adjustment?
"We have a lot of fish"
"Unique martial arts is technology, it is our deep moat, and only by staying ahead of technology can we maintain development." We have a lot of fish, and when the market needs it, we will sneak out a fish. Wang Chuanfu believes that technology is the foundation of the company's moat and sustainable development.
All along, BYD has shown its skills. When he appears in public, Wang Chuanfu most often wears not a suit, but a tooling; BYD's most proud praise is not "China's highest market value car company", but "mastering the independent research and development and production capacity of core product components of the whole industry chain such as batteries, motors, electronic controls and chips".
BYD does have technical reserves. Since 2020, blade batteries, DM-i super hybrid, e-platform 3.0 and other technologies have been released. At present, it is also developing technologies such as energy storage products (BMS-active), DiLink 4.0 (5G), and large-size half-chip photovoltaic modules.
"Electrification is the first half, and intelligence is the second half. In the second half, chip + 5G, the core technology can not be less, but we have not yet released. We take the core technology as life, we have a whole set of software, chips a series of talents. Wang Chuanfu said.
The independent research and development and production capacity of the core product components of the whole industry chain of new energy vehicles have enabled BYD's new energy vehicles to gain market recognition, and at the same time, they have also paid heavy costs.
In order to achieve independent research and development of core components, BYD has a huge R & D team. As of the end of December 2021, BYD has 40,382 R&D personnel, accounting for 14% of the total number of employees, and one in every six BYD employees is A R&D personnel. In order to maintain the normal operation of this R & D team, BYD spent 10.6 billion yuan in 2021, accounting for 7% of operating cash outflows. For every 100 yuan that BYD spends, 8 yuan is spent on research and development.
In order to achieve independent production of core components, BYD has also built a number of industrial parks and employed a large number of workers. As of the end of December 2021, approximately 197,000 employees were engaged in the automotive business in addition to 91,000 employees engaged in the mobile phone components and assembly business.
For comparison, Geely Automobile and Great Wall Motor have 44,000 employees and 78,000 employees, respectively. In 2021, BYD paid 28.76 billion yuan in wages, while Geely Automobile and Great Wall Motors were 8.978 billion yuan and 9.893 billion yuan, respectively. BYD's salary expenditure is more than geely and the Great Wall combined.
On the one hand, there is a heavy burden of research and development and labor, and on the other hand, it is a profit as thin as paper. Contrary to the impression of the outside world, BYD is not exactly a car company. The company's main business consists of three parts, namely the automotive business, the mobile phone components and assembly business, and the secondary rechargeable battery and photovoltaic business. In 2021, the mobile phone business contributed 86.454 billion yuan in revenue, accounting for 40%, and the automobile business contributed 112.489 billion yuan, accounting for 52.04%.
BYD's revenue is huge, but the profits of various businesses are very thin. As a typical labor-intensive industry, the gross profit margin of the mobile phone assembly business is only 7.57%. This means that more than 86 billion in turnover only generates 6.5 billion gross profits. The mobile phone business only increased the scale of revenue, but did not create much profit.
At the same time, the gross profit margin of the automotive business is only 17.39%. For comparison, Tesla and NIO's gross margins reached 29% and 20.1%, respectively. Although it has mastered the research and development and production capacity of core products in the whole industry chain such as batteries, motors, and electronic controls, from the current point of view, BYD's efficiency is still not high.
Unlike Tesla and Nio, BYD focuses on the low-end market. In 2021, the average price of Tesla and Weilai's bicycles is 320,000 yuan and 363,000 yuan, respectively. BYD did not announce this figure, but from the perspective of sales, the most popular models are the Qin series and the Song series, and their guidance prices are 11.18-17.58 million yuan and 152.8-20.58 million yuan, respectively.
The vertical integration strategy enables BYD to grasp the R&D and production capabilities of the core components of the whole industry chain, and also intensifies its R&D and labor costs, the internal performance is that the gross profit margin is not high, and the external performance is the decline in profits. This phenomenon is exacerbated by the increasingly competitive pure electric and hybrid markets.
In the face of difficulties and challenges in development, BYD has gradually explored a solution. Key actions include insisting on R&D investment, splitting the business unit and launching high-end brands.
"Only make BYD's money, that's not called skill"
"So we have a market-oriented 1.0 strategy, that is, the separation of the parts business. Motors, batteries, powertrains and other businesses are killed in the form of business units to compete with their peers. Only to earn BYD's money, that is not called the skill, to take it out to earn the market money that is called the skill, which means that the product is competitive. ”
At a media briefing in December 2021, Wang Chuanfu explained BYD's behavior of splitting its business and raising funds independently in recent years.
In May 2019, BYD spun off the battery division to establish Fordy Battery. "All the car brands you can imagine are talking to us about blade battery-based partnerships." He Long, chairman of Fordy Battery, revealed.
Recently, some media reported that the fixed-point cooperation between Weilai and Fordy batteries has been finalized before the Spring Festival, using BYD's lithium iron phosphate batteries. "In the second half of last year, a number of Weilai battery people frequently visited BYD's Shenzhen Pingshan headquarters."
Fordy Battery has received external orders, and BYD Semiconductor is about to split and go public. In May and June 2020, BYD Semiconductor completed series A and A+ rounds of financing, introducing investors such as Xiaomi Group, SMIC, SAIC Investment, and ARM. In January 2022, the LISTING COMMITTEE of the Gem Board announced that BYD Semiconductor launched its first meeting on the 27th.
"Marketization 1.0 is to sell products, and 2.0 is to sell enterprises and let the capital market recognize." BYD Semiconductor is already on the way to the market, and more business units will be listed in the future, and batteries and motor drives are possible. ”
"This can further mobilize the enthusiasm of various business units, BYD will distribute 10% of the equity of the subsidiary to the management team, the larger the market value after the listing, the greater the income." If I have achieved a little success myself, our aim is to make every subsidiary a little king. Wang Chuanfu said.
In mid-2021, there is news that BYD will launch high-end brands. At the media communication meeting, Li Yunfei, general manager of BYD's brand and public relations business department, confirmed the news. "In the second half of next year, you will see our high-end brand, the first car is a hardcore off-road vehicle, the price is 500,000 to 1 million."
Insisting on R&D investment, splitting the listing, and launching high-end brands have become the established route. With the rapid development of the new energy market, BYD has also gained unexpected gains. At a recent investor meeting, BYD revealed that the cumulative number of undelivered orders reached 400,000. "Sales are conservatively expected to be 1.5 million units in 2022, and if the supply chain is good, it will hit the sales target of 2 million units."
However, the experience and lessons of more than 20 years of entrepreneurship have enabled Wang Chuanfu to gain a deep sense of distress and maintain caution and restraint in the rapidly changing market.
"The market changes too fast, we can understand the direction of the development of technology, but we can't see through the development of the market in the next few years, and we don't know how fast the market will rise, which will lead to our insufficient preparation." At present, the official data is too conservative, and we dare not be too aggressive, after all, this involves a huge investment. ”
"I have been thinking about whether there will be a new crisis in the future, how to master more technologies, how to grasp the development direction of the industry, whether the strategy we have formulated will be deviated, and whether we will bury hidden dangers while we are growing rapidly?"