Author | Zhou Zhiyu

Editor | Zhang Xiaoling

By surpassing a monthly sales volume of over 0.5 million vehicles, BYD has set a new record.

Among joint venture brands, both the North and South Volkswagen brands have never reached this data in terms of sales volume for all their subsidiary brands at their peak; for most new carmakers, their annual sales volume is far from it.

Based on current data, BYD's cumulative sales volume for the first ten months has already surpassed last year's annual total. If this momentum continues, the full-year sales volume this year is also expected to exceed 4 million vehicles, coming close to 'the leading car company' Saic Motor Corporation.

Riding on the trend of new energy vehicles, BYD has risen rapidly. In just four years, from an annual sales volume of only 0.4 million vehicles, it can now make it to the TOP10 list of global car companies by sales. However, it should also be noted that BYD's current sales mainly come from the mass market, relying on cost reduction through vertical integration and efficiency improvements for cost-effectiveness.

For BYD to truly establish its own technological barriers and build brand premiums on this basis, apart from advancements in electrification technology, it must also lead in intelligence. It should even make intelligence its core competence, akin to Tesla, to enjoy valuation premiums in the capital markets.

To transform into a true global automotive giant and stand on equal footing with the once admired counterparts, BYD needs to strive wholeheartedly amid questioning and applause.

Breakthrough

The sharp increase in BYD's sales mainly comes from the outbreak of hybrid models in the mass market. Through technological innovation and changes in marketing strategy, it still maintains control of the discourse in the 0.1-0.2 million yuan market.

The rapid development of the hybrid market has added fuel to BYD's sales sprint. Looking at the specific sales in October, 62% of BYD's sales that month came from hybrid models. Since releasing the fifth-generation DM technology at the end of May this year, over a dozen models have been launched with this new technology.

The proportion of hybrid models in its total sales has gradually increased from about 55% to over 60%. The monthly sales of hybrid models have also increased from 0.1841 million vehicles in May to 0.3109 million vehicles in October. During the same period, sales of BYD's pure electric models only rose from 0.1464 million vehicles in May to 0.1896 million vehicles in October.

From the evaluation results, BYD's models equipped with the fifth-generation DM technology can achieve comprehensive range of over 2000 km. In the past, this kind of range was only achievable in joint venture car companies' B-segment cars priced at around 0.2 million yuan. Models like Qin L DM-i have directly brought the long-range threshold down to the 0.1 million yuan level.

According to a foreign brokerage analyst at Wall Street Horizons, plug-in hybrids (PHEVs) / extended-range electric vehicles (EREVs) have a more attractive total cost of ownership to consumers compared to pure electric models, with limited range anxiety compared to pure electric vehicles.

According to JPMorgan's forecast, the sales of hybrid models represented by PHEV and EREV will account for 41% and 45% of the total demand for new energy vehicles in 2024 and 2025, respectively, compared to 23% in 2022, nearly doubling.

For mainstream consumers in the market, the cost of purchasing a car and the cost of using it are the core factors in their decision-making process, and one core issue that hybrid technology solves is the cost of vehicle usage.

Furthermore, compared to many other automakers' press conferences explaining numerous technical parameters, BYD's conferences this year have focused on fuel consumption and range, directly addressing the vehicle usage cost that users are most concerned about. For owners of fuel vehicles who take advantage of the new energy vehicle replacement policy, this approach is very efficient.

To further address the issue of car purchasing costs, BYD has vigorously promoted the "Double Car Strategy" with the Wangchao Network and the Marine Network this year. Different from the past strategies of "having many children" and forming differentiated competition, this year, BYD has adopted the "Double Car Strategy" in multiple new vehicle releases, with the same configuration, simultaneous launch, focusing on a specific price range to capture users' attention.

"Double Car Strategy" has the advantage of expanding publicity at the same time. It is understood that initially, the Wangchao Network and the Marine Network had some resistance to this, thinking that internal competition would be significant. However, the group believes that the mass market has a large enough capacity, and the "Double Car Strategy" can play a role in diverting traffic.

This approach is indeed effective, with the Ocean Network and the Wangchao Network showing a monthly sales increase of over 0.08 million vehicles in October.

More importantly, the cost reduction under the "Double Car Strategy". By standardizing the entire vehicle platform and commonizing components, with more common parts, it is easier to spread out research and development and production costs. BYD's new models also have more room for price reductions, making them more competitive in the market.

From this perspective, BYD's breakthrough in sales is still a success in manufacturing.

Guard the championship.

If all goes well, BYD is expected to produce its 10 millionth new energy vehicle in November. Of these, 9 million units have been completed in the past three and a half years, marking a success story of Chinese manufacturing.

In just over a decade, its number of employees has soared from 0.1 million to over 0.9 million. In the past three months alone, BYD has added nearly 0.2 million new employees. He Zhiqi, Executive Vice President of BYD Group, revealed that from August to October, BYD increased production by nearly 0.2 million units in three months, recruiting nearly 0.2 million people for whole vehicles and components, with all bases operating at full capacity.

As a result, BYD has surpassed Volkswagen to become the world's largest automaker in terms of workforce.

Rapid changes in scale in the short term pose a huge challenge to BYD's management model. An internal source at BYD noted that while BYD used to emphasize a "family culture" and employee belonging to the company, the focus has shifted to competitiveness with the motto of "learning from and surpassing others", aiming to enhance organizational competitiveness and efficiency. This is the issue BYD must address as it transitions from its highest growth period to a gradual slowdown in growth.

Furthermore, with the increase in the number of vehicles, there has been a rise in quality issues with BYD products over the past two to three years. Recently, due to safety risks, BYD announced the recall of nearly 0.1 million domestically produced Dolphin and Yuan PLUS electric vehicles.

To truly achieve Wang Chuanfu's goal of becoming the global leader, surpassing the milestone of 0.5 million monthly vehicle sales is only halfway there. Next, BYD must continue to make progress in upscale, smart, and global market areas to achieve further advancements.

Currently, BYD's upscale progress is sluggish, with Tang EV sales hovering around 0.01 million units and Song Max's monthly sales stagnant below ten thousand, down from over 1600 units at the beginning of the year to less than 300 units now.

The focus will be on international expansion next. In July this year, BYD completed its factory in Thailand, aiming not only at Southeast Asia but also intending to use it as a platform to export to other regions; moreover, even after the EU imposed tariffs, models with higher pricing like the Song PLUS can still maintain considerable profits.

According to sources close to BYD management, the plan for next year's overseas expansion is to double based on this year's efforts. Since the beginning of the year, BYD has been exporting approximately 0.03 million vehicles per month, with overseas cumulative sales exceeding 0.32 million vehicles in the first ten months. Based on current sales estimates, this year's total overseas sales are expected to be around 0.4 million vehicles, while next year they are aiming for 0.8 million vehicles.

For BYD, in the short term, it still needs to solidify its position in the domestic market, but the competitive pressure only continues to increase. In the hybrid field, competitors like Geely and Chery have launched their latest hybrid technologies to compete with BYD. Contemporary Amperex Technology has also introduced extended-range battery brands to help partners explore this market.

In terms of pure electric vehicles, BYD is rapidly launching more products and technologies to cope with market competition. In the future, models from BYD Ocean Network will gradually be equipped with high-voltage platforms of 800V or higher, as well as mass-produced electric motors operating at 23,000 rpm. The new power batteries will also be installed in future models of the Ocean Network.

After its rapid rise, BYD must continue to work hard to maintain its leading position.

Breakthrough

For BYD, after exhausting efforts to reduce costs on the production side, the breakthrough must come in autonomous driving to maintain its foundation and seek high-end breakthroughs.

As BYD internally determines, last year was a market battle with gasoline cars, and the next challenge will be against new forces, with autonomous driving being the core of competition.

To some extent, this also leads to differences in valuation by the capital markets between BYD and other car manufacturers.

In the current market, the competition for advanced driving assistants has shifted from the range above 0.2 million yuan to around 0.15 million yuan, becoming the mainstream market. The popularity of Xiaopeng MONA 03 also indicates that in the mainstream market, smart driving will be the watershed for future product competitiveness.

BYD, which has always been questioned for its driving capabilities, is unwilling to fall behind. Wang Chuanfu stated earlier this year that in the field of intelligence, BYD will invest 100 billion yuan in the future.

For this reason, BYD has been conducting internal competitions to independently develop its own smart driving system. Zhang Zhuo, General Manager of the Ocean Network Sales Division, revealed that the next goal is to integrate smart driving into the seagull model to achieve true technological empowerment.

This means that BYD will fully integrate its self-developed smart driving system from the lowest-priced seagull to the million-level models, promoting the popularization of intelligent driving technology.

Breaking through in smart driving is not an easy task. The founder of a smart driving solutions company told Wall Street that the current mid-to-low-end smart driving market has homogenized competition, with users not using them frequently after spending money to purchase. Real advancements in high-end smart driving are only made by a few independent intelligent driving suppliers, as doing AI is not an easy task, and investing money does not guarantee success.

BYD has no choice but to take action. Previously, BYD's strategy in the high-end market still emphasized 'cost-effectiveness', enabling models including the Tang D9 to quickly gain market share. However, subsequent launches by Tang have not gained significant sales, prompting BYD to change its strategy by debuting unique technologies on high-end models and heavily promoting the Smart label.

Internally, BYD believes that when sprinting towards high-end cars, having smart driving capabilities is crucial to creating distance from competitors of the same level.

If successful, smart driving also has the potential to drive BYD's upscale process, allowing it to break through the current bottleneck.

In a sense, BYD Company Limited has been following the pace of Toyota and Volkswagen, focusing on "production, efficiency" in the era of new energy, and achieving a leap in scale.

However, just as Mercedes-Benz invented the internal rbob gasoline engine and Toyota created lean manufacturing, innovations in technology and craftsmanship have allowed these global automotive giants to leave a significant mark in the hundred-year history of the automotive industry. BYD Company Limited, which has already established itself as the leader among Chinese automotive groups, has also been entrusted with the responsibility of the times to reshape the world's automotive landscape in this era full of uncertainties.