In 2022, China's new energy vehicles continued to grow explosively, with production and sales reaching a new high of 7,058,000 and 6,887,000 respectively, up 96.9% and 93.4% year-on-year, and remaining the top 1 in the world for 8 consecutive years.
After a decade of efforts, BYD（比亚迪） takes the lead among automotive companies with a total sale of 1,863,500 new energy vehicles in 2022, a year-on-year increase of 208.64%, which surpassed Tesla's 1,133,900 vehicles, becoming the world's top seller of new energy vehicles.
By now, BYD has been ranked the first in new energy vehicles in China for nine consecutive years and has become the first Chinese automobile enterprise to break through the trillion-dollar market value. Adhering to the principle of highlighting technology and innovation, BYD has mastered core technologies and launched important electrified products, such as blade batteries, DM-i/p hybrid technology, e-platform 3.0, etc., through which BYD has made great strides in the era of new-energy vehicles and has become a leading enterprise.
Innovation-driven development, independent and cooperative R&D of core technologies
Innovation and independent R&D of core technologies have been BYD's secret weapon. According to statistics, BYD has more than 40,000 R&D personnel. BYD's R&D investment has been stable at about 8.5 billion yuan since 2018, and in 2021, BYD's revenue is CNY 216.1 billion, and R&D investment is CNY 10.62 billion, with a year-on-year increase in R&D investment of 24.2%, which continues BYD's tradition of sustained high R&D investment.
BYD has launched blade battery technology, which ensures the safety of new energy vehicle batteries; DM-i hybrid technology, which realizes fuel-electric hybrid; CTB battery integration technology, which greatly simplifies the structure and production process; as well as a series of cutting-edge technologies developed specifically for new energy, such as e platform 3.0 and iTAC technology, which tackle with the safety, cost, and framework problems. Mastering the core technology leads to the cost advantage, so that the experience of high-end cars to achieve lower price, part of the model of the off-sale illustrates the strong demand in the market.
The electrification of new energy vehicles is the first half of the game, while intelligence is the key link in the second half of the game. BYD has taken advantage of the inherent advantages of new energy vehicles in intelligence, and has entered into co-operation with domestic and foreign well-known automotive automation leading companies such as Horizon, NVIDIA and Momenta, to jointly research and develop a standard platform for intelligent automotive platform. As the first and only new energy automobile enterprise in the industry that master the core technology of power battery, electric motor and electronic control system, the core components of electric vehicles), BYD is gradually forming a systematic closed loop on the research and development of new energy technology, thus promoting continuous growth and the new generation of products.
Rich Product Matrix and Brand Upgrade
The release of new technologies and brand upgrades are important driving forces for BYD to launch new models. Since 2008, the updating and iteration of the three electric technologies have contributed to the continuous improvement of BYD's new energy passenger car product matrix. At present, BYD's new energy passenger cars take into account both pure electric cars and hybrid cars, and the models cover sedans, SUVs, and MPVs. The models that BYD exports overseas - Han EV, Tang and Yuan Plus(ATTO 3) - are flagship models, which are conducive to building BYD's relatively high-end brand image in overseas markets, and can also guarantee a certain profit margin. The Yuan Plus is a volume model, and its compact size combined with solid range, power and handling levels are undoubtedly attractive products in the many countries where it is currently stationed. The newly launched Yangwang brand is BYD's real attempt to enter the premium market.
In October 2022, BYD participated in the Paris Motor Show, debuting its new energy passenger car matrix in Europe, where it went on sale and delivered in the fourth quarter of that year. Subsequently, BYD announced its plan to enter the Japanese passenger car market and held a conference in Tokyo to unveil the Yuan PLUS, Dolphin and Seal EV models, which target different price ranges, with the Yuan PLUS having gone on sale in January 2013, and the Dolphin and Seal expected to go on sale in the middle and second half of this year, respectively.
Accelerating Overseas Expansion through Oversea Value Chain Layout
The long-term impact of value chain layout on overseas business is extremely far-reaching. BYD is deeply committed to the overseas market and its value chain layout by building local R&D centres, vehicle and parts factories, logistics companies, etc., in order to enhance the overseas market insight and production and supply capacity, to reduce the cost of the vehicle, to achieve the optimal allocation of resources.
Taking the manufacturing chain as an example, BYD is committed to promoting localized production. In September 2022, BYD and WHA formally signed an agreement related to land subscription and plant construction, marking the official landing of BYD's first wholly invested overseas passenger car plant in Thailand. The plant is expected to start operation in 2024, with an annual capacity of about 150,000 vehicles, and the cars produced will be put into Thailand, radiating to the neighbouring ASEAN countries and other regions.
BYD will also expand its localized production strategy to countries and regions that are relatively easy to access, such as South America and Australia. Up to now, BYD has set up more than 30 industrial parks around the world, producing new energy vehicles in more than 70 countries and regions and over 400 overseas cities.
Focusing on Building Local Cooperation Ecology to Boost Sales and Services
With the development of overseas markets, the construction of cooperation ecology is an indispensable topic for car enterprises. BYD focuses on local ecological construction, different from the direct sales model of new power brands, BYD still adopts dealer distribution, and cooperates with local influential dealers to promote the sales and delivery of B-side vehicles. This can not only quickly build brand image and develop the market in the local area, but can also hand over after-sales links such as warranty, maintenance, repair, and rescue to local dealers, improve service quality, and significantly reduce costs.
On 1 August 2022, BYD announced that it had partnered with Hedin Mobility, a dealer group in Europe, to provide sales and service of new energy vehicles for the Swedish and German markets. The first pioneering shops were reported to have opened in October. The next day, BYD announced a partnership with Israel's Shlomo Motors to sell new energy vehicles there. The most notable announcement in October was the signing of a contract with German car rental company Sixt to deliver at least 100,000 new energy vehicles to Sixt over the next six years. According to public information, BYD currently has local dealers in Europe, Southeast Asia, Central Asia, Central America and Australia to cooperate with the layout.
In addition to refining the traditional sales and after-sales links, BYD attaches importance to local cooperation in the new services and experiences, providing high-quality services adapted to local standards and needs in the areas of Internet of Vehicles, charging, and autonomous driving. In order to convince consumers to choose an unfamiliar Chinese brand in the European market, where fuel cars are still in the ascendant, the energy issue has to be resolved first, and the endorsement of a traditional company like Shell plc is of significant value. In March, 2022, BYD and Shell signed a global strategic cooperation agreement and an equity cooperation agreement in an attempt to optimise BYD's customers' charging experience by relying on the Shell's energy network business in the future expansion of the new market. The agreement aims to optimise the charging experience of BYD customers in new markets in the future. At the Paris Motor Show, BYD and Shell also announced the opening of around 300,000 Shell charging stations across Europe to further enhance the charging experience for European customers.
The Journey to Going Global is still Full of Risks
Although BYD has established the advantage in the direction of going overseas, it is still facing problems such as serious shortage of production capacity, lack of protection of overseas supply chain and service network, and untimely response to customer demand. According to relevant reports, "There are still hundreds of thousands of orders on hand, and production capacity is the main bottleneck, so we need to expand production capacity as soon as possible and ensure delivery, while focusing on qualitative growth as much as possible."
On the other hand, both the construction of factories and the layout of the supply chain means the expansion of expenditure. The layout of the whole industrial chain brings dividends for BYD, but also makes BYD's capital chain tight, and BYD's 69.3% gearing ratio in the first half of 2022 set a new record. Due to the heavy asset attributes, some of BYD's long-term assets also rely on current liabilities to provide a source of funding, and the long-term debt servicing ability is poor.
In addition, BYD has limited resources in overseas markets. The local government, media, industry associations and other external relations are difficult to establish; There is limited understanding of local laws and norms, financial, risk control, local user preferences and competitive landscape, etc.
Meanwhile, BYD's brand advantage is not yet obvious, and consumers in some overseas regions have low acceptance of Chinese brands. BYD highlights "cost-effective" which makes brand high-end and profit enhancement face difficulties. In Europe, BYD not only needs to face the competition of its domestic counterparts, but also collide head-on with Tesla.
BYD is also facing some potential risks, including rising prices of upstream raw materials leading to earnings pressure, price cuts for fuel cars to grab part of the market, and lower-than-expected sales of new-energy vehicles due to policies, regulations and changes in consumer demand affecting the penetration rate of new-energy vehicles.
As the world's largest passenger car market, China has the world's most competitive new energy vehicle market. Laying out in advance in the promising overseas market and cultivating new growth points will be a mandatory course for Chinese automotive enterprises and a necessary stage. BYD chose high investment, which has high requirements for its capital strength and product system, and is a strategy only suitable for big enterprises. Yet, BYD's mindset is a universal experience, that is, standing in a more macroscopic point of view to think about internationalization, with long-term thinking, not only the pursuit of short-term sales results but also the importance of a solid market foundation to pry the healthy growth of new overseas markets.