Analyze | Why did BYD stop production of fuel vehicles?

(This article is the original manuscript of Zijin Finance, please indicate the source when reprinting)

If you have been paying attention to BYD's news, you will not be so surprised by the information that BYD has stopped production fuel vehicles!

As early as last year, it was rumored that BYD had plans to stop selling fuel vehicles, and since then it has been officially refuted. The usual view is that the transition from fuel vehicles to new energy vehicles is not achieved overnight, and there is a demand for fuel models in the current market and consumers, and most car companies cannot completely abandon fuel vehicles in a short period of time.

However, after the Qingming holiday, BYD officially announced that it would completely end the fuel vehicle, and since then BYD will no longer produce fuel vehicles, ANDD said that in the future, BYD will focus on pure electric (EV) and plug-in hybrid (DM) vehicles in the automotive sector.

So have fuel vehicles really retired from BYD's production line? Will BYD completely abandon the fuel technology that has been stored for many years in an instant?

Abandoning fuel vehicles into BYD is inevitable choice

When the 92# gasoline is about to break through the 9 yuan mark, and the 98# gasoline has already broken through the 10 yuan mark, "can't afford to add oil" has become a deep pain in the hearts of many fuel owners.

Under the soaring oil prices, bydir Song DM-i, which has been evaluated by the outside world, the fuel consumption is only about 2.6L per 100 kilometers. Correspondingly, bydir Song's fuel version of the model, the manual 100 km fuel consumption is about 8-9L, the automatic 100 km fuel consumption is about 11-12L.

From the price point of view, Song DM-i is about 100,000 yuan more expensive than the fuel vehicle version, but after deducting other new energy subsidies and purchase tax exemptions, the gap between the two has been less than 100,000 yuan.

This is a simple math problem. Compared with the automatic fuel model Song and DM-i version, the fuel consumption gap between the two 100 kilometers has reached 8L, and the current price gap of about 8.7 yuan per L of gasoline is calculated, the price gap of 100 kilometers is close to 70 yuan, and the price gap of 10,000 kilometers reaches 7,000 yuan.

That is to say, when the vehicle is driven to 100,000 kilometers, the DM-i model begins to be lower than the fuel vehicle in terms of comprehensive cost, and this is still the DM model in the hybrid state of oil and electricity. If there is a charging pile at home to charge at any time, in the case of rare use of fuel, it will make up for the gap in the price of the car earlier.

In the scene of the family car, the annual mileage of the car is about 20,000 kilometers, that is to say, in less than five years, the economy of Song DM-i will completely exceed the fuel car version, and the vehicle that has been used for eight to ten years is in the middle age of the vehicle, that is to say, the more Song DM-i drives, the more money is saved.

Therefore, it can be seen that in BYD's March 2022 production and sales express, BYD's fuel vehicle production in that month was 0. In 2021, BYD will sell 730,000 passenger cars, of which 59 new energy passenger cars will be sold, accounting for up to 80%, and EV and DM models will each account for half of the sky, and sales will be hot, which has made BYD's traditional fuel vehicles account for a significant decline in sales.

In fact, as early as mid-2021, in a research activity by BYD, the company said that the planning of future fuel vehicles has stopped, and the monthly production capacity of DM-i will reach 80,000 units in 2022, and after 40,000 units shipped per month, it will be able to achieve a comprehensive replacement. Bydir's complete abandonment of fuel models is not just from what the company calls "building a green tomorrow", but from the comprehensive product economy and market needs to be considered.

All along, BYD's fuel vehicles have tried to break through the price ceiling of "100,000 yuan", but the final number of models is difficult to break this spell, the old generation of car owners also regard BYD's F0, F3 is the symbol of the company, do not know that the "Dynasty" series has foreshadowed the ambition of the BYD brand.

Calculate a simple mathematical calculation problem, Song DM-i model price is about 200,000, Song fuel version of the model price in 100,000 yuan, in the case of sufficient supply of power batteries, the same root of the same source of two cars which can bring profits to the manufacturer? Of course, it is the Song DM-i, which is twice as expensive. Although the cost of the vehicle has risen due to the assembly of two powertrains, the overall increase in the price of the car has made it possible for car companies to have more profit margins and the possibility of obtaining new energy subsidies.

In addition, it is reported that bydy-Tang EV version arrived quickly, because the profit per bicycle was as high as about 50,000 yuan, which was BYD's veritable "cash cow".

Whether from the perspective of consumer appeal or BYD's own brand and profit margin, fuel vehicles are already a "chicken rib" existence for BYD, and even using it to rush sales has little significance.

Nowadays, the consumption level of Chinese consumers is constantly improving, the mainstream automobile sales price has increased to about 150,000 yuan, and imported brand cars have occupied a considerable market share at this price, leaving little space for domestic independent brands.

In the case of the steady growth of new energy vehicle sales and the rise in gasoline prices, BYD gave up fuel vehicles, thanks to the dm-i product technology breakthrough and market recognition, making BYD's product structure from traditional fuel vehicles to DM-i models become inevitable, and replacing traditional fuel vehicles with DM-i models has become its best strategy to adapt to market changes.

How long does it take to wait for a new car?

This problem is more serious, not to mention BYD's pure electric models, even IF IT ISM-i models, except for a few models like Tang, the general pick-up date of other models has to start in three months.

Two months ago, Zijin Finance went to a BYD ocean online store in Beijing to investigate, as the store's main model, BYD Dolphin at a price of more than 100,000 yuan, quite cost-effective, in this level of sales is very hot.

According to the staff of the 4S shop, the model does not even have a price increase to withdraw the car, and the car must be prepared for more than three months, and there is a possibility of price increase in the later stage of the vehicle, and the early booking car can also lock the price in advance.

Sure enough, after raising prices ranging from 1,000-7,000 yuan in early February, BYD raised prices for new energy models again in March, ranging from 3,000 to 6,000 yuan. Just after the announcement of the suspension of fuel vehicles, there was news that BYD will launch a new round of price increases. After several price increases, the unit price of BYD's products has increased significantly, and the average sales price is exceeding the level of 150,000 yuan.

Although BYD resolutely debunked the rumors that the news of the third price increase this year was untrue, in the case of rising raw material costs of power batteries and strong market demand, even if BYD raised prices again, some hot-selling models would not cool down, after all, new energy manufacturers have ushered in a wave of price increases.

BYD said on the previous conference call that the price adjustment corresponds to the pressure of raw material price increases, and the rise in oil prices has led to BYD's orders not falling but rising.

Now the trend of rising raw material prices for power batteries has slowed down, and there is room for prices to fall as supply increases. BYD, which already has a scale advantage, has more advantages in cost, technology and market space than other new energy automobile companies in the case of the core technology of the three electric power companies, and this advantage has also become the key to consumer clustering.

It is only BYD's advantages in new energy vehicle technology and products that cannot cover up the backwardness of the company's production capacity and service, not to mention the difficulty of lifting cars that are common in BYD's current models, from the sales and service level of 4S stores, BYD is at the middle and lower level of the industry.

There have been many times when Zijin Finance asked the sales staff in the BYD 4S store because of the vehicle configuration and data, and the other party had to query the vehicle configuration table to make an accurate answer.

At the same time, BYD's product iteration also gives ordinary investors a headache, Song EV, Song plus, Song max, Song Pro, although it sounds like they are all from the Song series, but it is completely different generations of different driving models, which is more obvious in the yuan series models, so that unknown consumers have a big head.

The only similarity between the new version of the yuan plus and the yuan pro and the old version of the yuan ev360 is that the car logo is the same. There have been many consumers who have strongly shouted ATD to expand the "Dynasty" series to the "Five Generations and Ten Kingdoms" period, which is actually a major overhaul compared with the new model and the old model, and it has long been two different cars.

What is the plan behind increasing revenue and not increasing profits?

BYD will sell 590,000 new energy vehicles in 2021, and data from the China Association of Automobile Manufacturers shows that BYD's new energy vehicle market share will reach 17.1% in 2021, an annual increase of nearly 8%.

At the same time, BYD's new energy passenger cars have accumulated production and sales of more than 1.51 million units, becoming the leader in domestic new energy vehicle companies, but in the case of increasing sales of new energy vehicles and increasing profits of bicycles, BYD's profits have not increased.

According to the data, in 2021, BYD achieved revenue of 216.142 billion yuan, an increase of 38.02% year-on-year; but its net profit attributable to shareholders of listed companies fell by 28.08% year-on-year to 3.045 billion yuan. Obviously, BYD fell into a situation of increasing revenue but not increasing profits, compared with the company's net profit soared by 162.27% year-on-year under the serious impact of the epidemic in 2020.

For the decline in net profit, BYD executives have said that the decline in net profit is mainly due to the decline in gross profit margin due to changes in product structure. Indeed, from the gross profit margin data, BYD's gross profit margin in 2021 is only 13.02%, the lowest level in recent years, the most important factor of which is affected by the price increase of raw materials and the lag of product price increases, while the operating cost of BYD's automobile business in 2021 increased by 47.9% year-on-year.

In 2022, BYD has made two price increases, although each price increase will bring consumer dissatisfaction, but the price increase of upstream materials is obvious to all, so the price increase of car companies is also expected.

Even if the raw material price increase factor, it is difficult to say that by BYD in 2021, the sales of new energy vehicles are good, the company's net profit growth rate is declining, is there any other reason for this?

According to the data, BYD has recruited 63,000 new employees in 2021, including nearly 10,000 R & D technicians, and the total number of BYD employees has reached 280,000, while there are 6 projects under construction.

For BYD's 2021 annual report, some people use the term "big expansion" to describe it. Car sales, cash flow, fixed assets and employees, BYD's expansion rate in 2021 is what the data can see, as the company's scale expands, selling expenses and administrative expenses will naturally increase in tandem.

While subtracting the product strategy and abandoning the fuel vehicle market, BYD continues to expand its resources for the new energy vehicle business, this "only for the day" attitude, not only because BYD founder Wang Chuanfu proudly announced at the end of 2021 that DM-i platform models have orders of up to 200,000 units in hand, but also because the automotive consumer demands under high oil prices are quietly changing, BYD seems to have given up a huge traditional fuel vehicle market, but has played a unique pattern in the DM market.

Above the surface of the water, it is only the tip of the iceberg, and below the surface of the water, is the real reason why BYD completely abandons the fuel car!