「Core Tips」
Wang Chuanfu seemed to be sitting on a time machine and betting on the right trend. However, in terms of earning power, BYD is even stronger.
Author | Li Xin
Edited by | Gokuno
On August 9, 2007, BYD Automobile F6 rolled off the production line, the Pingshan base was completed, wang Chuanfu changed the low profile of the past, and said:
BYD will become the world's number one auto company in 2025.
For how to achieve the first, he explained: "2020 is the world of electric vehicles, the core of electric vehicle technology is the battery, and BYD's core technology is battery technology. ”
More than a decade later, electric vehicles have gradually gained momentum, and Wang Chuanfu, who is sitting on the time machine, has also officially announced goodbye to fuel vehicles.
On April 3, BYD announced that it would stop the production of fuel vehicles from March this year according to the needs of strategic development. In the future, BYD will focus on pure electric and plug-in hybrid vehicles in the automotive segment.
As a result, BYD was suddenly labeled as "the world's first company to officially announce the suspension of fuel vehicles".
Seeing that BYD's strategy is so decisive, a netizen who is familiar with "Super Source Force" directly threw out the conclusion: BYD's stock price should rise again!
The short-term rise and fall of stock prices belongs to metaphysics, but BYD's strategic move this time has indeed released important industrial signals. In this regard, we would like to discuss two issues in this article:
1) Why is BYD resolutely transforming?
2) What challenges is BYD facing as a benchmark for transformation?
1. Gambling on disruptive industries?
"In fact, it is (because) the growth of oil trucks is negative, and the magnitude is not small." A person from BYD, who did not want to be named, told Chaoyuanli that the company's planning and focus are on new energy.
The data is actually a hint. Since 2017, BYD's fuel vehicles and electric vehicles have formed a classic "first and second curve switching".
As the fuel vehicles that supported BYD's "first curve" growth in the past, its sales have fallen from 296,000 in 2017 to 136,000 in 2021; but at the same time, the plug-in hybrid + pure electric vehicles of the "second curve" have soared from 113,000 to nearly 600,000 in 2021.
From the perspective of industry data, behind the weak growth of oil vehicles is the popularity of new energy vehicles. As "Super Source Force" said in a previous article, the current electric vehicle industry is similar to Apple subverting Nokia.
In 2021, the national retail sales of passenger cars were 21.055 million units, an increase of 6.0% year-on-year, basically returning to the pre-epidemic level. Among them, the sales volume of traditional fuel vehicles was 18.134 million units, down 3.1% year-on-year;
In contrast, the retail sales of new energy passenger cars in 2021 have reached 2.989 million units, a year-on-year surge of 169.1%, and the penetration rate has reached 14.8%, of which the penetration rate in december has even reached 22.6%.
What is the concept of 22.6% penetration? This means that for every 100 vehicles sold in December 2021, 22.6 are new energy vehicles, and the market share of traditional gasoline vehicles has been torn apart by huge cracks.
In addition, the penetration rate of about 20% has its more special significance.
The so-called penetration rate refers to the ratio of "existing demand for commodities" and "potential demand for commodities", and the penetration rate of more than 20% often indicates that the development of the industry will usher in the "main rising wave".
Communication science has a famous innovative diffusion theory: anything new, from unknown to widely known, its diffusion rate is not uniform.
At first, the spread of a new thing will be slower, but when the size of the population that accepts it (that is, penetration) reaches a certain tipping point (usually 10%-25%), the speed of diffusion will suddenly accelerate.
The principle behind it comes from the herd effect, the first batch of crabs are a minority, but when more and more people eat crabs reach a certain scale, there will be obvious follow-up.
For example, zhu Xiaohu, a famous investor, once said:
If the market penetration rate reaches 20%, everything can be done with half the effort;
Investors, to enter the market layout when the penetration rate reaches 15%;
Entrepreneurs, on the other hand, are best to start recruiting when the penetration rate reaches 5% to 10%.
From the policy point of view, the future car burns "electricity" without burning oil, which is not something that needs to be discussed.
On October 26, 2021, the State Council issued the "Carbon Peak Action Plan before 2030", which clearly proposed to vigorously promote new energy vehicles and gradually reduce the production and sales ratio of fuel vehicles.
As early as 2019, Hainan took the lead in proposing a total ban on the sale of fuel vehicles in 2030; in foreign countries, large car companies, such as Jaguar Land Rover, also announced that they would not produce fuel vehicles after 2025, while German Volkswagen was in 2040.
Huawei Ren Zhengfei once said: "We will never consume strategic competitive forces in non-strategic markets." "It is intended to prompt the strategy to focus and insist on exerting force on the main channel."
BYD's current actions seem to be the realistic interpretation of the above topics.
However, the industry belongs to the industry, although BYD has stepped on the industrial outlet, but its development is still uncertain.
2. Profitability is in doubt
If you look at sales, BYD cars are actually selling hot in 2021.
According to the production and sales express, BYD will sell 740,000 vehicles in 2021, an increase of 73% year-on-year. Among them, new energy vehicles became the main force of growth, with annual sales of 600,000 units, a year-on-year increase of 218%; pure electric passenger car sales of 320,000 units, an increase of 145% year-on-year, plug-in sales of 270,000 units, an increase of 467.62%.
For BYD, the more favorable news is that the company's share in the new energy vehicle market has increased to 17.1%, an increase of 5.2 percentage points year-on-year.
However, if you put sales down, BYD's financial report data is not very good, and the typical signal is that the gross profit margin of the automobile business continues to decline.
Gross profit margin is a key indicator reflecting the profitability of the enterprise, it means that for every 1 yuan of income generated after deducting the cost of operation, how much money can be used to pay for various expenses of the operating period to form a profit.
According to the data, the gross profit performance of BYD's auto-related business is not ideal. In 2021, the company's automotive gross margin was 17.4%, down about 8% from 2020, the worst gross margin in the past decade.
What is the concept of 17.4%? It should be known that BYD's automobile business includes the whole vehicle and batteries, in which the batteries required by the whole vehicle are all supplied by themselves. It is reasonable to say that if you can enjoy your own supply, cost control should be better than your peers. In contrast, Weilai, which does not include batteries, can maintain a stable gross profit margin of around 20%, and Tesla's gross profit margin of 30%. Therefore, BYD's gradual decline in data does not seem to be very optimistic.
For the declining gross profit, BYD's explanation is that upstream materials are rising. For example, in the 2021 semi-annual report, BYD said that lithium carbonate, an important raw material for lithium iron phosphate blade batteries, rose by more than 5 times, significantly affecting operating performance.
However, if we look at it from the business level, BYD's low gross profit may also be related to the volume of low-cost models and aggressive pricing strategies.
From the perspective of model structure, after the release of BYD's DM-i platform in 2021, related models became popular, and BYD took the lead in launching Qin Plus and Song Plus with low pricing;
In addition, in order to cash in on the price of oil and electricity, BYD has flattened the price of its higher-cost plug-in hybrid models and Japanese general hybrid models, so the overall pricing is more aggressive.
However, the so-called price reduction is easy to increase the price, and the long-term effect of this pricing strategy remains to be seen. If the price is not increased in the future, then the corresponding models need to continue to increase the volume of products, reduce production costs and increase gross profits, which will also test BYD's product strength.
In fact, today's BYD is not only the automobile business, but the company is actually a mixture of automobile manufacturing, mobile phone assembly (operated by BYD Electronics), secondary batteries and photovoltaics. The ratio of each business to total revenue was 52%, 40% and 7.6% respectively.
The performance of mobile phone assembly and secondary batteries and photovoltaics is also not very optimistic.
In 2021, BYD recorded asset impairment losses of RMB857 million and credit losses of RMB388 million, of which credit losses were mainly impairments in accounts receivable. For this impairment, Guosen Securities speculated that this may be related to the impairment of the company's PV business inventory and capitalized R&D investment.
The photovoltaic business, BYD's layout for many years, has been cutting in since 2009, and has invested billions of yuan before and after, but has not seen obvious profits so far.
In addition, bydir electronic profit contraction is obvious, driving the company's profit decline.
Bydir Electronics' annual profit declined, mainly due to the decline in demand for medical products (mask business) after the normalization of epidemic prevention and control, and the repeated epidemic situation and the lack of core in the industry inhibited customer demand, resulting in low capacity utilization of the company.
According to the data, BYD's shareholding ratio in BYD Electronics was 65.76%, while the annual net profit attributable to BYD Electronics in 2021 was 2.31 billion yuan, and the net profit attributable to BYD was 1.519 billion yuan, down 57.55% year-on-year.
In addition to the above factors, it should be noted that BYD's 2021 report card includes government subsidies, if you deduct the 2.263 billion yuan of government subsidies included in the profit and loss of the current period, BYD's annual profit is only 782 million yuan, and the profit margin is only 0.36%, on the verge of loss.
Zhang Xiang, dean of the New Energy Vehicle Technology Research Institute of Jiangxi New Energy Technology Vocational College, told Chaoyuanli that with the decline of subsidies in the future, as well as a large proportion of research and development investment and new business layout, BYD's profits will still be affected.
As for the stock price, a private equity fund manager told Chaoyuanli that BYD's previous rise came from the domestic concept of Tesla's surge on the one hand, and from the continuous exceeding expectations of product sales on the other hand. Nowadays, the logic of the two parts has been gradually fulfilled, and the focus of the next market game is either that sales continue to exceed expectations or profitability improves, "after all, the fundamental value of the enterprise comes from the continuous creation of excess profits for shareholders."