BYD, the Chinese electric vehicle manufacturer, has reported substantial earnings in the past six months.
8 min read
How substantial? In the first half of this year, BYD achieved a net profit attributable to shareholders of RMB 10.95 billion (approximately $1.5 billion USD), slightly below the mean forecast of RMB 11.1 billion, but still an impressive figure.
Comparing these figures to the financial reports or forecasts released by other automakers for the first half of the year, BYD stands out. While Great Wall Motors forecasted a net profit of RMB 1.15 billion to RMB 1.55 billion, Geely reported RMB 1.57 billion, and GAC Group reported RMB 2.966 billion.
With profits in the billions, BYD’s earnings are several times higher than those of the mentioned automakers, making it one of the most profitable companies in China.
Simultaneously with the financial report release, BYD also completed its “largest ever” acquisition, spending RMB 15.8 billion to acquire an electronic company.
As a leader in the new energy vehicle sector, BYD is reaping comprehensive rewards. The company’s global sales reached 1.25 million vehicles in the first half of 2023, a 96% increase year-on-year, surpassing Mercedes-Benz and BMW and ranking among the top ten automakers globally for the first time according to MarkLines data cited by Nikkei News.
According to data from Nikkei News, the top ten global automakers by sales volume in the first half of the year were Toyota (5.41 million vehicles), Volkswagen (4.37 million vehicles), Hyundai and Kia (3.65 million vehicles), Renault-Nissan-Mitsubishi Alliance (3.20 million vehicles), Stellantis (3.20 million vehicles), General Motors (2.96 million vehicles), Ford (2.17 million vehicles), Honda (1.84 million vehicles), Suzuki (1.52 million vehicles), and BYD.
BYD, which was ranked 13th last year, advanced to the 10th position this year, surpassing both Mercedes-Benz and BMW that were ranked ahead of it last year, as well as Geely.
Simultaneously, in the first half of the year, BYD expanded its market share in the domestic market to 33.5%.
The strong sales performance naturally led to increased revenue. In the first half of the year, BYD achieved a revenue of RMB 260.124 billion, a year-on-year increase of 72.72%, which translates to approximately RMB 1.4 billion per day.
The net profit attributable to shareholders was RMB 10.954 billion, a substantial increase of 204.68% compared to the same period last year. The non-GAAP net profit reached RMB 9.695 billion, a year-on-year increase of 220.02%, with earnings per share of RMB 3.77.
In terms of profitability, BYD’s gross profit margin for its automotive business in the first half of the year was 20.67%, a 4.36% increase compared to the previous year’s full-year gross profit margin of 20.39%.
Looking at individual vehicle profitability, excluding BYD’s electronic business profit of RMB 1.46 billion, the per-vehicle profit in the first half of this year was approximately RMB 7,560.31, a growth of over 60% compared to the same period last year’s RMB 4,616.82.
Source: BYD
However, the average selling price per vehicle for BYD in the first half of the year decreased by 1.62% year-on-year to 166,300 yuan due to the influence of some lower-priced models.
Behind the rapid growth in performance is significant investment in technology. In the first half of this year, BYD invested 14.246 billion yuan in research and development, a year-on-year increase of 120.2%, far exceeding the net profit for the same period.
Since BYD began focusing on plug-in hybrid vehicles in 2008, Wang Chuanfu has led the company to persistently pursue the route of plug-in hybrid technology. Over BYD’s nearly 12-year development journey, in 11 of those years, the company’s research and development investment exceeded the net profit for that year.
Source: BYD
Up to now, BYD’s total research and development investment has exceeded 100 billion yuan, with over 90,000 research and development engineers, 11 major research institutes, an average of 19 patent applications submitted every working day, and 15 patents granted.
Investment always yields returns, and in recent years, BYD’s achievements include the implementation of technologies such as blade batteries, DM super hybrid systems, CTB integrated battery packs, Yi Si Fang, and Cloud Chariot.
Continuous Expansion of Exports
Starting from last year, BYD accelerated its overseas business expansion. In the first seven months of this year, over 92,400 new energy vehicles were sold overseas, surpassing the full-year overseas sales of 55,900 vehicles in 2022.
Currently, BYD has entered 54 countries and regions including Japan, Germany, Australia, Brazil, and the United Arab Emirates. Among them, BYD’s first globalized model, the BYD Yuan PLUS (also known as BYD ATTO 3), has achieved monthly sales champion titles in Thailand, Israel, New Zealand, and other places.
Source: BYD
According to the half-year report data, BYD’s revenue from overseas markets in the first half of the year reached 64.41 billion yuan, a year-on-year increase of 92.94%, accounting for 24.76% of the total revenue, an increase of 2.59 percentage points.
In July of this year, BYD announced that it would build three new factories in Brazil, with Chairman Wang Chuanfu stating that they are well-prepared to meet the growing demand in overseas markets.
Benefiting from the hot automotive business, other business sectors of BYD also experienced growth.
Specifically, in the first half of this year, the revenue from BYD’s automotive-related products was about 208.824 billion yuan, a year-on-year increase of 91.11%, accounting for 80.28% of the total revenue for the first half of the year.
The revenue from mobile phone components, assembly, and other products was about 51.1 billion yuan, a year-on-year increase of 24.40%, accounting for 19.64% of the total revenue for the first half of the year.
Overall, new energy vehicles and related businesses continue to be the largest revenue increment for BYD.
Intending to Enter the “Apple Chain”?
Just on the eve of BYD’s release of the 2023 half-year report, BYD disclosed its largest-ever acquisition.
On August 28th, BYD announced that it had agreed with JEP Singapore to sign a framework agreement to acquire the seller’s product manufacturing business in Chengdu and Wuxi for approximately 15.8 billion yuan (equivalent to 2.2 billion US dollars) in cash. This includes the existing customer component manufacturing business. Based on this, JEP has established a new legal entity in Singapore, Juno Newco Target Holdco Singapore Pte. Ltd., and intends to reorganize the target business to this company. BYD Electronics and its subsidiaries will acquire 100% of the shares of the new company. BYD Electronics and JEP Singapore have completed the signing of the framework agreement on the same day.
According to BYD’s official disclosure of previous acquisitions, BYD’s previous largest acquisition amount was only 3.5 billion yuan.
The target of the transaction, JEP Singapore, is a wholly-owned subsidiary of the first-tier global manufacturing industry, JEP. In August 2023, JEP was also selected in the Fortune Global 500 list for 2023, ranking 456th.
The acquired JEP Chengdu factory is mainly responsible for the processing of mechanical and electronic products, with over 60,000 employees. JEP’s Wuxi factory is also engaged in the design and manufacturing of consumer electronic mechanical components. Interestingly, BYD Electronics’ business is closely related to mobile phones, with over 98% of its revenue from mobile phone components, modules, and other product sales in 2022.
JEP, as a precision structural component supplier for Apple, supplies components to Apple. JEP’s Chengdu and Wuxi factories are important production bases for consumer electronic mechanical components. Being “adopted” by BYD is seen by many as an intention to enter the “Apple Chain.”
It’s worth noting that BYD Electronics’ predecessor was the mobile phone component and module division of BYD Co., Ltd. This division was separately listed in December 2017 and is considered BYD Group’s second growth curve apart from its electric vehicle business. In BYD’s 2023 half-year report, it was the second-largest revenue segment, accounting for nearly 20% of the total revenue.
Now, with the surge in the automotive business, wanting to rapidly increase business revenue and fulfill the mission of BYD Group’s second growth curve, choosing mergers and acquisitions to expand more capacity naturally becomes the favored solution.
Cluster of New Cars in the Second Half
In BYD’s outlook for the second half of the year, “multi-brand matrix” and “new energy vehicle going global” have become keywords.
The multi-brand matrix has basically been laid out. In the first half of the year, BYD unveiled its new high-end brand “Yangwang” (Upward Gaze), aiming at the million-yuan-level new energy vehicle market. In June, BYD’s new personalized brand was officially named “Fangcheng Bao” (Formula Leopard), and it recently launched its first model, Leopard 5.
With the completion of its brand lineup from the Dynasty Ocean Network series, Tang, Fangcheng Bao, and now Yangwang, it covers the household, luxury, and personalized markets. After completing the layout, the next step is the successive launch of new cars. According to incomplete statistics, BYD will release four to five new models in the second half of the year.
The all-new mid-size plug-in hybrid sedan BYD Hai Bao DM-i will be launched in the third quarter of this year, with a price range of 180,000 to 250,000 yuan.
Source: BYD
Since the formation of the “Qin, Han, Tang, Song” product matrix, BYD’s Wangchao series has not introduced new models for a long time. The new model in this series is the Song L, positioned as a mid-size all-electric SUV that is more upscale than the existing Song series. It is expected to be released and launched on the market within the year.
Next comes the highlight: BYD’s two new sub-brands, Fangcheng Bao (Leopard Formula) and Yangwang (Upward Gaze).
(Note: This information appears to be cut off or incomplete. It seems to be referring to BYD’s strategy of introducing new models and sub-brands in their product lineup, but the specific details are not fully provided.)
Source: BYD
The Yangwang U8 can definitely be considered one of the most talked-about new cars of 2023. According to the plan, deliveries are expected to start gradually in the third quarter of this year. The recently released Fangcheng Bao, with its lower price, also has greater market potential than the Yangwang U8. The first model, Leopard 5 (Bao 5), will also begin deliveries this year, with pre-order prices ranging from 300,000 to 400,000 RMB.
During the 2022 performance release conference, Wang Chuanfu set a goal to become the largest automaker in China by the end of this year. The annual sales target set was 3 million vehicles, and BYD completed 1.25 million vehicles in the first half of the year. With an additional 260,000 vehicles in July, BYD is halfway to achieving its annual sales target.
However, the competition in the domestic new energy vehicle market remains fierce, and the intensity has not diminished compared to the beginning of the year. In the context of intensified competition, going global has become a new growth point.
In July, BYD’s overseas sales reached 18,000 vehicles, a 72% increase month-on-month. The company also launched new vehicles in markets such as Thailand, Malaysia, and Chile. Additionally, BYD announced plans to build a factory in Brazil, with a target annual production capacity of 150,000 vehicles.
Nonetheless, BYD still maintains its advantages. Despite price wars among car manufacturers, BYD has also started to reduce prices. For instance, the prices of over a dozen champion edition models were reduced by an average of over 10,000 RMB. The starting price of the Qin PLUS DM-i was even lowered to below 100,000 RMB.
Even with these adjustments, BYD’s per-vehicle profit has increased, indicating that scale is the key to success in the car sales business. It can be foreseen that BYD’s strong cycle of growth will continue.
