BYD opens high-end: into cruelty and dreams

Image source @ Visual China

Wen | Finance Qiguan

Wang Chuanfu said another provocative remark - "BYD's brand is no longer what it used to be." ”

On March 30, BYD released its 2021 fiscal year annual report, and the focus of attention was on the decline in net profit by 28%;

On April 3, BYD announced that it would stop the production of fuel vehicles, taking another important step towards a new era;

During the same period, the official release of data shows that BYD passenger car sales exceeded 100,000 in March, han, Song, Qin, Yuan, Dolphin, a total of five models sold more than 10,000;

I don't dare laugh anyway.

In the face of absolute data, we can only dress up and respect the "heavy weapon of the country".

01, low gross profit is "rolled"

Let's talk about profit first.

According to the financial report, in the past fiscal year 2021, BYD's operating income totaled 216.14 billion yuan, an increase of 38% year-on-year.

However, net profit attributable to shareholders of listed companies fell by 28% year-on-year to 3.045 billion yuan. Deducting non-net profit fell by 57.53% year-on-year, only 1.25 billion yuan.

Most intuitively, the surge in raw materials is the biggest reason.

In the online briefing meeting after the financial report, Zhou Yalin, chief financial officer, said: "The increase in operating costs during the period was mainly affected by factors such as rising raw material and commodity prices. ”

Wang Chuanfu also said: "Behind the explosive growth of the market, the industry is facing severe challenges such as the intensification of the epidemic, the soaring price of raw materials, and the instability of the supply chain. ”

And suggested: "Comprehensively sort out the layout and production capacity of lithium carbonate resources, increase domestic mining and foreign imports, maintain market supply and demand, stabilize price expectations, and promote the healthy and safe development of the industry." ”

Taking lithium phosphate as an example, public data show that the increase in 2021 will reach 4.4 times to 278,000 yuan / ton, and it has risen by 62% year-to-date to 504,000 yuan / ton.

From the perspective of financial analysis, changes in revenue structure are also an important reason for the decline in gross profit margin.

In 2021, BYD will continue to maintain three major segments of automotive, mobile phone OEM and battery business.

Revenue was 112.49 billion yuan, 86.45 billion yuan and 16.47 billion yuan respectively, an increase of 34%, 44% and 36% year-on-year, respectively.

Among them, the mobile phone business growth is the most eye-catching, but the gross profit margin in this field has not been too high, the industry average is generally hovering around 10%, and the gross profit margin of BYD's mobile phone parts and assembly business during the financial report period is as low as 7.6%.

This is directly related to the low overall economy and the lowest right to speak in the processing process.

The automotive revenue with the highest gross profit margin is the one with the smallest increase in the internal horizontal comparison of its three major businesses.

Overall, in 2021, BYD's highest gross profit automobile business revenue accounted for 2pct, the lowest gross profit of the mobile phone business revenue increased by 2pct, and the change in revenue structure also led to an overall decrease in gross profit margin.

But looking further, what we want to point out here is that the gross profit of the mobile phone business has declined, which is a last resort.

The decline in the gross profit of the automobile business is to some extent an active choice for BYD.

In the rapid growth period of the industry, the value of the user base, market share, and word of mouth is much higher than the profit itself.

Based on this understanding, BYD has formed a strategic idea of "seeking scale first, and then seeking profitability".

Today, BYD's sales in March directly exceeded 100,000, and it has put forward a guarantee of 1.5 million vehicles for 2022, hitting the overall target of 2 million vehicles.

As early as 12 months ago, BYD was also ridiculed by everyone as "than 30,000".

To put it more clearly, BYD in 2021 is engaged in a price war with the situation of a sharp rise in raw materials: "My raw materials are rising, and yours is not rising?" ”

In the case of the basic technical product level is not inferior, holding on to the price increase, you can easily win a large number of peers.

Therefore, in the middle of last year, we had an article that clearly pointed out that to update BYD's identity cognition, it should not be regarded as a mature traditional car company, and it should be more important to increase the value weight of its "future".

Pinduoduo, B station large losses can get hundreds of billions of dollars in market value, BYD is in a new new energy intelligent driving track, is in the market, users, brand recognition, technology development of the rapid growth period, as an investor, I only think he lost not enough.

02, acceleration, acceleration

When the wind comes, decelerating is a crime.

Honestly speaking about BYD, our previous understanding was to "deeply cultivate the parity market, continue to advance in the main battlefield of 'electric alternative fuel', and win by quantity."

Under this understanding, we have greatly highlighted the strategic position of BYD hybrids, pointing out

In 2021, with 590,000 new energy passenger car sales, it won the top spot in the sales ranking of new energy vehicle manufacturers that year, and the sales volume exceeded 100,000 in March, which are the actual effects of this cognitive projection in reality.

It is important to note that two default conditions in this cognitive framework have now been loosened.

The first is the issue of high-end.

A year ago, we thought that the Han series was BYD's highest sharp knife, and at least there would be no big action in five years.

Due to the vastness of the market below 300,000, and the big difference between the underlying logic of high-end luxury cars and the low-end, we believe that BYD will not launch a high-end impact in the short term.

However, at the briefing after this year's financial report, Wang Chuanfu clearly gave the release time of the more high-end brand, "probably in October", and the price range is expected to be more than 50-1 million yuan.

The second problem is intelligence.

In last year's related articles, we repeatedly emphasized that "carbon neutrality" and "unmanned driving" are two independent outlets, but the coupling is high.

Now, with the official launch of BYD's intelligence, this emphasis has gradually become meaningless.

In fact, intelligence and high-end are already two sides of the same coin. Compared with BYD's existing consumer groups, intelligent experience is not as important as more practical dimensions such as cost performance, energy consumption, safety and stability.

But if it wants to continue to explore the BBA, Weilai and other high-end electric vehicle user groups, then BYD must develop its more intelligent user experience.

In the previous briefing, BYD executives also began to say: "The company will continue to increase the development of automotive intelligence, from the three aspects of perception, decision-making, and execution, actively explore cooperation with partners in different professional fields between the world, integrate the powerful potential of scientific and technological innovation, build an intelligent automobile industry ecology, promote the intelligent development of the automotive industry on the fast track, and carry out technology research and development and on-board application at the right time." ”

To be honest, BYD's earnings report meeting is the least popular kind, at first glance it is all official clichés, obviously prepared in advance to deal with clichés.

From the perspective of stripping away the cocoon, the two points of "embracing intelligence and cooperation first" are the limited information currently revealed by BYD, of which the former is a very clear established direction, and the latter should be a vague means of transition.

Overall, BYD is more aggressive and aggressive than we think, which may be directly related to the confidence brought about by last year's brilliant achievements.

Looking to the future, BYD, which has clearly decided to explore high-end and intelligent, must once again refresh its imagination space, but the corresponding risks will also increase at the same time.

BYD's attitude has always been to be the first, and all the successes in the past are greatly based on the technical advantages it has accumulated in the field of batteries over the years.

In the face of a new field, BYD will adopt a brand, product, sales and service network, operation and other aspects are a new and independent team, and the first model to choose a hardcore off-road vehicle that has rarely been touched before.

The uncertainty is naturally enormous.

03. Reefs are overgrown

Finally, let's talk about BYD.

Management, branding, channel quality.

In a conversation interview last year, Wang Chuanfu said that he was more inclined to Edison, and the time allocation was basically three or seven open, 70% in technology, and 30% in management.

Although he is no longer involved in specific research and development, he is still responsible for defining it, and he is still the chief engineer of BYD.

The emphasis on technology is certainly worthy of recognition, but it is by no means an excuse or reason for neglect.

For a long time, the high turnover rate of BYD's grass-roots employees has been an open secret in the industry, and even once had the reputation of "the cradle of industry talents", typical of which can cultivate people but cannot retain people.

In the mouths of these departees, BYD is a bad company with low salaries, irregular and transparent management, too many nepotism, and extremely limited promotion space.

Among the dealers, BYD has also been complained about the confusion of product and network planning, and the lack of systematic consideration of pricing.

The advertising door in 2018, the corruption problem exposed by executives eating inside and outside, and the group incidents that were affected by the epidemic in 2020 and the outbreak of employees pulling up banners to protect their rights are all direct impacts of the above management problems.

It should be affirmed that BYD has begun to deal with the above problems, such as a series of measures such as readjusting the organizational structure in 2021, boldly enabling young people, and disclosing anti-corruption achievements every quarter.

But as we know, management is a complex system problem that can never be achieved overnight.

In the context of BYD's further proposal to attack high-end and intelligence, on top of a relatively low management level, how to take into account efficiency and internal order is undoubtedly a major problem.

In addition, the brand problem is also something that BYD must overcome.

For example, in terms of marketing, cost performance is always very important, but in more high-end areas, it is absolutely impossible to take cost performance as the core selling point.

Taking Huawei mobile phones as an example, in the period of deciding to impact the high-end to really make the high-end, Huawei stayed up for three years, and the first high-end machine Ascend P1 in 2011 had extremely poor performance and failed;

Subsequently, the Ascend D series had a serious fever and failed;

Huawei P2, find the wrong user pain points, failure;

It was not until 2013 that Yang You, head of the brand department of Samsung China, was recruited, and after the tonal upgrade of the literary and artistic petty bourgeois atmosphere of "beauty is an attitude", "jazz life" and "like a year of water flow", Huawei really hit with the P6.

At present, with the joining of top global designers such as Lopez, Egger, and Paganetti, BYD has completed iterative upgrades in product aesthetics, but at the marketing level, there is still a lack of matching teams.

A small example can show how much BYD attaches importance to the so-called "brand operation".

In an interview, Wang Chuanfu said: "There are many enterprises in Shenzhen, and it is not easy to pass the name of two words, so you can only take three words, BYD, which is more strange, and if it is more strange, you will easily pass." ”

He further added: "At that time, it was difficult to start a business, and it was not known whether it could survive, so it was established first and then said through registration. ”

After getting bigger, we have to consider the brand, so we have to put together a concept of "Build Your Dream".

A small detail shows Wang Chuanfu's emphasis on reality and ignores the characteristics of the brand to the fullest.

Finally, let's talk about the distribution system.

In fact, there are many friends around me, under the amway of others, who decided to try to buy BYD's car. But when they walk into the 4S store, they will always be directly dissuaded by the decoration style of "Tu Hi".

Obviously, the aesthetics of the product has been upgraded, but the cognition of the entire dealer is far from keeping up, so we often see a very good car, with a vulgar garland on the body, and a strange gift box on the roof.

What is even more unacceptable is that the service of BYD's auto sales staff is too large compared with other brands, the price increase has not brought about the renewal of personnel, and 300,000 car owners still enjoy the sales treatment of 50,000 yuan.

The quality improvement of front-line practitioners is both a management problem and a brand problem.

In addition, the profit problem, the problem of production capacity, which many people value more, is not so harmful to us - the former is only a matter of time, while the latter is not beyond BYD's ability.

All in all, BYD's exploration of high-end and intelligence is surprising and gratifying to us.

Although there are many concerns about this rationally, it is still emotionally happy to see Chinese companies show such great ambition and enterprising in business operations.

Therefore, in terms of attitude, on the one hand, we will never pour cold water on this company, but on the other hand, we will continue to warn about the risks involved.

Everything in the future is as Milan Kundera said:

When living elsewhere, it is a dream, it is art, it is poetry, and when it is elsewhere, the sense of sublimeness becomes the other side of life: cruelty.