Chinese NEV manufacturer repainting the world passenger car map ~ Part 2: BYD that won't take a step back against Tesla ~

In the company's interim financial results for the fiscal year ending 23/6, sales were 26,124 million yuan, up 72.7% from the same period last year, and net profit was 10.954 billion yuan, up 2 times from the same period last year. Although sales exceeded market expectations, net profit fell slightly below market expectations. NEV sales for the fiscal year ended 23/1-6 were 1,25,600 units, up 95.8% from the same period last year, of which 74,300 units were for overseas markets (55,900 units for the full fiscal year 2022). As price competition intensifies in the Chinese EV market, the lineup (150,000 yuan to 1.1 million yuan) represented by the Dynasty (Dynasty) series, Ocean (Ocean) series, etc. is substantial, and the company, which utilizes the cost advantage of a “vertically integrated type,” which develops and manufactures the main EV parts itself, continues to hold the top market share position in the Chinese EV market.

The graph below includes the average sales price, average cost, average gross margin, and average gross margin ratio per unit of the company's NEV. The average sales price of the company's NEV for the fiscal year ended 23/4/6 was 156,600 yuan. Although there was a price drop of 13,300 yuan compared to the previous quarter, gross profit fell 1,000 yuan to 34,000 yuan in response to a drop of 12,000 yuan in average cost. While gross profit per unit began to decline slightly, the price reduction strategy paid off, and sales results for the fiscal year ended 23/4/6 were 703,600 units, up 27.4% from the previous quarter.

When the Nikkei Shimbun conducted a “major product/service share survey” on 63 main items in 2022 in the global market, the United States took the lead with 22 items, followed by China with 16 items, and Japan remained at 6 items. China, which has a high market share in the EV field, automotive lithium-ion battery field, insulator field for lithium-ion batteries, etc., is expanding its market share with 18 items. In the case of the company, both EVs and automotive lithium-ion batteries have eaten into 2nd place in market share.

The company's R&D expenses in 2022 will rise to 20.2 billion yuan, accounting for 4.77% of operating profit. The “blade battery,” a long, sword-like battery cell developed by the company, is known as the company's specialty technology. Unlike mainstream batteries called “ternary systems,” it is characterized by high thermal stability, long charging/discharging cycle life, and low cost since rare metals are not used by adopting lithium-ion iron phosphate batteries. Meanwhile, in order to overcome the shortcomings of low energy density and short EV cruising range, the company succeeded in extending the cruising range by installing more cells in a limited space. The Japanese subsidiary of the company was also equipped with “blade batteries” in the new EV buses “J6” (small buses) and “K8” (large buses) introduced for the Japanese market in 22/5. The life span of an EV battery is generally “8 years or 160,000 km,” but the company's warranty period is “8 years or 400,000 km,” which is unrivaled by other companies.

While a bullish sales target of 3 million units was set this year, cumulative sales volume up to August remained at 1.78 million units, 60% of the annual target. Looking at the company's sales trends, it is growing steadily, with over 260,000 units in July and over 270,000 units in August, but clearly the hurdle seems high for the remaining 4 month sales target of 1.2 million units. The company's management team said at the financial results briefing on 8/29 that Chinese NEV manufacturers have already entered an elimination phase, and that they will invest in survival over the next 3 to 5 years to develop a full line wrap and a thorough price reduction strategy. Against the backdrop of China's national policy support, along with the rapid increase in EV ventures, it is said that there will be 300 NEV manufacturers in China. We cannot take our eyes off the company's trends more and more from the Chinese NEV market, where the downturn has unfolded. Next time, I would like to take a look at the three emerging EV companies listed in the US market: NIO (NIO), Xiaopeng (XPEV), and Ideal (LI).