BYD entered the market with a knife, and the Japanese decided not to resist

Original debut | Golden Horn Finance

Author | Corgi's Ke

On February 19, BYD announced that its two plug-in hybrid models, Qin PLUS Glory Edition and Destroyer 05 Glory Edition, were launched, with a starting price of 79,800 yuan, compared with the previous version of the Champion Edition model, the price of the two new versions of the model has decreased by 20,000 yuan. Among them, the price range of the Qin PLUS DM-i Honor Edition is 79,800 yuan to 125,800 yuan, and the price range of the Qin PLUS EV Honor Edition is 109,800 yuan to 139,800 yuan.

In less than 48 hours, more than 5 car companies have launched new entry-level models with lower prices, or carried out price reductions and other actions, covering SAIC-GM-Wuling, Changan Qiyuan, Nezha Automobile, etc. Zhou Yu, deputy general manager of SAIC-GM-Wuling Brand Division, even shouted directly on social platforms, "One word, follow!"

Some industry insiders pointed out that BYD's above two models will further accelerate the "gasoline-electric substitution" effect of plug-in hybrid models. According to Li Yunfei, general manager of BYD Group's brand and public relations department, this is to "completely open the decisive battle with fuel vehicles"!

In this way, the ball was kicked to the traditional fuel vehicle forces represented by Toyota Volkswagen, and in the face of new energy, shouting "electricity is lower than oil", how to crack the demolition move.

BYD is also under pressure

For BYD itself, the price war is also facing pressure on sales and costs.

BYD's annual sales in 2023 will reach 3.02 million units, of which 526,400 pure electric vehicles will be sold in the fourth quarter of 2023, and 1.5748 million pure electric vehicles will be sold for the whole year. This data shows that BYD surpassed Tesla in pure electric vehicle sales in the fourth quarter of 2023 and became the world's largest pure electric vehicle manufacturer.

Based on this, BYD's full-year sales target for 2024 is set at 4.5 million units.

Among them, the Qin PLUS DM-i will achieve sales of 300,000 units in 2023, accounting for nearly 10% of the annual sales, which can be said to be BYD's star model and will continue to play an important role in BYD's annual sales target of 4.5 million units.

However, in January this year, Qin PLUS DM-i only sold 20,318 units, and the ranking also fell to 9th, BYD needs to take relevant measures to stabilize the basic market of Qin PLUS DM-i.

In 2023, Qin PLUS DM-i relies on price advantages to achieve such results. In February last year, the BYD Qin PLUS Champion Edition dropped to less than 100,000 yuan for the first time with an entry price of 99,800 yuan, and shouted the slogan of "the same price of oil and electricity, subverting fuel", directly benchmarking FAW Toyota Corolla, SAIC Volkswagen Lavida and other joint venture brand A-class models. In November last year, BYD once again launched a limited-time discount of 10,000 yuan for the Qin PLUS DM-i model, reducing the starting price to 89,800 yuan.

Therefore, BYD repeated its old tricks, and just after the Spring Festival holiday, it made a big move to reduce the price, and the price was reduced by 10,000 yuan.

Cui Dongshu, secretary general of the passenger association, said that with the decline in lithium carbonate prices, the reduction of battery costs, and the decline in car manufacturing costs, and with the rapid development of the new energy market, the scale effect has been formed, and the products have more profit margins.

However, the continuous price reduction has had a negative impact on BYD's profits.

On the evening of January 29, BYD released its 2023 performance forecast. During the period, the company achieved a net profit attributable to shareholders of listed companies of 29 billion yuan to 31 billion yuan, a year-on-year increase of about 86%, and a net profit attributable to shareholders of listed companies of 27.4 billion yuan to 29.7 billion yuan, a year-on-year increase of about 90%.

Excluding BYD's announced net profit of 980 million yuan in the fourth quarter, it is estimated that the net profit of BYD's automobile business in the fourth quarter will be 6.65 billion yuan to 8.65 billion yuan, and BYD's single car profit will be about 7,000 yuan to 9,200 yuan, which is lower than the single car profit of 10,800 yuan in the third quarter.

Therefore, under the target of 4.5 million units, BYD's price reduction strategy is also licking blood on the tip of the knife, and it is necessary to find a balance between cost and sales.

Morgan Stanley released a report saying that BYD's sales in the fourth quarter of last year broke the peak and the high-end product mix performed benignly, but the profit fell from the peak in the third quarter, and the expansion of car sales discounts and rebates to agents may be the main reasons to offset the cost savings of upstream metals.

Toyota panicked

BYD's price cut this time has directly extended its tentacles to the sphere of influence of traditional fuel vehicles represented by Toyota.

BYD, as the leading brother of domestic new energy, fired the "first shot" of the price war of new energy vehicles in the Year of the Dragon, and shouted the slogan of "electricity is lower than oil". Subsequently, the new energy brands of Changan Qiyuan, Nezha Automobile, and SAIC-GM-Wuling followed up with price cuts.

Wuling Xingguang announced a price cut on February 19, and the Wuling Xingguang 150km advanced plug-in hybrid sedan was reduced to 99,800 yuan, which was 6,000 yuan lower than the original price of 105,800 yuan, which was basically the same as the price of the BYD destroyer 05 120km version.

Chang'an Qiyuan announced that Chang'an Qiyuan A05 starts at 78,900 yuan, and also plays the slogan of "electricity is lower than oil". It is reported that Chang'an Qiyuan A05 cut the price by 11,000 yuan.

On the evening of February 19, Nezha Automobile announced a price reduction for a number of main models, among them, Nezha X reduced the price by 22,000 yuan, Nezha AYA reduced the price by 8,000 yuan, and Nezha S reduced the price by 5,000 yuan. At the same time, Nezha Automobile has launched a value-preserving exchange policy, from now until March 31, 2024, the purchase of Nezha S and Nezha GT models can enjoy the right to exchange for all new cars of Nezha Automobile at a 7% discount on the opening price within 2 years.

For a time, domestic new energy focused on the A-class car market, which had long been known as the "three major highways" joint venture car control.

According to the China Passenger Car Association, the size of the A-segment market is shrinking year by year, from 61% in 2018 to 48% in 2023. In the A-segment segment, the percentage of traditional fuel vehicles in the A-segment segment market will drop from 97% in 2018 to 77% in 2023, while that of new energy vehicles will increase from 3% to 23%.

In other words, as a stock market for A-class vehicles, the market for fuel vehicles is gradually being eaten away by domestic new energy. With BYD setting off a wave of price cuts for A-class cars, if the "three mothers on the road" do not immediately launch relevant countermeasures, it is bound to further expand its voice in the A-class car market.

From the perspective of the company's macro strategy, Toyota believes that electric vehicles are just a transitional technical route for new energy vehicles. With this in mind, Toyota has invested a lot of resources in two technical routes: HEV hybrid technology and FCEV fuel cells.

Fuel cells are recognized by all parties as the ultimate technical route for new energy vehicles. Most of the problems faced by various electric vehicles, such as long charging time and range anxiety, can be well solved by fuel cells. Take the Toyota Mirai, the world's first mass-produced fuel cell car, as an example, which can be charged with hydrogen for 3 minutes and have a range of 850km.

Therefore, it is difficult for Toyota to directly adjust its product strategy to deal with it, and the rather practical strategy is to reduce the price with the brand. For Toyota, if it does not take countermeasures, BYD's price reduction wave may spread to the entire price band, and the loss of the A-class car position may only be the beginning.

The confidence to support the price reduction of domestic new energy is the scale effect formed by the continuous decline in the price of battery raw materials such as lithium carbonate and the continuous increase in the penetration rate of new energy vehicles. Faced with the annual sales pressure of 4.5 million units, BYD has the ability and motivation to set off a full-scale price war.

Divide the river and rule?

Due to the use of plug-in hybrid technology, the Qin PLUS DM-i has avoided the negative impact of the northern winter to a certain extent, and has begun to penetrate into the northern region.

According to the Ministry of Public Security's compulsory traffic insurance data (upper risk), the most popular city for Qin PLUS DM-i sales in 2023 is Tianjin in the north, with terminal sales exceeding 12,000 units. In addition, half of the top 10 cities in sales are northern cities, and even Changchun, located in the northeast region, ranked sixth, with 7,049 vehicles.

In this way, the fuel vehicles represented by Toyota theoretically do not have the situation of retreating to the north and realizing the rule of the river with new energy.

Moreover, China's infrastructure direction and national strategy is to support the "northward expansion" of new energy. For a country like China, electricity is mainly obtained by burning coal. This means that although electric vehicles have achieved zero emissions at the vehicle end, their essence is only to move emissions forward. And if green power is promoted on a large scale, it will mean a significant increase in the cost of electricity. Not to mention, as the number of electric vehicles increases, the entire power grid will face an increasing load. If you want to transform the power grid and invest in new power plants, it means that you need a lot of capital.

According to Toyota's logic, it is difficult for any country in the world to make huge support and sacrifices in infrastructure for the popularization of electric vehicles. Akio Toyoda, the head of Toyota, pointed out that if all the world's cars were replaced with electric vehicles, the electricity required would be twice as high as it is today, putting huge pressure on the grid and causing more carbon emissions.

Unexpectedly, Toyota underestimated the courage and courage of the "infrastructure madness". Recently, the State Grid Corporation of China revealed that in 2024, it will continue to increase the construction of a strong digital and intelligent power grid, promote the green and low-carbon transformation of energy, and promote the construction of UHV projects from Aba to Chengdu East. Focusing on application scenarios such as digital distribution network, new energy storage regulation and control, and vehicle-network interaction, we will build a number of digital and intelligent strong power grid demonstration projects, and the total investment in power grid construction is expected to exceed 500 billion yuan.

Backed by the support of the "infrastructure madness", the electrification process of China's auto market has begun to accelerate, and the HEV hybrid technology, which cannot be supported by policies, and the electric vehicles that are obviously not competitive enough, have made Toyota lose the momentum of rapid development in the domestic market. According to the data, 2022 is the first decline in Toyota's sales in China in ten years, with a decline of 0.2%, and in 2023, the sales in China will be 1.9076 million units, and the decline will expand to 1.7%.

Fortunately, most of the new energy forces are participating in the war at the expense of profits, and the sustainability of the later period remains to be seen. According to Wind data, in the first three quarters of 2023, among the 20 A-share passenger car companies, 7 car companies' net profit attributable to the parent company declined, including Dongfeng Motor, Guangzhou Automobile Group, Great Wall Motor, and SAIC Group. Except for Li Auto, the rest of the car companies are in the red in the first three quarters of 2023.

In other words, this set of Chinese new energy vehicles has not yet completely solved the problem of profitability, so that the model of fuel vehicles still has certain advantages. It's just that the scale effect formed by the continuous decline in the price of battery raw materials such as lithium carbonate and the continuous increase in the penetration rate of new energy vehicles, in the face of "low electricity than oil", it has begun to shine from ideal to reality, and there is not much time left for Toyota to adjust.