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PostsBYD aims to increase its sales target by 20% in 2024 based on its performance in 2023 (4Q23 Earnings Call Summary).
BYD FY23Q4 Interpretation Meeting Minutes:
Below are the minutes of BYD's 2023 fourth quarter financial report conference call. For the financial report analysis, please refer to " "Price Butcher" BYD: Blood Battle Bright Weapon, Dawn is Near 》
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I. Review of Core Financial Information:
II. Detailed Content of the Financial Report Conference Call
2.1. Key Points from Executive Statements:
2.1.1 BYD Auto
Technological and Product Innovation: BYD has released core technologies such as Easy Four, Cloud Chariot, Heavenly Eye, DMO Hybrid Off-road Platform, etc., meeting diverse personalized full-scenario car needs from household to luxury, mass to personalized. Optimizing the product lineup, new models like Look Up, Formula Leopard, and Tengshi have been launched, integrating technology with Chinese cultural elements, covering different market segments.
Market Performance and Expansion: In the domestic market, multiple models such as Han EV DMI Champion Edition, Tang Champion Edition, etc., have achieved significant sales results. Internationally, BYD is actively expanding its presence, launching models like Han EV, Tang EV in countries like Mexico, UAE, and establishing production bases in Thailand, Brazil, deepening its global market layout.
Collaboration and Application Solutions: BYD has deepened cooperation with companies like NVIDIA, Weichai Power, promoting the commercial development of new energy commercial vehicles. In the urban rail transit sector, BYD is promoting the SkyRail and SkyBus projects, aiming to improve urban microcirculation and last-mile transportation issues, providing innovative solutions for urban transportation.
R&D and Industrial Chain Advantages: With 90,000 engineers and huge R&D investment, BYD focuses on leading battery, motor, and electronic control technologies. With a highly vertically integrated industrial chain, cost control, efficiency improvement, and comprehensive competitive advantages are achieved.
Strategic Positioning: 2024 marks the beginning of a three-year grand final in the automotive industry. BYD emphasizes competition in cost, technology, and scale. Focusing on the cost advantage of electric vehicles, aiming to make "electric cheaper than oil" a turning point in the industry, striving to drive electric vehicle costs below gasoline vehicles. Through strong product strength and technological advantages, achieving greater success in the global market, especially in decisively defeating gasoline vehicles and joint venture brands in competition.
2.1.2 BYD Electronics
Overseas Market: BYD Electronics plans to deepen cooperation with overseas major customers, by providing more product lines and services, enhancing customer empowerment, increasing market share, and exploring greater growth potential
Android: Promote the extensive application of titanium alloy in flagship models to meet the growing demand of domestic major customers, further driving the growth of the Android business.
New Business Expansion: BYD Electronics will vigorously expand cooperation with top customers to become a partner of the global AI leader, actively layout in the fields of AI servers, edge computing, AIPC, and robotics.
New Energy Vehicles: Seize market opportunities through the promotion of smart cabins and smart driving products. By 2024, continue to promote low, medium, and high computing power smart driving products. In the field of chassis and suspension, layout innovative products such as intelligent shock absorbers, air suspension, hydraulic suspension, and carbon-ceramic brake discs to promote the rapid growth of the new energy vehicle business.
Outlook: It is expected that BYD Electronics will achieve sustained high growth in 2024, with the business scale expected to exceed 150 billion. At the same time, the business structure will be further improved, mainly focusing on the field of consumer electronics components.
2.2, Q&A Analyst Q&A
Q: What is the proportion of overseas sales and domestic sales, and the profit proportion? The Thai factory will start production in the second half of 24, how do you view the change in production capacity? And expectations for other localized production?
A: The level of competition is inversely proportional to the gross profit margin. The gross profit margin in the domestic market is low, while Brazil, Thailand, and Europe have higher gross profit margins. With the intensification of competition in the European market, it is expected that the gross profit margin in this region will decrease. In most overseas markets, the level of competition is relatively insufficient, so we are more hopeful for the future development of overseas markets.
We have two product lines, pure electric and PHEV, which are different from companies like Tesla, making us more flexible in adapting to different market demands. The penetration rate of new energy in Thailand, Brazil, and other places is low, and our products can be powered by both fuel and electricity, which is more in line with the local infrastructure support. Our PHEV products have a range of 100-200km, with fuel consumption even lower than conventional fuel vehicles, representing two generations of products compared to traditional fuel vehicles, giving our products a significant competitive advantage in the market.
Q: How to accelerate industry consolidation in 24? Competing companies are in trouble now, is there any consideration for mergers and acquisitions? Where are the company's R&D personnel distributed in terms of batteries and forward-looking personnel?
A: BYD plans to accelerate industry consolidation in the next 3 to 5 years, expanding and strengthening the company's scale through mergers and reorganizations. BYD focuses on technological innovation and team collaboration, and the independently developed blade battery equipment demonstrates internal innovation strength. The company adopts a highly centralized strategy, with various R&D platforms and subsidiaries working collaboratively around the automotive business mainline to quickly adapt to market changes. The company has a large R&D team, including professionals in fields such as batteries, intelligent driving, and semiconductors. The engineer culture is one of BYD's core competitive advantages, encouraging technological innovation and ultimate design, achieving optimal cost-effectiveness and technological leadership through upstream and downstream integration. Engineers pursue technical excellence and rapidly transform technology into industrial applications. The next three years are crucial for BYD, with the founder and management personally participating in market competition and strategic execution to ensure the company maintains its leading positionQ: How do you view the layout of mobile phone manufacturers in the automotive industry?
A: Mobile phone manufacturers entering the automotive industry, we have long-term cooperation, maintaining a good relationship, aiming to provide better, more efficient, and reliable products and services, promoting closer cooperation between both parties.
Q: BYD has excellent products in both the automotive and mobile phone fields, and has rich component accumulation in areas such as AI servers. Could you please share the company's current considerations for the layout and development direction of future products?
A: Our cooperation with NVIDIA not only includes servers and cooling systems, but also involves automotive thermal management, integrated cards, and new generation refrigerant cooling and heat dissipation modules. In addition, the power of the cooling systems and integrated cards developed in cooperation with NVIDIA continues to increase, with higher technical requirements, so we focus on module development. In the field of optical communication, we are also cooperating to develop new key modules and devices, using diverse technologies to enable BYD to play a synergistic role in product diversification. By leveraging BYD's overall technology, we cooperate with leading global customers to provide complete machines, key components, and accessories.
Q: How should we interpret the 24-year net profit of bicycles? Please explain the export market and high-end market. How should we view the depreciation rate?
A: This year, bicycle profits may slightly decline, but we have the support of a large-scale high-end product and overseas market. From the insurance situation in March, our production has already exceeded 300,000 units, with an expected annual growth of at least 20%. If we can maintain this level of production, profits can stabilize. We rely on scale, overseas markets, and high-end brands to offset the impact of declining bicycle profits and ensure overall profitability.
BYD maximizes the profits of each industry chain through vertical integration, optimizing management and design to achieve ultimate cost efficiency. In terms of scale and cost, BYD has a highly integrated business model, with hardly any competitors with lower costs than us. We are confident in maintaining overall profitability in price competition.
Q: Smart driving? Talent? Landscape?
A: The field of intelligent driving has gone through a turbulent development process, initially relying heavily on image technology, but now no longer dependent on images. The development of AI algorithms has also faced many challenges, but now some consensus has been reached, such as the application of AI neural networks and training models. At the same time, regulations and national policies are gradually relaxing their supervision of this field.
BYD has a large group of car owners, and the number of new energy vehicles is constantly increasing. We have strong capabilities in engineering and complete vehicles, with close relationships with the industry, experts, and associations. We have participated in many organizations and associations, exerting a profound influence on industry regulations. Our R&D team has a strong talent reserve, and the company will make huge investments in the future.
We understand customer needs and have in-depth knowledge of the field of automatic parking and valet parking. Smart parking is the safest and most convenient way to park, which is attractive to users. We have over a decade of experience in this field and continue to innovate to meet the growing market demand. By understanding customer needs, we can seize the initiative and maintain a leading position in the industryQ: What are the expectations for the products of DM5.0 this year, and how is the technology implemented? What is the pace of boarding on DM5.0?
A: Based on DM4.0, we have successfully improved the efficiency of various systems. The engine efficiency has increased from the original 43% to the current 46%, effectively improving fuel consumption of the system. At the same time, there has been significant progress in NVH compared to DM4.0. In terms of overall experience, the acceleration performance per hundred kilometers remains at the level of DM4.0, while the fuel consumption per hundred kilometers has been reduced to 2.94L, and the full tank and full charge state can achieve a range of 2000km. We expect to gradually switch to DM5.0 starting from May, but due to the strong market demand for DM4.0 vehicles such as Qin and Destroyer, the switching process will have certain difficulties. However, as the market gradually adapts, we believe that DM5.0 will be able to sustain the popularity of the products for another 1-2 years.
Q: The significant increase in capital expenditure and research and development expenses, how do you foresee the future?
A: Currently, the company has 90,000 R&D personnel, making it the largest R&D team among global automotive companies, covering multiple areas such as battery, motor, electronic control, and power semiconductors, laying a good foundation for future competitiveness improvement and product innovation.
Q: What are the expectations for intelligence?
A: Currently, we have a smart driving team of 4,000 people, with significant investments in chip development, algorithm optimization, perception technology, planning control, and hardware configuration. With the company's strong capabilities in vehicle manufacturing and engineering, BYD will integrate intelligent technology into many models in the future. Our advantages mainly lie in two aspects: cost control, through the integration of the industrial chain, our smart driving system has strong competitiveness; and a deep understanding of consumer demand and precise grasp of regulatory timelines. In the coming years, we will launch a series of smart driving products to meet the diverse market demands.
Q: Understanding the sales target for the 24th year? How to decompose the structure of high-end models, volume, exports, and honor editions?
A: Currently, the automotive industry is entering an elimination phase, and it is expected that in the next 24 to 26 years, there will be a crucial moment of decisive battle, which will be a comprehensive competition on scale, cost, and technology. The key factors determining which car companies can stand out in this decisive battle mainly depend on the following factors: first, scale is a decisive factor, representing the company's production capacity and market share. Secondly, cost control is equally important, not limited to first-level assembly costs, but also including second and third-level assembly costs. Only by fully controlling the cost and profit of the industrial chain can a company gain an advantage in competition. In addition, technological breakthroughs are also indispensable. By adhering to the parallel development of pure electric and plug-in hybrid technologies, among which DMi technology stands out for its advantages of low fuel consumption, low noise, good acceleration performance, and the ability to use both fuel and electricity, the company has a significant advantage.
Since the beginning of the year, the company has launched the "electric lower than oil" strategy based on the advantages of scale, cost, and technology, marking a turning point in the decline of fuel vehicles. It is expected that sales in March will reach 300,000 vehicles, with strong market demand and supply unable to meet the demandIn particular, the order volume of Qin Plus and Destroyer 05 far exceeds the current production capacity. We are increasing production capacity to meet market demand. Looking ahead, we are confident that we will achieve a sales target in 2024 that is at least 20% higher than in 2023.
Q: Considerations for external supply of batteries and energy storage?
A: In addition to power batteries, there is also energy storage. With the increasing global demand for energy storage, BYD's energy storage has also demonstrated significant advantages. The company's energy storage and power batteries share the same production line, leading to high industrial synergy and cost synergy. Even with a large-scale energy storage, it only accounts for 10%-20% of electric vehicles, so the massive scale of power batteries can be used to reduce the cost of energy storage batteries. As for external supply, due to significant domestic demand, the proportion of external supply is not large, but the total number is increasing.
Q: How is the R&D investment of 40 billion divided between electrification and intelligence? Can you distinguish between forward-looking technologies and existing technologies?
A: There is currently no classification. We have 90,000 engineers covering and deepening R&D work. The addition of 30,000 graduates last year further strengthened our R&D capabilities. With feedback from 7-8 million new energy vehicle owners, we have a better understanding of customer needs. In the field of intelligent driving, we both comply with regulations and drive reform, while also making forward-looking layouts. The company's engineers are efficient, with deep and extensive technological reserves, giving us an overwhelming advantage over peers, ensuring leadership in technology, scale, and cost over the next three years.
Q: Tesla has launched FSDv12.3. How do you view the application of end-to-end large models? Will there be forward-looking layouts for robots in the future?
A: Adopting AI technology to streamline 350,000 manpower will bring huge profit growth potential to the company. We are collaborating with companies such as NVIDIA, Horizon, Huawei, and DJI to explore diverse solutions to meet the company's diverse vehicle needs. At the same time, we are paying attention to Tesla's V12 technology and firmly believe that AI will drive the development of intelligent driving. In addition, humanoid robots are a future trend, and their legal advantages may accelerate their growth. Our company is intensively researching this area.
Q: Outlook on the changes in per-vehicle profit in Q1 and Q2 of this year?
A: With the deepening price war, per-vehicle gross profit will decrease, but the company will maintain overall profitability through economies of scale. Scale and high vertical integration are advantages. Currently, the high-end and internationalization strategies are also incremental, with internationalization contributing significantly to gross profit. Moreover, the high-end vehicles have already reached a monthly sales volume of 10,000 units, which will also contribute to gross profit. After scaling up, per-vehicle gross profit may decrease this year, but we are confident in maintaining profitability levels through scaled production.
Q: Outlook and targets for market share in the plug-in hybrid and pure electric markets? Currently, the market share in plug-in hybrids has already exceeded 50%, what about the outlook for pure electric market share?
A: In March, the company's market share in the automotive market has already reached 10%+. The main competitors of the Honor Edition models are fuel vehicles and joint venture brands. The launch of the Honor Edition has been very effective in converting customers from joint ventures and fuel vehicles. Currently, the company's (EV+PHEV) market share in the automotive market is around 16%, and in the new energy vehicle market, it is 35%The company will further increase the production capacity of the 05 and Qin models in April and May. The company will also adopt a dual-track approach, with plug-in hybrids mainly for family replacement vehicles, and pure electric vehicles for additional family purchases. Currently, the domestic penetration rate of new energy vehicles has reached 45%, and is expected to reach 50% in the future.
Q: What is the progress of new technologies in battery development?
A: Currently, battery technology continues to innovate, and cost-effectiveness has surpassed energy density as a key consideration. In the next 3-5 years, the core development focus for battery manufacturers is to reduce costs and enhance safety. Taking the example of vehicle body technology, although aluminum bodies have many advantages, due to cost factors, steel bodies still hold 99% of the global market share. Similarly, the development of battery technology needs to focus on improving cost-effectiveness after addressing range anxiety, to meet market demand.
Q: What is the potential for new energy vehicles in emerging markets other than China, the US, and Europe?
A: Currently, China has the most comprehensive market, while foreign competition is still in the early stages, providing a good path for Chinese brands to go global (competition is not very intense). Therefore, Southeast Asia, Europe, South America, and the Middle East are all promising avenues for Chinese new energy vehicles to expand globally. The company has achieved good results in the European market, especially in Southeast Asia and South America, with strong sales growth and contribution to the company's gross profit. The company exported 240,000 units last year, with a target of 500,000 units this year, and is expected to reach 1 million units by 2025.
Q: How does the shift in market share by traditional car manufacturers (such as Changan, Great Wall, Geely, etc.) impact the company's market?
A: Domestic peers are accelerating their transformation into the new energy field, where the performance of new energy vehicles has surpassed traditional vehicles comprehensively. In terms of purchase cost, after experiencing stages where electricity was more expensive than gasoline, and then at par with gasoline, this year marks a turning point where electricity is cheaper than gasoline. This signifies a rapid shift in the territory of traditional joint venture brands. Once domestic companies master leading technology and achieve cost advantages, it is expected that within the next 3-5 years, the market share of joint venture brands will decrease from 40% to 10%, leaving a 30% market share as development space for Chinese brands.
Q: How does the price of battery materials affect the company?
A: Currently, the supply of raw materials exceeds demand (mainly due to previous industry investment impulses), but this has also driven innovation, efficiency improvements, technical design, etc., leading to continuous cost reductions in raw materials. This has significantly enhanced the competitiveness of components and battery materials. The company will work together with battery material manufacturers to promote the development of China's new energy vehicles, forming a highly competitive automotive industry chain.
Q: How is the internal research and development allocation of the current 4,000-person intelligent team between in-house development and external cooperation?
A: Currently, we adopt a combination of learning from others and independent research and development to continuously optimize existing solutions. With the company's strong scale advantage, we can obtain the best product prices and abundant human resources support from partners such as NVIDIA, Horizon Robotics, Texas Instruments, Huawei, etc. Therefore, the company's intelligent driving capabilities will show a trend of starting low and then rising, and will launch many products equipped with intelligent driving functions in the next two years to meet market demandQ: Progress of NOA entry for models with a base price below 200,000 in cities
A: In the second half of the year, a batch of NOA models priced below 200,000 will be launched in cities. Currently, the company maintains a good relationship with relevant national departments to coordinate the implementation of L3 regulations and will also design products based on consumer demand.
Q: How is the advantage of a high-end brand company reflected?
A: Going global and high-end positioning are the two major opportunities facing the company, especially the significant advantage of high-end positioning in the domestic market. Currently, the monthly sales volume of the YANGWANG brand remains stable at 1000-1500 units, showing strong performance; the new TANK D9 continues to maintain sales of tens of thousands of units, performing well in the MPV market. The new TANK N7 will be launched on April 1st, and is expected to have outstanding performance as well. The TANK brand will also introduce the city NOA function, plan to release a series of new products, and incorporate unique intelligent driving functions such as valet parking. Due to the low speed of valet parking and fewer legal obstacles, the company will strive to make this product the best it can be. In the future, the company's goal is to create a distinctive intelligent driving experience that makes consumers feel dependent (under the premise of legal compliance).
Q: How to view market share in the medium to long term under the background of price wars?
A: In the long term, joint venture brands may lose 30% of their market share, leaving a great opportunity for domestic brands. The future battle will be fierce, and the enterprises that truly survive will be those with scale, cost, and technological advantages, as well as the ability to respond quickly, have precise strategies, and possess core technological capabilities.
Q: How to consider geopolitical risks in going global?
A: Currently, globalization is not very realistic. Relying on going global + localization is the key to achieving a more long-term and sustainable international presence. The domestic new energy market is already very saturated, so combining new energy technology with localization strategies in Europe, Southeast Asia, South America, and the Middle East is one of the keys to success. Therefore, the company is establishing factories in South America, Europe, and Southeast Asia to complement its international strategy, forming two areas of development: domestic and international, to promote a healthier development of the company.
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