On March 29, 2023, BYD (002594. SZ) announced its 2022 annual report, with revenue of 424 billion, a year-on-year increase of 96%; net profit attributable to owners was RMB16.6 billion, a year-on-year increase of 445.9%; Net cash flow from operating activities was RMB140.8 billion, up 115% year-on-year.
In the global field of new energy vehicles, BYD and Tesla are recognized leaders. Compared with Tesla, BYD currently leads in sales and cash flow, and the gap between revenue and net profit is large.
According to the closing price on March 31, BYD's market value is 745.3 billion yuan, and Tesla's market value is equivalent to 4.5 trillion yuan. BYD's profit is about one-fifth of Tesla's and its market capitalization is one-sixth of Tesla's.
"Heroes Club" VS "Two-person Turn"
In 2017, Tesla's sales just exceeded the 100,000 mark, BYD sold 355,000 vehicles, and "Bitby" (BYD sales/Tesla sales x 100%) was 345%.
In 2019, Tesla's vehicle sales climbed to 368,000 units, and the "bitby" fell to 111%. At the end of the year, Tesla's Shanghai factory was officially put into operation.
In 2020, the production capacity of the Shanghai factory was gradually released, Tesla sold 500,000 vehicles throughout the year, and the "bitby" fell to 79%.
In 2021, the "bitratio" dropped to a "minimum" - 77%.
In 2022, BYD and Tesla's vehicle sales will increase by 150% and 40% respectively. BYD's sales exceeded 1.8 million units, and "Bitby" reached 137%.
In Q1 2023, BYD sold 552,000 units, up 92.8% y/y. Tesla's global sales were 423,000, up 36% year-on-year, of which sales in the United States were 180,000 units, up 39.5% year-on-year; Sales outside the U.S. were 243,000 units, up 33.5% y/y.
Before 2020, BYD's vehicle sales included fuel vehicles. At the beginning of 2022, BYD will stop producing fuel vehicles, and all sales in 2022 will be new energy vehicles.
If BYD, which has many models, sings "group heroes", Tesla is "two-person turn". Since the mass production of Model 3 and Model Y, these two models have been the "only" pillars of Tesla.
In 2021, Model 3/Y sales reached 911,000 units, accounting for 97% of total sales. Model S/X sales were 25,000 units, accounting for only 3%;
In 2022, Model 3/Y sales reached 1.247 million units, accounting for 95% of total sales; Model S/X sales increased to 5% to 67,000 units.
The latest news said that Tesla Model 2 will start production in 2024 and go on sale in 2025. Throughout 2023 and 2024, Tesla's main model will still only be Model 3/Y.
"Two-person turn" will have to be sung for at least two years, and from 2017, the Model 3 is less than eight years of "service".
With the rapid spread of new energy vehicles and the emergence of new models, the competitive landscape is very different from that of a decade ago. In the field of new energy vehicles "rolled out of the sky", Tesla wants to use a car to "hit" the main force for eight years, and the only trick is to reduce prices.
Tesla is inevitably "big", thinking that it is Feitian Moutai. The two-fisted four-handed is the first factor that Tesla's market value is surpassed by BYD.
Three core indicators, BYD wins a game
For any enterprise, revenue, net profit, and cash flow are the most core indicators. Although it regained the new energy vehicle sales championship, BYD only led in one of the three core indicators.
1) The revenue gap has narrowed
In 2015~2020, BYD's revenue growth rate was below 30%, and even negative growth in 2019.
In 2021, the growth rate will be close to 40%, and the revenue will exceed 200 billion.
In 2022, the growth rate will increase to 96.2%, and the revenue will reach 424 billion.
In 2022, BYD's revenue was 77.4% of Tesla's, and in 2021, it was 63%.
2) Establish two main businesses
BYD's three main businesses are automobiles, mobile phone parts and assembly, rechargeable batteries and photovoltaics.
In 2021, the revenue of the three main businesses will be 112.5 billion, 86.5 billion and 16.5 billion respectively, accounting for 52%, 40% and 7.6% of the revenue, respectively.
In 2022, the revenue of automotive and mobile phone parts and assembly business will be 324.7 billion yuan and 98.8 billion yuan, accounting for 76.6% and 23.3% of the revenue, respectively. The two main businesses together accounted for 99.9% of the revenue. The automotive business contributed 100% to revenue growth.
The rechargeable battery business disappeared from the 2022 annual report, but the mobile phone parts and components business was retained due to the continuous decline in global consumer electronics sales in recent years and weak demand for rechargeable batteries.
The mobile phone components/assembly business covers many industries such as consumer electronics and smart home, and has great potential in the field of "smart cockpit".
Wang Chuanfu said: "Intelligence is the second half of new energy vehicles." BYD's "mobile phone components/assembly" segment is already producing a large number of in-vehicle electronics for the automotive business, and it will be used more in the "second half".
3) Net profit – Tesla came later
The net profit comparison between BYD and Tesla is more "dramatic" -
In 2016~2019, BYD's net profit margin decreased year by year, from 4.5% to 0.2%.
In 2020, the net profit margin rebounded to 1.9%, and in 2021 it fell back to 0.6%.
In 2022, BYD's net profit will reach 17.7 billion, a year-on-year increase of 346%, and a net profit margin of 4.2%; Non-net profit was 15.64 billion, a year-on-year increase of 1146%.
Since its establishment in 2003, Tesla has lost money for 17 consecutive years -
In 2017, the loss was US$2.24 billion, with a loss rate of 19%;
In 2018, the loss was 1.06 billion US dollars, with a loss rate of 5.7%:
The loss in 2019 was $780 million, with a loss rate of 3.2%:
Profit for the first time in 2020, net profit of US$860 million, profit margin of 2.7%;
In 2021, the net profit was 5.64 billion US dollars, a year-on-year increase of 555%, and the net profit margin was 10.5%;
In 2022, the net profit was US$12.6 billion, and the net profit margin increased to 15.5%, and the growth rate dropped to 123%.
In 2021, BYD's net profit was only 11% of Tesla's (converted into RMB), which increased to 21% in 2022.
4) Cash flow – BYD dominates
In the early years, when Tesla was still losing money, the cash flow from operating activities had begun to return to positive -
In 2015, the operating loss was US$710 million, the net loss was US$890 million (loss ratio of 91%), and the net cash outflow from operating activities was US$520 million.
2017 was Tesla's darkest moment, with a net loss of $2.24 billion, but net cash outflow from operating activities has fallen sharply to $60.56 million;
In 2018, Tesla lost US$1.06 billion, and its operating cash flow has returned to US$2.1 billion, equivalent to RMB13.8 billion. In the same year, BYD's operating cash flow was 12.5 billion, equivalent to 90% of Tesla's;
In 2019, Tesla still did not turn around, but its net cash flow from operating activities reached US$2.4 billion, equivalent to RMB16.6 billion;
In 2020, Tesla received a "small profit" of US$860 million, and its operating cash flow reached US$5.9 billion, equivalent to RMB40.7 billion. In the same year, BYD's operating cash flow reached 45.4 billion, equivalent to 111% of Tesla's;
In 2021, Tesla's net profit was US$5.64 billion, with operating cash flow equivalent to RMB74.2 billion; BYD's cash flow was RMB65.5 billion, equivalent to 88% of Tesla's;
In 2022, Tesla's net profit soared to US$12.6 billion, and its operating cash flow was US$14.7 billion, equivalent to RMB99 billion. BYD's operating cash flow reached 140.9 billion, equivalent to 142% of Tesla's.
BYD and Tesla attach great importance to cash flow, and operating cash flow is much higher than net profit is their "daily". In the last three fiscal years, BYD has led by two fiscal years.
Of the three indicators of revenue, net profit and cash flow from operating activities, BYD is 42% ahead of one indicator and 23% behind the other.
The most critical indicator is net profit, which BYD has maintained for many consecutive years, but was significantly surpassed in 2021 and one-fifth of Tesla in 2022.
Automotive business profitability
1) Pricing strategies are very different
In 2015, BYD's main models were compact models such as the F3 and S7, with annual sales of 394,000 units (including 58,000 new energy vehicles) and an average annual ex-factory price of CNY 93,000. Tesla sells two "tall" Model S and Model X (Model 3 has not yet come out), with a factory price of 68,000 US dollars, equivalent to 421,000 yuan (plus taxes, Chinese consumers pick up the car price up to one million).
Whether in the United States or China, Tesla was definitely a "luxury car".
With the mass production of Model 3 and Model Y, especially the Shanghai factory, the proportion of Model S/X dropped to about 5%, and the average factory price dropped significantly, falling to 300,000 yuan in 2021.
In 2022, Tesla raised prices several times on the grounds of rising raw material prices, and the average annual sales price increased to 344,000 yuan. Tesla adopts a "skimming pricing method" with the primary goal of maximizing profits.
In 2020, BYD's average sales price increased to more than 210,000, equivalent to 63% of Tesla's. It will fall back to 156,000 yuan in 2021 and 180,000 yuan in 2022. In the second half of 2022, BYD's orders on hand peaked at 800,000 units. BYD's pricing strategy is "small profits but high sales", with the primary goal of maximizing market share.
In the Chinese market, BYD's main rival is not Tesla, but traditional fuel vehicle companies to grab potential buyers.
Unlike some people's subjective impressions, in the past eight years (2015~2022), there were five annual gross profit margins of BYD's auto business that were higher than Tesla's.
Net gross profit margin is more interesting when combined with price and volume.
For example, in 2016, the average factory price of BYD and Tesla was 136,000 and 489,000 respectively, and the price of BYD was only 28% of Tesla. However, BYD's gross profit margin is 4 percentage points higher than Tesla's. The main reason is that Tesla sold only 76,000 units in 2016, while BYD sold more than 420,000 units.
In 2016, BYD's price was less than 30% of Tesla's, but its sales were 450% ahead, and its gross profit was higher, indicating that cars are economies of scale.
In 2020, affected by the epidemic, BYD's sales were less than 400,000 vehicles, while Tesla's sales exceeded 500,000 units, but BYD's gross profit margin was 5 percentage points higher than Tesla's, which shows BYD's ability to control supply chain costs.
In the following two years, BYD and Tesla respectively aimed at "market share maximization" and "profit maximization", and Tesla's gross profit margin was leading.
In the past eight years, the gross profit of BYD's automobile business has been slightly higher, but due to the low average selling price, the gross profit of single vehicles is far less than that of Tesla.
In 2020, BYD's gross profit per vehicle was 54,000, once reaching 79% of Tesla.
In 2021, the two strategies are different, and the gross profit of the single vehicle "parted ways". In 2022, BYD's gross profit per vehicle will be 37,000, equivalent to 41% of Tesla's.
Musk has experienced "hard days", and Tesla's business is highly dependent on the international market - research and development in the United States; a significant portion of the assembly outside the United States (currently mainly Shanghai); Global procurement of raw materials and accessories; Products are sold worldwide. Market, assembly, spare parts "three heads outside".
BYD is not only "three heads", but even a considerable part of the industrial chain is in its "own yard".
The impact of the international situation, geopolitics, globalization and other aspects on Tesla's performance is much greater than that of BYD.
Musk, who endured 17 years of losses, chose to make money first when he could make money, and it was right at all. If Wang Chuanfu and Buffett would choose this way in Musk's position.
In short, for the two leading leaders of BYD and Tesla, the gross profit margin is not only affected by external factors, but also has a considerable weight - if the boss wants to seize the market, the price is set lower; The boss wants to make money first, and the price is set higher. Not as the "layman" imagines, "BYD will not make money."
In 2022, BYD's new energy vehicle subsidy revenue will be 10.47 billion yuan, with an average of 5,800 yuan per unit.
In response to the "decline" of subsidies, on the last day of 2022, BYD will increase the price of related models by 2,000 yuan ~ 6,000 yuan.
According to data released by BYD, the subsidy standards for plug-in hybrid and pure electric vehicles are 4,800 yuan per vehicle and 12,600 yuan per vehicle respectively. Obviously, BYD's strategy is that "consumers and companies each bear 50%".
The automotive industry presents typical "economies of scale". The scale of BYD in 2023 is far from comparable in 2021 and 2022. In the absence of subsidies, it is entirely possible to earn a few thousand dollars more per car.
Fuel vehicle companies may not only have a "suicide price reduction" road
1) Plug-in hybrid and pure electric are transitions
On June 21, 2022, Tiger Sniff "Wang Chuanfu "gamble" trillions of market value" mentioned that in the past two decades, BYD has faced at least six relatively big strategic choices. Looking back, they all "bet" right, from "blatantly entering the automobile industry" and "the layout of the whole industrial chain" to "betting on lithium iron phosphate batteries" and "self-developed chips"... Among them, "plug-in hybrid, pure electric than wings fly together" has set an example worth learning for the transformation of fuel vehicle companies.
First of all, we must recognize a problem: plug-in hybrid and pure electric vehicles are transitional solutions, and pure electric vehicles are not the other side. Energy density, cycle life, resource bottlenecks, and safety issues have sentenced pure electric vehicles to "four deaths". For example, lithium resources, hundreds of millions of new cars in the world every year all use pure electric, only enough to last for 20 years. This prediction is not very accurate, and it does not need to be accurate, it is enough to know the magnitude. Resources that are only enough for decades for humanity are by no means the final solution.
Since it is a transition, plug-in hybrid has only advantages and no disadvantages compared with pure electric:
First, it is not constrained by the promotion progress of charging piles;
Second, the consumption of lithium, nickel, cobalt and other resources is only one-fifth to one-third of pure electric vehicles; After completing the transition mission, the number of waste batteries that need to be disposed of has also been greatly reduced;
Third, there is no mileage anxiety, so that consumers can buy a car with confidence, use the car with confidence, can use electricity to run without burning oil (because electricity saves money), and the energy-saving and environmental protection effect is better than that of pure electric vehicles.
For consumers, the fuel consumption of plug-in hybrid vehicles is only equivalent to a 1.0-displacement "mini car", the price is equivalent to a 1.5-displacement "affordable car", and the power is equivalent to a 3.0V6 "performance car".
There is no need for subsidies, no need for "green cards", consumers will make choices that are beneficial to them.
BYD's plug-in hybrid technology has sounded the "death knell" for mid- and low-end fuel vehicles. At the beginning of 2023, this round of fuel vehicle price reduction has little to do with Tesla, plug-in hybrid and fuel vehicles "the same price of oil and electricity", and the starting price of Tai PLUS is less than 100,000 is the real "fuse".
In 2022, the number of vehicles in mainland China will be about 320 million, of which fuel vehicles account for 96%, the annual consumption of gasoline and diesel will be about 260 million tons, and the need for crude oil will be 430 million tons, equivalent to 86% of crude oil imports. Getting rid of dependence on imported crude oil is not only an environmental issue, but also a matter of energy security.
Internationally, the U.S. aims to achieve a 50% penetration rate of new energy vehicles by 2030. The EU is more aggressive and wants to achieve "zero emissions" by 2035. Europe and the United States will not patiently wait 37 to 2060. We also have the ability, conditions, confidence and motivation to accelerate the replacement of fuel vehicles by new energy vehicles.
As soon as 2030, the proportion of plug-in hybrids in China's automobile market may reach 60% or 70%, and the remaining share will be divided between pure electric vehicles and remaining "pure fuel vehicles".
The purpose of the subsidy is to eventually cancel the subsidy, and now new energy vehicles (especially plug-in hybrids) have forced fuel vehicles to die. "Wheelchairs" and "crutches" are used by fuel vehicle companies (to prevent them from "dying too fast"), such as Dongfeng Motor receives subsidies of up to 90,000 yuan per vehicle from the government.
2) Fuel vehicle enterprise transformation model
BYD adheres to the established strategy of "two legs and walking in unison" of pure electric and plug-in hybrids.
In Q4 2021, the sales volume of pure electric and plug-in hybrid vehicles was 136,000 units and 127,000 units, respectively, accounting for 48% of new energy vehicle sales.
In Q4 2022, the sales volume of pure electric and plug-in hybrid units will be 329,000 and 353,000 units, respectively, and the proportion of plug-in hybrid will increase to 52%;
In Q1 2023, the sales volume of pure electric and plug-in hybrid units will be 265,000 and 283,000 units, respectively, and the proportion of plug-in hybrid will remain at 52%.
In November 2021, the author predicted in "BYD's Lizi": "Fuel vehicles have completed their mission, and BYD will become the first company in the world to truly abandon fuel vehicles", "BYD adheres to the strategy of DM plug-in hybrid and EV pure electric 'flying together', and has advantages that Tesla and 'new forces' cannot match", "Without the technology and experience accumulated in manufacturing millions of fuel vehicles, BYD's hybrid is 'water without source'".
In March 2022, BYD stopped producing fuel vehicles, and many media used words such as "back to the water" and "strong men broke their wrists", which could not help but laugh generously.
In 2022, BYD's plug-in hybrid vehicle sales reached 946,000 units (an increase of 673,000 units from 2021). Plug-in hybrid vehicles are equipped with a fuel engine, transmission... It is equivalent to "containing" a fuel vehicle.
The suspension of fuel vehicles is not a "broken wrist", and the production capacity of fuel vehicles is not only not idle and waiting for scrapping, but also expands and expands production. At its peak, BYD's fuel vehicles did not sell 950,000 units in a year.
In 2022, China's automobile production will be 27.02 million units, of which 7.06 million new energy vehicles will be united. The existing fuel vehicle production capacity exceeds 30 million units / year, with the further decline in sales, the utilization rate of fuel vehicle capacity will fall below 50%, 40%, 30% sooner or later... Perhaps, this day came sooner than expected: entering 2023, despite the huge price cuts, sales of fuel vehicles in January and February still fell by 15%.
Instead of "suicide price reduction", many fuel vehicle companies should follow BYD's example and actively transform plug-in hybrids, such as Great Wall Motor.
With plug-in hybrid as the main transition method, if the transition period is 20 years (the final solution may be hydrogen), China's huge fuel vehicle production capacity can be fully utilized to avoid huge waste. For BYD, which has the first layout, this is a huge blue ocean, and Tesla has no relationship with half a dime, which is the second factor that Tesla's market value has been surpassed.
Fight the cost, BYD is not afraid; In terms of technology, BYD has "easy sifang", and the significance of autonomous driving is overestimated and the difficulty of implementation is underestimated (the third factor).
According to the current trend, BYD's market value will sooner or later surpass Tesla.
*The above analysis is for reference only and does not constitute any investment advice