01. The more the price is reduced, the more money is made?
BYD, which held the price sickle high at the beginning of the year, announced its results for the first quarter of 2024 on the evening of April 29.
According to the financial report, the company's revenue in the first quarter was 124.944 billion yuan, a year-on-year increase of 3.97%, a decrease of 30% from the previous quarter, the company's net profit attributable to shareholders of listed companies in the first quarter was 4.569 billion yuan, a year-on-year increase of 10.62%, a decrease of 47.3% from the previous quarter, a year-on-year increase of 5.24% to 3.752 billion yuan after deducting non-recurring gains and losses, and a year-on-year increase of 4 percentage points and a month-on-month increase of 0.66 percentage points to 21.88%.
Specifically, the growth of revenue is due to the increase in sales of new energy vehicles, BYD sold a total of 626,300 new energy vehicles in the first quarter, a year-on-year increase of 13%, higher than the production of 612,000 units in the quarter.
In the eyes of industry insiders, the increase in sales volume is due to the price strategy in the first quarter. Just after the Lunar New Year this year, BYD dropped a "bomb" on the auto market with the four big words "electricity is lower than oil". The first is the Qin PLUS Glory Edition, and then the main models such as Ocean.com and Han, Tang, Song, and Yuan have brought a drop of 10,000-50,000 yuan with their respective glory versions, and then triggered a series of car companies to cut prices. BYD's inventory pressure has also been greatly reduced.
Although BYD's net profit growth rate is greater than the revenue growth rate, the profit of the bicycle is still affected to a certain extent.
According to the production and sales express report released by BYD from January to March, BYD's cumulative sales in the first quarter were 626,300 units, and the average net profit per vehicle was estimated to be about 7,295 yuan, far lower than 8,600 yuan in 2023 and down from 7,480 yuan in the same period last year.
However, in the view of Guojin Securities, BYD is very strong in cost control, and the cost of a single vehicle has dropped sharply to make up for the price reduction gap, which has driven the gross profit of Q1 to exceed expectations.
You must know that although Tesla's net profit of 1.129 billion US dollars (about 8.177 billion yuan) in the first quarter was higher than that of BYD, its gross profit margin (17.4%) was still surpassed by BYD (21.88%).
(Screenshot of BYD's 2024Q1 financial report)
"BYD's Q1 car sales were 624,400 units, an increase of 14% year-on-year and a month-on-month decrease of 33.8%. In late February, the company started the facelift and price reduction of the Glory version, but it still achieved a year-on-year increase in gross profit margin, and the performance exceeded expectations. According to the calculations of analysts at Guojin Securities, the company's Q1 single vehicle cost was only 102,000 yuan, down 24.9% year-on-year and 9.8% month-on-month; The operating cost in Q1 was 97.6 billion, down 1.1% year-on-year and 31.2% month-on-month.
In fact, under the influence of the price war in the domestic market, no one is immune, and Tesla's profit per car in the first quarter also declined. Based on the net profit and delivery volume in the same period, Tesla's net profit per car in the first quarter of this year is 21,100 yuan, and in 2023, Tesla can earn about 60,000 yuan for every car sold, which is almost three times as much as it is now.
At the same time, the company will continue to invest overseas in 2024, and the Southeast Asian and Latin American markets will continue to expand, and the improvement of the model structure will drive the company's bicycle profitability upward.
In addition, on April 26, the Ministry of Commerce, the Ministry of Finance and other seven departments jointly issued the "Implementation Rules for Automobile Trade-in Subsidy", which made clear guidance on the scope and standards of automobile trade-in subsidies, subsidy declaration, review and distribution. Under the favorable policy of "trade-in", the industry believes that BYD's compact tram has the leading power and pricing power in the market, and the channel and cost advantages may be more obvious.
02. How far is BYD from becoming "China's Toyota"?
I still remember that after the release of the 2023 annual report, at an analyst exchange meeting, Wang Chuanfu, chairman of BYD, once said, "The next three years will be a big battle, the competition is very fierce, and the supply exceeds demand." This decisive battle must be a battle of scale, cost, and technology. He believes that the last ones to stay must be powerful car companies with large-scale sales and output.
BYD, which is positioned in globalization, has made great progress in recent years and is regarded by the outside world as the Chinese car company most likely to catch up with Toyota.
When BYD made cars from batteries in the early years, Wang Chuanfu bought dozens of Toyota cars and studied them one by one. After more than ten years of self-research and supply chain construction of the company, BYD's achievements in the new energy vehicle track have begun to export in reverse. At this year's Beijing Auto Show, BYD also unveiled the slogan "World Champion of New Energy Vehicles".
BYD's determination to rush to the peak can be seen. Reese Automotive Division believes that from a corporate point of view, BYD Group still has a long way to go from the world's leading car companies. In the agency's view, in order to become a world-class car company, BYD not only needs to grasp the trend of intelligence, accelerate its comprehensive entry into the global market, but also gain a firm foothold in the mid-to-high-end market.
In the first quarter of this year, BYD mainly consolidated the fundamentals of the low-end markets such as Dynasty Network and Ocean Network. For example, in March, BYD Dynasty's key marine models continued to be remodeled. At the April auto show, the Qin L and Seal 06DM-i equipped with a new generation of plug-in hybrid platforms were unveiled, and it is reported that the new car will be launched in 2024Q2, with an estimated starting price of about 120,000 yuan, and the first pure electric mid-size SUV Hiace 07EV of Ocean Network also made its debut, which is expected to be officially launched in May this year, with a price in the range of 200,000 yuan.
However, it is still the brands that have laid out the high-end market such as Denza, Yangwang and Equation Leopard to provide protection for their profits. It is reported that in 2024, new high-end brands such as DENZA flagship sedan, sports sedan, luxury SUV, Formula Leopard 8/3, and Yangwang U9/U7 will be launched one after another. According to media reports, BYD is expected to hit the sales target of more than 3.6 million units in 2024, of which 20% of its revenue is expected to come from high-end brands.
Reese Automotive Division believes that the high-end market is particularly important to BYD, but how to tell the high-end story well is a science.
It is undeniable that Yangwang and Formula Leopard chose to do off-road and sports cars, and achieved a certain premium by creating differentiated categories in the early stage, but taking Formula Leopard as an example, in the mid-to-high-end off-road vehicle market, in the face of the tank brand of the industry's old-timers Great Wall Motors, how to establish differentiated advantages and cognition as soon as possible will eventually be reflected in sales.
However, judging from the on-site statement of Zhao Changjiang, general manager of DENZA Automobile, at the Beijing Auto Show, BYD's high-end brand is ready for internationalization. It is reported that in June and July this year, DENZA will deliver the D9 in Hong Kong, Macau and the Asia-Pacific region, and will launch the Z9GT global roadshow next.
Becoming China's version of Toyota or Volkswagen, BYD has already shown its potential. In the eyes of industry insiders, with the continued increase in sales, the increase in the proportion of overseas sales, the development of high-end models, and the launch of new models, BYD's gross profit margin may still have room for improvement.
Author|Liu Dongxue
Edited by Tian Yanlin