Wang Chuanfu, the one who stands on the lifeblood of BYD, is also defeated by him, and success is also up to him.
Author | Clear diagram
Edit | Zhao Jian
Since the end of last month, BYD has been talking about the topic and firmly occupied the C position of public opinion in the automotive circle.
On March 31, BYD was shortlisted for the list of "100 Most Influential Companies in 2022" and was called "Titans" in the electric vehicle industry by Time Magazine in the United States; on April 3, BYD announced the suspension of production of fuel vehicles, becoming the first car company in the world to announce the suspension of production of fuel vehicles.
According to the data released by the Federation of Passenger Vehicles, in March, BYD once again refreshed the sales record of new energy passenger cars in China, becoming China's first new energy passenger car brand with monthly sales of "100,000 +", and won the top of the monthly sales with sales of 104,300 units, achieving the "ten consecutive championships" of new energy passenger car sales.
Under the fame, BYD's "face" is bright, is "Lizi" also solid? After 27 years, how did this local independent brand grow into an "industry giant" step by step? In the future, what hidden dangers does it have?
Through the complex financial data and historical clouds, let us re-examine BYD.
1. If the increase in income does not increase profits, is BYD still healthy?
IN 2022, BYD has made great strides and won consecutive laurels, but from its disclosed 2021 annual report, last year, BYD's business situation did not seem to be optimistic. In 2021, although BYD's overall production and sales volume have increased, net profit has declined.
From its 2021 financial report data, it can be seen that in this year, BYD achieved a total revenue of about 211.3 billion yuan, an increase of 37.7% over last year (153.4 billion yuan).
The scale of production and marketing has expanded, but the income is not necessarily more. BYD's net profit in 2021 was about RMB2.958 billion, down 31.16% from last year (RMB4.297 billion).
Specifically, BYD's business is mainly composed of three major segments: automotive, electronics and batteries. Among them, the automobile business, as the trump card, is naturally THE most important source of income for BYD, about RMB109.659 billion, accounting for 51.9% of the total revenue, an increase of 33.8% year-on-year. The Chinese market revenue accounts for 92.9% of the automotive business revenue, which is the absolute main body.
In 2021, the gross profit margin of BYD's automotive and related products business was only 17.39%, down 7.81% year-on-year, setting a new low. Part of the reason is that in 2021, "the price fluctuations of steel, plastics and other metal raw materials, such as lithium, cobalt, etc.", resulting in a year-on-year increase in the cost of the automotive business, an increase of 47.90%.
Another reason is the sharp decline in BYD's mask business. During the epidemic, BYD has used its business advantages in the field of foundry to quickly become the world's largest mask manufacturer, relying on the sale of masks to obtain a lot of profits. In 2020, its profit was as high as 1.3-1.5 billion yuan. However, BYD did not calculate this part of the profit separately, but merged with the automotive and related products segments. Therefore, in 2021, in the case of Good Epidemic Prevention and Control in China and the decline in demand for masks, BYD's automobile business profits also declined.
Compared with the automotive business, BYD's electronics business, that is, the production and assembly of mobile phone components, performed more steadily. In 2021, BYD's business revenue was about RMB85.546 billion, accounting for 40.49% of total revenue, an increase of 44.12% year-on-year. Among them, overseas business is the mainstay, with revenue of 48.007 billion yuan, and domestic revenue accounts for a relatively small proportion, only 37.537 billion yuan.
Despite the rapid growth, the electronics business is after all in the downstream of the industrial chain, with limited bargaining power and low gross profit margin, only 7.6%.
Finally, there is the battery business, that is, the second-recharge battery and photovoltaic business. In 2021, the revenue of this part of the business was approximately RMB15.402 billion, accounting for 7.29% of the total revenue. It is mainly based on overseas markets, with revenue of 8.133 billion yuan, while domestic revenue is 7.268 billion yuan. Compared with 2020, BYD's battery business increased by about 31.59% year-on-year.
It is worth mentioning that in 2021, the cost of BYD's battery business increased by 50.30% year-on-year, which greatly reduced the profitability of BYD's battery business.
In fact, not only BYD, affected by the rise in raw material prices, other battery manufacturers, such as Ningde Times, Yiwei Lithium Energy, Guoxuan Hi-Tech, etc., in 2021, the gross profit margin fell by 3-5 percentage points year-on-year.
According to BYD's senior management, from the perspective of the group as a whole, the increase in raw material costs in the two links of automobile manufacturing and battery production is one of the important reasons for the decline in BYD's gross profit margin.
Another important reason is BYD's increasing research and development costs. In 2021, BYD's R&D investment was RMB10.627 billion, an increase of 24.2% year-on-year, of which RMB2.637 billion was capitalized expenditure.
The increase in R&D costs is actually more than 2021. Since 2020, BYD has begun to focus on research and development, focusing on breakthroughs in batteries, chips, intelligent driving and intelligent cockpit technology. Compared with 2019, BYD's expense-based R&D investment in 2020 increased by 32.6% year-on-year, from 5.629 billion yuan to 7.464 billion yuan, an increase greater than in 2021. At present, BYD has a number of core technologies such as blade battery, DM-i super hybrid, e-platform 3.0, IGBT4.0 and so on.
It also focuses on BYD's operating cash flow and liabilities. By the end of 2021, BYD's operating cash flow was RMB65.467 billion, which was relatively healthy. At the same time, BYD's capital-liability ratio at December 31, 2021 and December 31, 2020 was -15% and 69%, respectively, and the debt situation also improved significantly.
Therefore, overall, although BYD will not increase profits in 2021, this situation is mainly caused by the increase in the price of batteries and automotive raw materials and the increase in the group's R & D investment, coupled with BYD's cash flow and debt situation continue to improve, so the group's operating conditions are still healthy.
In fact, although BYD earned less last year, its market share in the field of new energy vehicles has increased steadily. In 2021, BYD's sales of new energy vehicles successfully exceeded 600,000 units, reaching 603,700 units, an increase of 218.3% year-on-year, and a market share of more than 17%, an increase of nearly 8 percentage points year-on-year.
2. After 27 years of ups and downs, success is also defeated by him
So favored by consumers, IND is indeed unique in China's new energy vehicle market. To get to this point today, BYD has actually gone through several ups and downs. And BYD President Wang Chuanfu is the person who stands on the lifeblood of BYD, and success is also up to him, and defeat is also up to him.
The earliest BYD started with the production of batteries, from the establishment of the company in 1995, to the successful listing on the Hong Kong Stock Exchange, and then to surpass the Japanese Sanyo company to become the world's largest battery supplier, BYD only took less than seven years.
After the wings were gradually enriched, BYD began to expand rapidly.
In 2003, BYD acquired Xi'an Qinchuan Automobile Co., Ltd. (now BYD Automobile Co., Ltd.) to enter the automotive field, and then produced the first market-oriented model F3 in only two years. This model was highly sought after as soon as it was launched, and two years after its listing, it set a sales record for China's own car brands at that time.
Also in 2003, BYD began to lay out the mobile phone foundry business and launched a fierce competition with Taiwanese foundry giant Foxconn. In just over three years, BYD's mobile phone manufacturing revenue has exceeded the 5 billion mark, and together with Foxconn and Flextronics, it has become the three giants in the field of electronic foundry. In 2007, BYD split the electronic foundry business separately and established BYD Electronics (International) Co., Ltd., which was successfully listed on the Hong Kong Stock Exchange.
The reason why BYD can first grow into the world's first battery supplier in seven years, and then use five years to succeed in the two fields of automotive and electronic oem, mainly due to the two magic weapons of President Wang Chuanfu: one is the tactic of the sea of people, that is, replacing mechanized production with manual production; the other is vertical integration, that is, replacing global procurement with self-production and self-sales.
The so-called human sea tactic is actually BYD's helpless move in the production of batteries. In 1995, BYD was incorporated and began to start a business to produce nickel-cadmium batteries. At that time, the battery production method was dominated by The Japanese automatic production line, which had high technology content and expensive cost, and it cost tens of millions of yuan to build the production line alone.
At that time, BYD's start-up capital was only 2.5 million yuan, and it wanted to build a Japanese-style production line with this family foundation, which was no different from a fool's dream.
In desperation, Wang Chuanfu could only find another way. By decomposing the automated battery production process step by step into processes that can be completed by hand, and then relying on domestic cheap labor and self-developed semi-automated equipment, BYD has successfully built a localized nickel-cadmium battery production line and greatly reduced the production cost of batteries. With the advantage of low price, BYD has successfully knocked on the door of the market.
Through a similar approach, BYD has also set up a lithium battery production line. This artificial production model, the quality of the battery created is almost the same as that of japanese manufacturers, but the price is less than one-third of that of Japanese manufacturers, when a Japanese-made lithium battery is about 10 US dollars, but in bydir's hands, the price is only 3 US dollars.
This "barbarian" production method was reproduced by Wang Chuanfu in the two fields of electronic oem and automobile manufacturing, especially in the field of automobile manufacturing. At that time, BYD's fire model F3 was very similar to Toyota Corolla in terms of function and configuration, with sunroof, air conditioning, leather seats and navigation functions, but the price was only half of the Corolla, for no other reason than low production costs.
Success came too quickly, which made Wang Chuanfu very confident in his production model, and also caused him to have a "disregard" for technology. At that time, Wang Chuanfu believed that "the development of a new product, in fact, more than 90% of it relies on literature and samples, and its own research and development accounts for 5%", "all technical patents are paper tigers".
With such a thought, Wang Chuanfu naturally believes that "what you buy is not as good as your own", so the first thing BYD does after making a car is to buy a mold factory and a hardware factory, trying to master all the parts needed in the car-making process in its own hands.
This development model, another magic weapon of Wang Chuanfu, is the vertical integration model, that is, vertical integration. The characteristic of this production mode is to open up the upstream and downstream of the industrial chain, from hardware parts to electronic components, from plastic accessories to airbags, all of which are self-made and self-produced.
This approach was also contrary to the global popular production model at that time, when foreign OEMs generally adopted the production mode of parts outsourcing in order to reduce research and development costs, light assets and reduce liabilities, and pursued a global procurement strategy. In such a big environment, the main reason why BYD insists on self-production and self-sales is that the cost of purchased parts is too high.
At that time, the key parts of the automobile were basically in a monopoly state, and the parts manufacturers led by the Bosch Group took advantage of this monopoly to greatly raise the price of auto parts. For example, a set of brake systems, Bosch quotation is 2000 yuan / set, the same performance, BYD self-developed, the price is more than half cheaper.
In addition to making the cost lower, vertical integration can also help BYD quickly adjust its product line, and by doing what the market needs, BYD can directly build.
Examples of distant ones, such as the F6 model launched by BYD in 2007, its body and chassis suspension resemble the Honda Accord, the front of the car borrows from the Lexus LS460, and the rear of the car is very similar to the Mercedes-Benz S500, all of which are made by themselves, which can be said to be eclectic.
In recent examples, such as the epidemic in 2020, BYD immediately reorganized its production workshop after seeing a large supply gap in the mask market, and built 100 mask production lines in less than 30 days, becoming the world's largest mask manufacturer.
This is the power of the sea of people tactics and vertical integration mode. With these two magic weapons, BYD has been smooth and rapid in its development process in the first and middle periods. From 2008 to 2009, in one year, BYD's stock price increased by more than tenfold, and Wang Chuanfu himself became the richest man in China with a net worth of 35 billion yuan.
In this way, BYD quickly gained a foothold in the three major fields of battery, electronic OEM and automobile, forming a group business map where the three major businesses are now juxtaposed. It's just that BYD's sense of technology was weaker at that time, which was completely different from today's BYD temperament.
The change occurred in 2010. For a long time, BYD has focused only on business expansion, while ignoring the improvement of brand image, distribution network, product quality and technical capabilities. In 2010, BYD was exposed to a large number of car quality problems and dealer withdrawal incidents, and its sales growth came to an abrupt end, with sales only 85% of expectations that year. In the same year, BYD's stock price shrank wildly, from 88.4 Hong Kong dollars per share in 2009 to directly reduced to 26 Hong Kong dollars per share.
Because of the tactics of the sea of people and the vertical integration model, BYD has achieved great success, but it is also because of these two strategies that BYD has become too "bloated". The former has caused BYD's quality defects, while the huge industrial chain has made BYD's assets too heavy, the profit margin has been sluggish for a long time, and the debt is extremely high. In 2010, BYD's debt ratio was as high as 60.1%.
Under the problem, BYD's net profit continued to decline, in 2009, BYD's net profit was 4.08 billion yuan, and in 2012, its net profit was only 210 million yuan. To this end, in 2011, Xia Zhibing, the sales general manager who dedicated 13 years of youth to BYD, resigned, and Wang Chuanfu himself had to apologize and personally admitted that BYD did ignore the quality of products because of its blind pursuit of scale.
Since then, BYD has gradually moved from a closed model of vertical integration to opening up and cooperation.
First, in 2012, Wang Chuanfu led the implementation of the "business department corporatization" strategy, shutting down the uncompetitive business departments, reducing redundancy, and purchasing advanced equipment on a large scale, in order to replace the tactics of the sea of people, improve product quality, and introduce foreign parts suppliers to reduce the self-control rate of parts from 80% to about 50%. The changes in this period are most intuitively reflected in BYD's 2012 annual report, which was only 11.5% gross profit margin, the lowest value in the decade from 2006 to 2016, behind which is the increase in costs.
In 2013, BYD's self-developed hybrid system "DM II" was officially released on the new car "Qin", which ranked third in international new energy vehicle sales that year and won market recognition. Later, in 2014, BYD released the "5-4-2" strategy, announcing that it will strive to achieve the three goals of accelerating within 5 seconds of 100 kilometers, full-time electric four-wheel drive, and fuel consumption of less than 2 liters per 100 kilometers, and is committed to developing high-performance models. After that, in 2015, BYD "Tang" and "Song" were listed, and in 2016, "Yuan" was listed, forming the "Dynasty Series" brand.
BYD's emphasis on science and technology is reflected in the cost of research and development. In 2014, after BYD announced its "5-4-2" strategy, its research and development costs soared by 45.8% compared with 2013. The return on investment, in addition to being reflected in market feedback, can also be reflected in patents. In 2015, BYD won the 17th China Patent Award for four new energy technologies, of which hybrid technology won the gold award.
Since then, BYD has gone through the bottom, re-embraced technology, opened up to the outside world, and focused its development on new energy vehicles.
In 2018, Wang Chuanfu poached wolfgang Egger, the former design director of Audi Group, to design the appearance of "Dragon Face Dragon Face", which qualitatively improved the image of the Dynasty series. In 2020, BYD released blade batteries, enhancing battery energy density and safety. In 2021, BYD's DM-i super hybrid system was released on the "Qin Plus", "Song Plus", and "Tang" three models. Also in 2021, BYD launched the mass production model "Dolphin" relying on the "e platform 3.0", which fired the first shot of the Marine series brand.
By 2021, BYD will officially announce the completion of the brand system with blade battery, e platform 3.0 and DM-i super hybrid technology as the core, as well as the brand system with the Dynasty series and ocean series as the core. BYD also regained the favor of the market, and at the close of the market on April 15, 2021, BYD (0002594. SZ) shares 165.5 yuan, and by April 15, 2022, BYD's stock price has risen to 236.2 yuan, up about 42.7% year-on-year.
For BYD's development in 2022, under the framework of segment valuation, CITIC Securities gave BYD a target price of 375.6 yuan for A shares. According to the forecast of CITIC Securities, this year, BYD may have a 59% increase in A-shares.
3. What are the hidden dangers? It's about the "soul."
Whether it is the stock market or the car market, BYD's performance is very eye-catching. In the first quarter of this year, BYD's cumulative sales of new energy passenger cars have reached 284,700 units, close to half of its annual sales in 2021. In March, BYD's share in the new energy vehicle market further increased to 22.93%, far exceeding a number of new car-making forces.
Such a BYD, is the future a smooth road? Are there still hidden dangers in its development?
The "first half" of new energy vehicles is electrification, and with the leading edge in the three core technologies of battery, motor and electronic control, BYD took the lead in the competition in the first half. But for the "second half" of new energy vehicles - intelligence, BYD does not seem to have an advantage.
For BYD, in order to enhance its intelligent capabilities, it has mainly made efforts in two aspects, one is the smart cockpit, and the other is automatic driving.
In the field of smart cockpits, existing players have both new car-making forces and Internet companies. Among them, new forces such as the ideal L9, the main five-screen linkage, Xiaopeng G9, the advantage in the Internet of Vehicles. Among the Internet companies, Baidu focuses on Jidu, Huawei and BAIC jointly launch the Polar Fox Alpha, and JD.com launches the Skyrim ME5.
As for BYD, its smart cockpit system is DiLink. This system was released in 2018 and has now been replaced in its fourth generation. Some media commented that compared with other smart cockpits, BYD's system technology is relatively backward, temporarily unable to fully communicate with the vehicle architecture, which is equivalent to providing the function of an Android tablet.
According to consumer complaints on the black cat platform, BYD's system cannot even fully realize remote OTA, and a considerable number of models can only operate offline through 4S stores or apply for BYD staff door-to-door service.
In the direction of automatic driving, ATD is currently taking the cooperative research model, and the main cooperation objects are Baidu, NVIDIA, Momenta and Sagitar Juchuang.
In February this year, BYD and Baidu reached an agreement that Baidu will provide BYD with an ANP intelligent driving product and a man-machine co-driving map, of which ANP2.0 can almost achieve a "plug and play" effect, covering intelligent driving functions in parking lots, highways and other scenarios.
In March this year, BYD announced that it has reached a cooperation with NVIDIA in intelligent driving technology, and from the first half of 2023, BYD will be equipped with NVIDIA's DRIVE Hyperion platform on some new energy vehicles. The platform provided by NVIDIA for BYD is actually a reference architecture that can accelerate BYD's self-research progress in the direction of autonomous driving. Compared with the direct procurement of Baidu ANP, cooperation with NVIDIA can give BYD more autonomy.
At present, Baidu can solve BYD's current predicament, and NVIDIA can help BYD complete the transition to self-research, but the cooperation with these two companies cannot fundamentally solve BYD's technical shortcomings, after all, for car companies, it is too risky to hand over the core technology such as automatic driving to automatic driving companies.
Moreover, Baidu's Apollo is to ensure the smooth delivery of the intelligent driving function of Jidu Automobile as the first goal, and the car companies cooperating with NVIDIA are not only BYD.
At present, BYD's real self-developed intelligent driving assistance system is only DiPilot, which relies on the assistance of 20 more sensors on the body to achieve automatic driving assistance functions. For this system, the evaluation results of the evaluation of the No. 42 garage show that in terms of automatic auxiliary driving ability, BYD is weak, and there is a big gap with new energy vehicle companies such as "Wei Xiaoli".
So in the intelligent track, does BYD still have a backhand? The establishment of a joint venture may be an answer. In December 2021, BYD and Momenta officially announced the establishment of an intelligent driving joint venture; on December 23 last year, BYD announced a strategic cooperation with Sagitar Juchuang, a smart lidar system technology company.
Momenta's strengths lie in algorithms and maps, while Sagitar's strength is lidar manufacturing. Through cooperation with these two companies, BYD may be able to gradually get rid of the backward situation of intelligent technology and achieve independence.
Looking at BYD's growth genes, we will find that this company has experienced complexity. It rose at the beginning of the century, once relied on the tactics of the sea of people and vertical integration model, and also fell to the bottom due to bloat and contempt for technology. It has both a "barbaric and extensive" side, as well as a refinement and advanced technology.
With the aura of China's own brand, BYD has succeeded, missed and failed. As for now, the new energy vehicle track has ushered in the "second half" of the race, how long can the sales miracle created by BYD continue? No one knows. In the future, can BYD achieve the same remarkable results as today on the road of intelligence? No one knows.
All we can know is the past, only BYD's 27-year history of continuous progress, continuous succession, ups and downs, and its innovation of the new energy world again and again.
END.