Each new energy vehicle earns 60,000 yuan less than Tesla, does BYD lose?

Ignoring the company's own strength and blindly pursuing high-end may go astray.

Recently, the automotive industry has attracted a lot of attention.

An online post is on fire: for every new energy vehicle sold, BYD only earns 1400 yuan, and Tesla earns 68000 yuan.

Is it true that the gap is so large?

Why is BYD selling cars so profitable?

The image below is a post circulating online.

Web post content

Before analyzing, let's verify whether the data in the post is true.

Let's start with Tesla.

On April 21 this year, Tesla announced its financial report, in the first quarter of 2022, Tesla delivered about 310,000 new cars, with operating income of $18.756 billion and net profit of $3.318 billion.

Tesla earnings

Still, Tesla's business isn't limited to the auto industry.

The auto industry has revenue of $16.861 billion, and a rough estimate is that the net profit of the auto industry should be around $3 billion (about 20 billion yuan).

In this way, Tesla makes a net profit of about 64510 yuan for every car sold.

Look at BYD again.

On April 27 this year, BYD announced its financial report that in the first quarter of 2022, BYD sold 291,000 vehicles, of which the cumulative sales of new energy vehicles were 286,000 units, and the net profit was 800 million yuan.

BYD earnings

Those familiar with BYD know that its business is not limited to passenger cars, but also includes mobile phone-related components, rechargeable batteries and photovoltaics.

Among them, BYD's auto revenue accounts for more than half of the total revenue. Here, we do more calculations and estimate that BYD's net profit in the automotive business in the first quarter of 2022 will be 600 million yuan.

In this way, BYD earns a net profit of 2,000 yuan for every car sold.

Compared with the two, BYD earns 60,000 yuan less than Tesla for every car sold.

Although it is an estimate, it is basically inseparable from ten, and the gap between the two is indeed very large.

Why is the net profit gap between BYD and Tesla so large?

They all sell cars, or they have to go back to the car to find the reason.

On one car platform, I compared Tesla to BYD.

Tesla compared with some BYD models

It can be clearly seen that Tesla has fewer models and high pricing, only 8 models, the main models are Model 3 and Model Y, and the starting price is as high as 290,000 yuan.

BYD has many models, large pricing span, more than 50 models, the main model is Qin, Song, the starting price of 100,000 yuan, the highest price is only more than 200,000 yuan, lower than the starting price of Tesla Model 3.

In general, the higher the selling price, the higher the profit.

Tesla's price is much higher than BYD's, and the profit is naturally much higher than THAT's.

The single model has another advantage: it is easy to compress costs.

Tesla's main models are Model 3 and Model Y, parts are shared, but also conducive to mass production, publicity is also convenient, the cost will be lower.

The high price and low cost are the reasons why Tesla's bicycle profits are much higher than BYD's.

Interestingly, don't say Tesla, that is, compared with domestic automobile companies, BYD's net profit is also surprisingly low.

Here, we look for a few domestic car companies to compare.

Great Wall Motor achieved a total operating income of 33.619 billion yuan in the first quarter, about half of BYD's, and a net profit of 1.634 billion yuan, which is about twice that of BYD.

Changan Automobile achieved a total operating income of 34.576 billion yuan in the first quarter, about half of BYD's, and its net profit reached 4.536 billion yuan, more than 5 times that of BYD.

GAC Group achieved a total operating income of 23.268 billion yuan in the first quarter, about one-third of BYD's, and a net profit of 3.009 billion yuan, nearly 4 times that of BYD.

Comparison of the first quarter financial reports of car companies

In this comparison, BYD's net profit is indeed pitifully low.

In fact, BYD's low net profit is not a new thing.

If you search for the "BYD doesn't make money" keyword with a search engine, you can search for more than 10 million results.

Search results

Various articles are analyzing the reasons why BYD does not make money.

And this kind of discussion has been around for more than 10 years.

The industry even said that BYD fell into a strange circle called "increasing revenue without increasing profits".

Many netizens are also curious, BYD only earns 2,000 yuan by selling 1 car, is it doing charity?

BYD is certainly not doing charity.

BYD has maintained a low net profit for more than a decade, roughly for two reasons:

First, there is more than enough heart and insufficient strength.

In business talk business.

They all sell cars, and every manufacturer wants the net profit to be a little higher, and then a little higher.

But not every car manufacturer can become Tesla and can enjoy the ultra-high gross profit margin brought by the brand aura.

Moreover, the Chinese market is very different from the European and American markets.

In the European and American markets, Tesla has few decent opponents.

But in the Chinese market, BYD has too many competitors. The rise of emerging new energy vehicle brands, traditional car manufacturers are also transforming, and every price point is crowded with competitors.

China's new car-making force

For example, at a price of 300,000-500,000, there are both traditional luxury car brands such as Audi, Mercedes-Benz and BMW, as well as emerging brands such as Weilai, Ideal, and Gaohe, and strong competitors such as Tesla.

BYD, if you want to sell for a high price, it is not so easy.

The second is to put long lines to catch big fish.

BYD's net profit is not only lower than Tesla, but also lower than other domestic car companies, to some extent intentional.

For example, BYD's DM-i hybrid platform model has a low overall pricing, breaking the higher pricing strategy of the previous joint venture brands for hybrid products.

By DOING SO, it is most likely to "exchange profits for the market."

In the era of new energy transformation, expanding market share and building a high moat are far more important than short-term high profitability.

BYD's idea is, on the one hand, to provide products with high cost-effective advantages in a small profit or even loss manner to expand market share; on the other hand, to invest heavily in research and development, establish technical barriers, and build a high moat.

Once firm, BYD can launch high-margin models while optimizing the supply chain, reducing costs with economies of scale, and ultimately improving profit levels.

Another noteworthy detail is that BYD's net profit is low, but its market value is not low.

According to the latest data, BYD's market value exceeds 700 billion yuan, exceeding SAIC's 200 billion yuan, becoming the largest automobile group in mainland China.

BYD's market capitalization

The money you didn't make from selling cars was made in the stock market.

At present, BYD's strategy is successful.

The data shows that BYD is selling crazy, with undelivered orders as high as 400,000 vehicles, which can be described as a ride in the new energy vehicle market.

Chinese enterprises should develop to the high-end.

However, ignoring the company's own strength and blindly pursuing high-end may go astray.

What Chinese consumers need, Chinese companies should build.

As far as China's current consumption level is concerned, a civilian BYD is more popular with the people.