BYD 2024
Build Your Dreams
BYD Company Limited
Company Profile
Management
Team
Business
Model & Products
Innovations
Distribution
Manufacturing
Valuation
Company
Profile
BYD Company Limited (the ‘Company’) is a joint stock limited
liability company registered in the People’s republic of China (the ‘PRC’). It is
primarily engaged in automobile business (EVs and ICEs), mobile phones
components and assembly services, rechargeable batteries, photovoltaics (solar)
business as well as urban rail transportation business segment.
BYD was founded in Shenzhen in 1995 by Mr. Chuanfu Wang. Since
2002, the company’s H shares have been listed on The Stock Exchange of Hong
Kong Limited. In 2008, MidAmerican Energy Holdings which is a subsidiary of
Warren Buffett’s Berkshire Hathaway Inc acquired around 10% share of BYD.
Warrant had originally requested to purchase 20% of BYD. Mr. Wang rejected the
proposal in order to keep the control of BYD. BYD is the secondary Chinese
company which was invested by Warrant after PetroChina.
In the earlier years, BYD was more disputable for its
similar design with certain automobile giants. BYD did conduct a strategy
called learning from the best and lowering the cost. Last year, BYD is ranked as the largest new
energy car manufacture worldwide.
Major Subsidiaries
|
Nr. |
Name |
Principal places of business |
Pct of equity attributable to the
Company (%) |
Business nature |
|
|
|
Direct |
Indirect |
|||
|
1 |
BYD Auto Industry Company Limited |
Shenzhen |
96.79 |
3.21 |
Manufacture |
|
2 |
CHANGSHA BYD AUTO CO., LTD. |
Changsha |
|
99.88 |
Manufacture |
|
3 |
Changzhou BYD Auto Co., Ltd. |
Changzhou |
|
100 |
Manufacture |
|
4 |
Hefei BYD Auto Co., Ltd. |
Hefei |
|
100 |
Manufacture |
|
5 |
BYD Electronic (International)
Company Limited |
Hong Kong |
|
65.76 |
Investment holding |
|
6 |
BYD Precision Manufacture Co., Ltd. |
Shenzhen |
|
65.76 |
Manufacture |
|
7 |
Huizhou BYD Electronics Co., Ltd. |
Huizhou |
100 |
|
Manufacture |
|
8 |
BYD Lithium Battery Co., Ltd. |
Shenzhen |
100 |
|
Manufacture |
|
9 |
BYD Auto Co., Ltd. |
Xi’an |
99 |
|
Manufacture |
Management
Team
Mr. Wang Chuan-fu is the founder of BYD, and his name is
closely associated with the company. He is a central figure and the driving
force behind BYD. Operating in a highly dynamic and fast-changing industry, BYD
relies on swift and strategic decision-making. This requires a strong leader, a
"captain," who can adeptly navigate the company through challenges
and quickly adjust its course as needed.
In 2003, Mr. Wang Chuan-fu had already recognized the
potential of the battery business and began planning the production of electric
vehicles. In 2011, when Warren Buffett backed BYD, the company was mocked by
Elon Musk. However, after a decade of development, Musk publicly praised BYD
several times. Over the past decade, many local automobile manufacturers have
fallen behind, while BYD has steadily grown to become the world's largest
manufacturer of new energy passenger vehicles, thanks to Mr. Wang's long-term
vision and perseverance. In March 2022, BYD ceased production of internal
combustion engine (ICE) vehicles. Toyota, with sales of 11.2 million vehicles,
remains the largest vehicle manufacturer globally, but its sales of electrified
vehicles stand at approximately 3.7 million, with only around 104,000 being
battery electric vehicles (BEVs). In contrast, BYD sold around 3 million
vehicles, with approximately half being battery electric vehicles (BEVs) and
the other half being hybrids.
Business model & Products
BYD’s revenue is driven by three major business sectors:
1.
Automobile and Batteries Business: Since
March 2022, BYD has exclusively manufactured new energy vehicles, including
hybrids and BEVs. In the new energy passenger vehicle market, BYD continues to
prioritize research and development of core technologies, aiming to lead the
future of intelligent automobile innovation. The company is also actively
expanding its international presence. In January 2024, BYD launched its first
roll-on/roll-off (Ro-Ro) ships for automobile transportation, marking a
significant milestone that will accelerate the export of BYD vehicles to
overseas markets.
Figure 1 BYDs portfolio of vehicles 
1) Dynasty Series: This brand is named after China’s prosperous dynasties, reflecting BYD’s aspirations for success and innovation. It consists of five subseries: Tang, Song, Han, Qin, and Yuan, all named after historical Chinese dynasties. The Dynasty series is targeted at mid- to high- end customers and features more efficient battery management systems, advanced driver assistance systems, and other cutting-edge technologies.
Ø Tang, medium/large flagship SUV series product.
Ø Song, compact SUV.
Ø
Han, flagship sedan.
Ø
Qin, compact SUV.
Ø
Yuan, small SUV.
2) Ocean Series: Inspired by nature and environmental sustainability, the Ocean series emphasizes advanced new energy technologies, such as lighter vehicle bodies to reduce energy consumption. This series is designed to appeal to younger customers and offers both hybrid and BEV models, aligning with the growing demand for eco-friendly mobility solutions.
Ø
Seal – This model is often compared to Tesla’s
Model 3, and is said to surpass it in terms of quality, design, and price,
making it a strong competitor in the electric vehicle market.
Ø
Dolphin
Ø
Seagull – A compact, budge-friendly mini car priced
around RMB 80,000, aimed at offering an affordable entry point into the new
energy vehicle market, particularly appealing to urban drivers and younger
customers.
Ø
Frigate 07
Ø
Destroyer 05
Ø Song Plus – Originally part of the Dynasty series, this popular model has been reallocated to the Ocean series to help balance sales between the two separate branding stores. While the Dynasty series has historically performed better in terms of sales, the move of Song Plus to the Ocean series is aimed at boosting the popularity and sales of the Ocean brand
This model is a high-end off-road SUV equipped with Huawei’s advanced autonomous driving system, starting at RMB 200,000. It is available in both hybrid and BEV versions, offering a blend of luxury, advanced technology, and sustainability for consumers looking for premium off-road capacities.
4) DENZA
DENZA was founded in 2010 as a joint venture between BYD and Mercedes-Benz Group AG (formerly Daimler), with each holding 50% equity. The partnership allowed Mercedes-Benz to enter the Chinese new energy vehicle market, with BYD providing the batteries, motors, and electric control systems, while Mercedes-Benz was responsible for vehicle manufacturing. The first DENZA car was launched in Beijing in 2012. However, sales remained modest from 2015 to 2018, with 2,800, 2,287, 4,713, and 1,974 units sold, respectively.
5) YangWang
Ø
U9 – A high-performance sports car, capable of
reaching a top speed 309km/h and accelerating from 0 to 100kmh in just2.36 s.
It was launched in February 2024 with a guided price of around RMB 1,680,000
Ø
U8 – A luxury off-road SUV, introduced in September
2023, priced at RMB 1,098,000, offering premium off-road capabilities and
cutting-edge technology.
Ø
U7- A battery
electric sedan, launched in April 2024, priced at RMB 1,098,000, combing luxury, performance
and eco-friendly technology.
Ø
U10 – A yet-to-be-released luxury MPV,
anticipated to be priced at RMB 1,500,000, aimed at delivering a premium travel
experience for families or business use.
Figure 2 displays the sales volume by vehicle types from January to July in 2024, with commercial vehicles accounting for only a small fraction of total sales. During this periode, the number of hybrid sold was 27% higher than BEVs, a trend observed in other countries as well. Customers seem to prefer hybrid over BEVs. In 2023, the sales of battery electric vehicles and hybrid were approx. 1.6 million and 1.4 million units, respectively.
Figure 2 Sale Volume by vehicle types, January – July 2024
As illustrated in Figure 3,
BYD's sales have skyrocketed over the past six years, growing from under
250,000 units to over 3 million units. This impressive growth reflects the
company's successful expansion and leadership in the new energy vehicle market.
Figure 3 BYD
Sales Volume by vehicle types 2018 - 2023
2. New Energy - rechargeable batteries and photovoltaics business
In 2021, the rechargeable batteries and
photovoltaics sector accounted for 8% of total revenue. From 2022 onward, this
sector has been merged into the Automobile and Related Products sector (* in
Figure 3) in the income statement. In 2020 and 2021, the rechargeable batteries
and photovoltaics sector made up 12.6% and 12.8% of the merged sector,
respectively.
Figure 4 Revenue by
business sectors 2017 - 2023
3. IT – Handset components and assembly business
In the field of smartphones and other smart terminals, BYD
provides clients with services ranging from new materials development and
product design to component and machinery manufacturing, along with supply
chain management. This industry sector is highly competitive, characterized by
extremely low gross profit margins.
In 2021, nearly 23% of the total gross profit was
contributed by IT-Handset components and assembly business. In 2023, it reduced
to be only 9%.
Figure 5 illustrates the gross profit for the two major segments: IT and
Automobiles. The gross profit in the Automobile segment is significantly higher
than in IT, primarily due to the differing stages of development between the
two. The IT segment is likely at the OEM (Original Equipment Manufacturer) /
ODM (original design manufacturer) stage,
whereas the Automobile segment has advanced to the OBM (Original Brand
Manufacturer) stage, resulting in a substantial profit disparity.
Figure 5 Gross
Profit (%) by business sectors 2017-2023
Geography
BYD’s business extends well beyond the Chinese market. In
2023, revenue from markets outside China accounted for 27% of the company’s
total revenue (Figure 6), approximately 12 times
higher than in 2017. However, the gross profit from outside China was only 7%,
compared to 25% from the Chinese market. In the first half of 2024, this figure
has increased to 17% for markets outside China.
Figure 6 Revenue and gross profit by regions,
2017-20223
Innovations
For a considerable period, BYD primarily focused on learning
from competitors and reducing costs. In recent years, however, the company has
become fully equipped to take off on its own. Now is the time for BYD to soar.
The company has shifted its strategy to leverage its proprietary technology,
particularly in batteries.
Here are some of BYD’s most exciting innovations:
1. Batteries
In brief, compared to NCA/NCM batteries,
the Blade Battery, based on Lithium Iron Phosphate (LFP), offers enhanced
safety and cost-effectiveness. It has been used in several BYD models since
July 2020. I will provide a detailed comparison next year when I delve into the
battery industry.
CTB technology is the world’s first
innovation to deeply integrate the vehicle body with the battery. By leveraging
the safety of Blade Batteries, this technology supports a lightweight body
structure and enhances overall vehicle integration. The result is optimized
space utilization, improved fuel efficiency, and enhanced safety
performance—offering comprehensive upgrades to pure electric vehicles.
2. DM-i Super Hybrid and DM-p Technology
BYD adopts a "two-pronged
approach" strategy, which involves two distinct product lines: plug-in
hybrid vehicles and battery electric vehicles (BEVs). Focusing on plug-in
hybrids is a key strategy given the current limitations in battery technology
and the lack of widespread charging infrastructure. BYD has made significant
investments in advancing its plug-in hybrid technology.
3. Large-scale photovoltaic modules with half-sheet module technology
In 2022, BYD began mass production of 210mm large-size half-cell photovoltaic modules. This innovative technology significantly enhances the power output of each module, boosting overall energy efficiency.
DiLink 4.0 is an advanced operating system,
now equipped with 5G connectivity. The 5G network enables a smoother and faster
internet connection for the system, enhancing user experience and
functionality.
Distribution
BYD utilizes two distribution channels: direct sales and
dealerships. Revenue generated from the dealership channel grew from 26% in
2020 to 52% in 2023. In recent years, the dealership channel has consistently
delivered higher gross profit than direct sales. In 2023, gross profit for the
dealership and direct sales channels were 23% and 17.3%, respectively. BYD
appears to be optimizing its gross profit by shifting more sales through its
dealership channel.
Manufacturing
Currently, BYD operates 11 plants across China, with an
additional 6 plants under construction overseas (Table
2).
According to consensus figures available online, BYD’s planned production
capacity is expected to reach 6.7 million units annually. This number could
increase further with extended working hours.
Table 2 BYD plants
To maintain its high revenue growth, BYD needs to accelerate its global expansion, a goal the company is actively pursuing. However, BYD’s exports have increasingly faced high tariffs in several countries. The Biden administration recently announced a 100% tariff on EV exports from China, and proposed duties on Chinese-built EVs in the EU could reach up to 45%. In response, BYD has begun establishing overseas plants to circumvent these high tariffs.
Valuation
BYD operates through two major business units: automobiles
(including batteries) and IT. I will apply only a discounted cash flow (DCF)
analysis exclusively to the automobile business, given its high growth
potential. The IT segment will be evaluated using a relative valuation method.
Assumption
I have developed two scenarios—base and
better—considering that BYD's automobile business is positioned within a
high-growth sector. The base scenario represents the most likely outcome, based
on consensus estimates of the potential capacity of BYD’s factories. The better
scenario, on the other hand, reflects Toyota’s scale, as Toyota is currently
the world’s largest automobile manufacturer. Table 3 presents the base scenario
with an approximate sales target of 6.7 million units by 2033, and the better
scenario with a target of 12.5 million units by 2033.
Table 3 Sales volume anticipation
A summary of the input assumptions:
Results
WACC = 10.72%
the estimated price per share based on DCF
model, is 430 RMB for the baseline and 897 RMB for the better scenarios. On
October 28, 2024, BYD’s closing price was approximately 305 RMB.
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