Huashan on the sword | BYD's AB side

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After experiencing the successive suspensions of the automobile industry in Shanghai and Changchun, the Chinese automobile market in April can be said to be full of mourning and collective waist. As the only car brand that has announced a monthly sales of more than 100,000 vehicles, BYD has become the "uncrowned king" in the minds of everyone.

According to the weekly report data reported by key enterprises, the China Association of Automobile Manufacturers estimates that in April 2022, the sales volume of the automotive industry is expected to complete 1.171 million units, down 47.6% month-on-month and 48.1% year-on-year; from January to April 2022, sales are expected to complete 7.68 million units, down 12.3% year-on-year.

On the one hand, competitors are in deep trouble, and the top-ranked brands such as North and South Volkswagen, FAW Toyota, Changan, Geely, and Great Wall have all experienced sales declines to varying degrees due to the impact of the epidemic; on the other hand, BYD's strong efforts after "desperate bets".

After announcing the official suspension of fuel vehicles, BYD focused all its production capacity on the new energy sector, and official data showed that BYD's cumulative sales in April continued to exceed the 100,000-unit mark, reaching 105,475 units, an increase of 136.5% year-on-year. From January to April this year, BYD's cumulative sales have reached 388,000 units, an increase of 395% year-on-year.

There are even internal documents showing that BYD's current undelivered orders in the scheduling have reached 400,000 vehicles, which is enviable.

Earlier, Cui Dongshu, secretary general of the National Passenger Car Joint Association, also said in the live broadcast connection, "This year, BYD may sit on two and look at one." Such an evaluation can be said to be a high degree of affirmation of BYD.

Why can BYD ride the dust?

The brand recognition and technology accumulation of the new energy market for many years are undoubtedly the most important reasons why BYD's sales can continue to rise against the trend.

As the only company in the world that has mastered the core technology of new energy and three electrics, BYD not only has unique technical advantages, but more importantly, it can achieve cost control that competitors cannot match. The DM-i Super Hybrid system is BYD's most powerful weapon at present.

As we all know, as early as 2018, domestic car companies began to launch plug-in hybrid models, but they have not been able to really popularize. The most immediate reason is that hybrid and plug-in hybrid models derived from the same model will be priced higher than fuel models. Therefore, although plug-in hybrid had the advantages of being able to get a green card, no endurance anxiety, energy saving and saving money, etc. at that time, it also failed to stir the "splash" of the new energy market.

The main reason why BYD DM-i models can be popular is to play the sign of "plug-in hybrid and fuel at the same price", which soon makes plug-in hybrids stand out in the new energy vehicle sector. According to BYD's front-line sales staff, the current DM-i full range of products takes at least 4 months to pick up the car cycle.

Although at present, including the Great Wall, Geely, Trumpchi and Chery and other head Chinese brands have also launched their own hybrid brands, the technology is also different, but only in terms of cost control, or can make BYD DM-i in many plug-and-mix models become the best choice. According to the data, BYD's sales in April, the plug-in hybrid version of the model sales were 48,072 units, accounting for 45.6%.

In addition to the technical advantages in the field of new energy, the layout of the whole industry chain is probably also an important reason why BYD can not be disturbed by the environment in April.

It should be known that the Yangtze River Delta region is a gathering place for the domestic auto parts industry, and there have been media statistics before that in the list of China's top 100 auto parts companies in 2021, a total of 38 companies in the Yangtze River Delta have entered the list.

Therefore, after the epidemic in Shanghai, the problems of factory suspension and logistics suspension will have such a far-reaching impact. Including He Xiaopeng, chairman of Xiaopeng Motors, and Yu Chengdong, CEO of Huawei's consumer business and CEO of Smart Car BU, have expressed concerns that "if Shanghai and its surrounding supply chain enterprises cannot resume work and production, all OEMs will face suspension of work and production in May."

But BYD has clearly not been greatly affected. This is largely due to BYD's regional layout capabilities. According to the data, BYD has set up more than 30 industrial parks around the world, realizing the layout of six continents in the world, involving electronics, automobiles, new energy, rail transit and other fields, and most importantly, realizing the self-research of the whole industry chain. At present, most of BYD's parts are self-sufficient.

It can be said that the jump in BYD's sales volume and the huge volume are the inevitable results of conforming to the time, location, and people.

There are also many challenges behind rapid development

In general, BYD's technical capabilities in the development of the whole industry not only allow it to stand alone in the case of a broken supply chain in the Yangtze River Delta, but more importantly, rely on technology and supply chain advantages to further reduce costs and thus obtain more competitive pricing. If there is no accident, with the development of scale effect, BYD's cost advantage will become more and more obvious in the future.

But now, BYD's cost advantage has not yet been realized. The jump in sales is more from aggressive price strategies designed to seize the market, and the earnings report is enough to explain the problem.

On April 27, BYD released its 2022 Q1 financial report showing that in the first quarter of this year, BYD's operating income reached 66.83 billion yuan, an increase of 63.02% year-on-year; net profit reached 808 million yuan, an increase of 240.59% year-on-year.

Although revenue continues to rise, BYD's weak profitability, which has been questioned for a long time, has not improved, and the problem of "selling more and making less" needs to be solved urgently. According to estimates, BYD's sales in the first quarter of this year were 284737 units, the net profit of bicycles was only 480 yuan to 1510 yuan, and the gross profit margin was 15.6%.

The most impactful comparison object is Tesla, which shows that Tesla's Q1 bicycle profit is as high as 10,700 US dollars, and the gross profit margin is as high as 32.9%.

In contrast, BYD's earning power does need to be improved. The official explanation is mainly due to the rise in raw materials upstream at the cost end. But in fact, in recent years, huge R & D investment, aggressive pricing strategies, and investment in building factories across the country to expand production capacity have all pulled down BYD's profitability to some extent.

Fortunately, these are long-term investments. At the same time, after ENTERING 2022, BYD has also announced many measures to make up for shortcomings. For example, on April 3, BYD announced that it would stop the production of fuel vehicles from March 2022, ALL IN new energy market.

For example, in order to strengthen the level of intelligence, BYD has signed strategic cooperation agreements with technology companies such as Baidu, NVIDIA, and Horizon since February this year.

In February this year, BYD announced that Baidu has become its supplier of intelligent driving technology, Baidu will provide BYD with an ANP intelligent driving product and man-machine co-driving map; at the end of March, BYD announced that it has reached a cooperation with Nvidia in intelligent driving technology, from the first half of 2023, BYD will be equipped with NVIDIA's DRIVE Hyperion platform on some new energy vehicles; in April, BYD and Horizon officially announced that they have reached a fixed-point cooperation, and will be equipped with horizon high performance on some of its models in the future. Journey of large-scale automatic driving chip 5.

This year, BYD will push forward the momentum and a new high-end new energy brand, from the brand, products to the sales service network, the operation team will be independent operation.

At the same time, in order to attract more talents, BYD also released an employee stock ownership plan on April 22, announcing that it will repurchase shares for 1.8 billion to 1.85 billion yuan, the repurchase price will not exceed 300 yuan per share, and the repurchased shares will all be used to implement the company's employee stock ownership plan, and the total number of people participating in the stock ownership plan will not exceed 12,000.

It is worth noting that the transfer price of the employee stock ownership plan is 0 yuan per share, that is, the participants can share by BYD's total shares worth 1.8 billion to 1.85 billion yuan without capital contribution.

This is the most tangible reward for employees, which can be seen that BYD has begun to attach importance to employee training and talent introduction, which will fundamentally strengthen the cohesion and combat effectiveness within the company.

epilogue

As a recognized "domestic new energy vehicle leader", BYD's market performance can always create surprises, which has been reflected in the capital market.

As early as 2003, when choosing cross-border car manufacturing, Wang Chuanfu, founder and chairman of BYD, said: Do not consider the direction of the highest profit and the highest rate of return, but first enter a large market to solve social problems, and then use technology and cost advantages to become a participant, leader and innovator of the new industry.

"Entrepreneurs should be good at developing themselves in solving social problems, so that they can win-win with society." Under his leadership, BYD has established its own style: advocating technology, problem-oriented, solving problems through innovation, and persistence.

In his view, new energy vehicles are a "big fish". 10 years ago, when no one believed in electric vehicles, we began to "raise" and encountered many difficulties, but we insisted and did not give up, because we believed that China had three major problems of oil security, clean air and warming climate that must be faced. "In this transformation, it must be fast fish eating slow fish, not big fish eating small fish."

Therefore, we saw BYD announce the suspension of fuel vehicles and do the fastest ALL IN new energy vehicle manufacturer; we saw that BYD has built a new large-scale production base nationwide since August last year to ensure the supply of production capacity, and said that it is expected that by 2023, it will have 9 major vehicle bases, covering Shenzhen, Xi'an, Changsha, Changzhou, Jinan, Hefei and other places, with a planned production capacity of 3.65 million vehicles.

In this sense, Wang Chuanfu and his BYD deserve the recognition of the current market and the new era that belongs to them.