Is BYD competing head-on with Tesla? What is the purpose of BYD's official announcement of price increases?

On November 23, BYD Auto announced on Weibo that it will adjust the official guidance prices of Dynasty, Ocean, and Tang new energy vehicle models, with price increases ranging from 2000 yuan to 6000 yuan. Specific adjustment notices for each model will be issued separately. Customers who pay a deposit and sign a contract before January 1, 2023 will not be affected by this price adjustment.

After the news was released, the market continued to discuss it, and even surged to a hot search at one point.

It is worth noting that since late October, under the leadership of Tesla, Chongqing Sokon Industry Group Stock, Leapmotor, Xiaopeng, Ford Mustang Mach-E, among others, have participated in promotions by offering terminal discounts or official price reductions to boost sales.

Now, BYD is going against the trend by raising prices for new energy vehicles instead of lowering them. What exactly is the intention behind this?

01. What are the reasons behind BYD's price increases?

According to the announcement, BYD announced two reasons for the price increase of some electric vehicles.

First, affected by the upcoming exit of national subsidies. According to the series of policies and plans for the development of new energy vehicles by the state, the new energy vehicle purchase subsidy policy will end on December 31, 2022. After this date, vehicles registered will no longer receive subsidies (current subsidy amounts: plug-in hybrid cars 4,800 yuan/vehicle, pure electric cars 12,600 yuan/vehicle).

Secondly, the significant increase in the prices of main raw materials for batteries since the second half of the year.

In fact, the factor of rising raw material prices is also widely present in the entire industry.

Specifically, the power battery, which serves as the heart of new energy vehicles, has been increasing in price in recent years, mainly due to the soaring prices of the main raw material lithium carbonate.

According to data from SCI99, as of November 23, the highest quoted price in the battery-grade lithium carbonate market has exceeded 6250 yuan/ton, rising from 5000 yuan/ton in less than 3 months.

Affected by the rise in raw material prices, many new energy vehicle companies are facing varying degrees of cost pressures. However, hindered by lower-than-expected sales, some new energy vehicle companies have had to choose price reductions and other marketing methods to promote sales.

In the past month, Tesla's aggressive price reduction measures have been fierce. In late October, Tesla reduced prices of its locally produced models by 14,000 to 37,000 yuan, followed by another official announcement in early November of offering insurance discounts of up to 8,000 yuan. This move has also led to many new energy vehicle companies following suit.

According to incomplete statistics, since October 24, chongqing sokon industry group stock, Leapmotor, Xiaopeng, Ford Mustang Mach-E, Mercedes-Benz, and others have participated in promotions by offering terminal discounts or official price reductions to boost sales.

However, amidst Tesla triggering a wave of price reductions for new energy vehicles, byd company limited has chosen to go against the trend. Some industry insiders believe that byd company's early announcement of price hikes is actually aimed at stimulating year-end 'rush orders'.

As is well known, in the first half of 2022, byd company limited had adjusted prices twice. Firstly in January, prices of related new energy vehicle models on Wangchao and Haiyang websites were increased by amounts ranging from 1,000 to 7,000 yuan; In March, byd company limited once again adjusted prices, with increases ranging from 3,000 to 6,000 yuan.

Calculating based on the lower limit of the increase, after the first two price adjustments, byd company limited's minimum increase was 4,000 yuan. However, the continuous rise in terminal prices does not seem to have affected its sales volume.

According to byd company limited sales data, from January to October this year, byd company limited's cumulative sales reached 1.4 million vehicles, a year-on-year increase of 158.52%. Among them, the total sales in October alone reached 0.2178 million vehicles, which broke through 0.2 million units after September, achieving a new record in monthly sales and capturing 37.1% market share.

However, the four new forces Wei Xiaoli and Leapmotor all showed a month-on-month decline in October, with Leapmotor and Xiaopeng both experiencing declines of over 35%. Tesla's market share also dropped by 1.2% to 2.5% year-on-year.

In comparison, byd company limited's performance is indeed outstanding, and strong sales may have given byd company limited more confidence in implementing price hikes.

On the day when byd company limited announced the price increase, Cui Dongshu, Secretary-General of the China Passenger Car Association, stated that with the official withdrawal of new energy vehicle subsidies at the end of this year, a new round of price increases is expected in the domestic new energy vehicle market early next year, but the scale will not be too large. Cui Dongshu believes that byd company limited's early announcement of a price increase over a month in advance will help accumulate more orders for byd company limited and facilitate a smooth transition of sales after the price increase at the beginning of next year.

Buffett, the stock god, is pessimistic, and the stock price is "dull".

Against the backdrop of a significant increase in sales of new energy autos, BYD has presented impressive report cards.

In the first three quarters of this year, BYD achieved a net income of 9.311 billion yuan attributable to the parent company, an increase of 281.13% year-on-year; in the third quarter alone, BYD's net income attributable to the parent company reached 5.716 billion yuan, a 350.26% increase from the same period last year when it was 1.27 billion yuan.

However, despite the good fundamentals, investors' enthusiasm was not ignited. On the contrary, the stock price showed signs of weakness in Buffett's pessimism (shareholding) and lacked upward momentum.

Specifically, continuing the downward trend of volatility in 2021, BYD's stock price once again hit a new low in May 2022 after entering a freezing point, fluctuating thereafter with relatively limited rebounds.

On November 22, the Hong Kong Stock Exchange disclosed an announcement showing that Berkshire Hathaway, under Buffett, continued to reduce its holdings of BYD shares on November 17 by 3.2255 million shares at an average price of 195.42 Hong Kong dollars. This cashed out about 0.63 billion Hong Kong dollars. After the reduction, Berkshire Hathaway's holdings of BYD shares dropped from 16.28% to 15.99%.

Obviously, Buffett has not slowed down the pace of reducing his holdings of BYD. As of now, since reducing holdings in August this year, Buffett has reduced BYD H shares five times, cashing out a total of approximately 10.268 billion Hong Kong dollars (about 9.343 billion yuan) this year.

As of the close on November 23, A-share BYD (002594.SZ) rose by 0.40%, closing at 251.5 yuan per share with a total market value of 732.2 billion yuan; H-share BYD Company (01211.HK) fell by 1.80% to 175 Hong Kong dollars per share, with a total market value of 509.5 billion Hong Kong dollars.