On the first day of the Qingming holiday, BYD released a "big move".
On April 3, BYD announced on its official Weibo that it would "stop the production of fuel vehicles from March 2022, and in the future, BYD will focus on pure electric and plug-in hybrid vehicles in the automotive sector." With the disclosure of the announcement, this also means that BYD will become the first car company in China and even in the world to announce the suspension of production of fuel vehicles.
Although the announcement looks like a big deal, investors should not have much surprise about BYD's "oil cut".
As a domestic new energy vehicle leader, now most of the models sold by BYD have been converted to pure electric and hybrid models, the production and sales data of BYD fuel vehicles in March this year has long been hung up to zero, and the sales of BYD fuel vehicles in the past six months are less than 10,000 units, so from this point of view, BYD's "oil outage" announcement is just to break through this layer of window paper.
In the case that new energy has become a major trend in the industry, BYD's decision to "cut off oil" is undoubtedly more in line with the trend of the industry, and on the second day of the announcement, bydy shares listed in Hong Kong rose by more than 8%.
However, BYD ALL IN electric vehicles are not without risks. In addition to the rising prices of raw materials and the continuous compression of new energy vehicle profit margins, the expiration of the new energy vehicle subsidy policy in 2023 will also have a huge impact on BYD, and the decision of BYD's "oil cut" is obviously full of uncertainty.
Say goodbye to fuel vehicles
On April 3, BYD used an announcement to highlight its confidence in ALL IN new energy.
"The company will stop producing complete vehicles for fuel vehicles in March 2022. In the future, BYD will focus on pure electric and plug-in hybrid vehicles in the automotive segment. BYD said in the announcement on the official Weibo. With the disclosure of the announcement, BYD has also become the first car company in China and even in the world to announce the suspension of production of fuel vehicles.
However, although it is said that the production of fuel vehicles is suspended, in fact, BYD's "oil cut" is not completely broken.
Why? Because the current BYD big sale of plug-in hybrid models, in fact, there are still internal combustion engines, can still "burn oil", in other words, BYD's "oil cut" does not mean that gasoline vehicles are no longer produced, let alone that the fuel era has passed.
From the data point of view, in fact, BYD's pure fuel vehicles have long been declining. In 2020, BYD's cumulative sales of passenger cars were 426,000 units, and fuel vehicle sales were 237,000 units, accounting for 55%; and in 2021, BYD's total passenger car sales increased by 75.4% over 2020 to 730,000 units, of which about 600,000 new energy vehicles, accounting for 82% of total sales, while pure fuel vehicles only had 130,000 units, accounting for 17.8% from 55% in 2020.
In March this year, BYD's production of new energy vehicles was 106,600 units, an increase of 416.96% year-on-year, and in March, a total of 104,300 passenger cars were sold, an increase of 160.9% year-on-year. Among them, DM models sold 50,600 new cars, EV models sold 53,600 units, and new energy models achieved a full proportion of the brand's passenger cars.
It is worth mentioning that in March this year, BYD's fuel vehicles (including cars, SUVs, AND MPVs) production and sales were 0, and this year's cumulative production of 4635 vehicles, sold 5049 vehicles.
There is no doubt that the plug-in hybrid model of electric and oilable has gradually replaced BYD's previous pure fuel vehicle model; behind this, it still shows that gasoline vehicles are still the mainstream of the current automotive industry, and the fuel era has not yet become a thing of the past.
Wang Chuanfu's new energy vehicle situation
As one of the traditional car companies, compared with Geely and Great Wall, BYD's transformation of new energy in recent years has undoubtedly been more successful.
The reason why BYD can achieve today's results is actually inseparable from the founder Wang Chuanfu's many "big bets" in the field of new energy.
Since the beginning of BYD's establishment, Wang Chuanfu has begun to develop and invest in new energy technologies; while other car companies continue to invest in pure oil vehicles and continuously launch new models because of concerns about sales, BYD began to reduce the capital investment of pure oil vehicles very early and wholeheartedly develop new energy technologies.
Looking back at the development of BYD, the company has the foundation to become a domestic new energy vehicle leader when it was just established - because the founder Wang Chuanfu was originally an expert in the field of batteries, and BYD also started from the battery business at the beginning, relying on excellent technology and quality, BYD also won the mobile phone battery orders of Motorola and Nokia.
In 2003, BYD, which is already the world's second largest rechargeable battery manufacturer, officially entered the vehicle manufacturing industry through the acquisition of Qinchuan Automobile, and it is also the second private car manufacturer in China after Geely Automobile. However, at the beginning, BYD only produced traditional cars, and there was not much connection with new energy vehicles.
Time to 2006, BYD's first F3e electric vehicle equipped with iron phosphate battery was successfully developed, which can be said to have created a precedent for domestic electric vehicles, but because the domestic charging equipment was not perfect at that time, BYD's electric vehicle was not listed, but Wang Chuanfu did not give up the electric vehicle business, but began the 1st generation of hybrid technology and S6DM pre-research projects, which can be seen as the beginning of Wang Chuanfu's "big gamble" new energy.
In 2009, BYD launched its pure electric vehicle BYD E6, equipped with self-developed lithium iron phosphate battery; in July of the same year, BYD acquired Hunan Midea Bus Manufacturing Co., Ltd., which gave BYD the qualification to manufacture electric buses.
In 2013, BYD launched the first model of the Dynasty series, BYD Qin, followed by the Yuan, Song, Tang and other models have appeared one after another, since then BYD has opened a real "dynasty"; with the help of the Dynasty series of models, BYD's new energy vehicle sales exceeded the 100,000 mark in 2016, and Wang Chuanfu's "high bet" was initially successful.
Later, Wang Chuanfu continued to invest in new energy, and the blade battery launched in 2020 and the DM-i super hybrid technology in 2021 pushed BYD to the peak; and with BYD officially announcing the cessation of production of fuel vehicles, this also means that Wang Chuanfu's "big gamble" in the field of new energy has officially been successful.
What are the risks of discontinuing fuel vehicles?
Although for BYD, fuel vehicles have long been on the decline, but the direct announcement of the suspension of fuel vehicles and ALL IN new energy vehicles is actually not without risks.
From the current point of view, BYD ALL IN new energy, the biggest risk comes from the policy level.
As early as December 31, 2021, the four departments jointly issued a document, indicating that the subsidy standard for New Energy Vehicles in China in 2022 will decline by 30% on the basis of 2021, and it is clear that the subsidy for new energy vehicles will be terminated on December 31, 2022, and the vehicles licensed after December 31 will no longer be subsidized.
At present, BYD's hybrid models and pure electric models are applicable to the subsidy policy for new energy vehicles, especially hybrid models, compared with pure oil models, they can be exempted from purchase tax, and can also be directly green cards in first-tier cities such as Guangzhou and Shenzhen, and the advantages are very obvious.
When these preferential policies are all canceled, when BYD's plug-in hybrid models need to compete directly with fuel vehicles, whether BYD can maintain the current strong momentum is obviously still unknown.
In addition, the rising cost of new energy vehicles also poses a great challenge for BYD.
Affected by the increase in raw material prices, BYD's 2021 financial report has a situation of "increasing revenue without increasing profits". In terms of specific data, in the whole year of 2021, BYD achieved revenue of 216.1 billion yuan, an increase of 9.85% year-on-year; achieved a net profit of 3.045 billion yuan, down 6.7% year-on-year.
Obviously, BYD's "oil cut" decision is another major decision by Wang Chuanfu in the field of new energy; although the previous decisions have been successful, but now that the fuel vehicles are directly stopped, there is still some uncertainty.