300 million units sold, 30 billion yuan in profit, BYD takes the lead in breaking through the price war | Insight Research

On the evening of January 29th, BYD released its 2023 performance forecast. While most new energy vehicle companies experienced a negative growth in profits, and even a loss, BYD's net profit maintained steady and high growth.

BYD expects to achieve a net profit attributable to shareholders of the listed company of RMB 29-31 billion in 2023, a year-on-year increase of 74.46%-86.49%; and achieve a non-GAAP net profit of RMB 27.4-29.7 billion, a year-on-year increase of 75.22%-89.92%.

In the fourth quarter of 2023, BYD expects to achieve a net profit attributable to shareholders of the listed company of RMB 7.63-9.63 billion, a year-on-year increase of 4.4%-31.7%, a MoM decrease of 7.5%-26.7%; and achieve a non-GAAP net profit of RMB 8.05-10.35 billion, a year-on-year increase of 10.7%-42.3%, with a MoM change of -16.6%-7.2%.

1. After surpassing Tesla in sales volume and gross profit margin, the next target is profit

In 2023, BYD successfully took the top spot in the global electric vehicle sales rankings, with annual sales of electric vehicles reaching 3.024 million units, a year-on-year increase of 62.3%. While achieving the annual sales target, it also left its old rival Tesla (1.81 million units) behind.

In addition, BYD's gross profit margin (18.7%) surpassed Tesla (18.2%) for the first time in the second quarter of 2023, and continued to maintain its lead in the third quarter. Considering that Tesla's gross profit margin in the fourth quarter hit a new low since 2019, BYD is likely to continue to maintain its advantage in gross profit margin.

However, it is worth noting that BYD's per vehicle profit declined in the fourth quarter.

Excluding the estimated net profit of RMB 980 million for BYD Electronics in the fourth quarter, the estimated net profit for BYD's automotive business in the fourth quarter is RMB 6.65-8.65 billion. BYD's per vehicle profit is around RMB 7,000-9,200, which is lower than the per vehicle profit of RMB 10,800 in the third quarter.

Huawei Research believes that there are two reasons for the decline in BYD's per vehicle profit:

First, in order to achieve the sales target of 3 million units, BYD offered price discounts for its main models in the Wangchao series, such as Qin, Han, Tang, and Song, in the fourth quarter, ranging from RMB 3,000 to RMB 15,000. Looking at BYD's 2023 vehicle sales structure, the sales volume of the Wangchao series products still accounts for about 50%, so the price reduction for this part of the models has a negative impact on BYD's per vehicle profit in the fourth quarter.

Second, to celebrate the achievement of the sales target, BYD provided an additional RMB 2 billion in rewards to its major car dealers at the end of the year. If this amount of reward is added back, BYD's per vehicle profit in the fourth quarter will return to above RMB 10,000.

2. High-end products and intelligent architecture are the top priority for BYD's future

2023 will be the first year for BYD to officially enter the high-end market. High-end models such as the U8 and the Tang EV5 have gained significant market attention. However, due to their short time on the market, the total sales of these high-end models in 2023 accounted for less than 5% of BYD's overall sales, which is not enough to drive the company's sales and profit growth.

However, 2024 is expected to be a year of explosive growth for BYD's high-end products, potentially changing the situation where low-end models dominate the sales of BYD's Dynasty series.

Firstly, BYD will launch more high-end products in 2024, including the Tang EV9, the Qin EV3, the Qin EV8, and the Yuanwang EV9. This will improve the sales structure of BYD's new energy vehicle products and boost the level of per-vehicle revenue and profit.

Secondly, BYD, which has been low-key in the field of intelligent driving, has officially launched the Xuanji architecture, the industry's first intelligent electric fusion architecture. It is worth noting that this intelligent driving solution, which has been developed by more than 4,000 BYD engineers, will not only be equipped on high-end brands like Yuanwang and Tang, but also provide optional intelligent driving solutions for vehicles priced above 200,000 RMB, and standard intelligent driving solutions for vehicles priced above 300,000 RMB. Undoubtedly, this will greatly enhance the appeal of BYD's mid-to-high-end models.

And this is just the beginning. BYD will continue to invest 100 billion RMB in the field of intelligentization, maintaining its leading position in the field of intelligent driving.

With the completion of the final pieces of the puzzle - high-end brand models and intelligent driving solutions, BYD will achieve a magnificent transformation from a leading domestic new energy vehicle company to a global automotive giant.