BYD firmly holds the Iron Throne

Author | Zhou Zhiyu

Editor | Zhang Xiaoling

With monthly sales exceeding 500,000 units, BYD has set a new record.

In the joint venture brands, both Volkswagen North and South have never reached this figure during their peak periods; for most new car manufacturers, their annual sales are also far behind.

According to current data, BYD's cumulative sales in the first ten months have surpassed last year's total. If the momentum continues, this year's total sales are also expected to exceed 4 million units, just a step away from the "car company leader" SAIC Group.

Riding the wave of new energy vehicles, BYD has rapidly risen. In just four years, its annual sales have grown from only 400,000 units to a position among the top 10 global car manufacturers. However, it should also be noted that BYD's current sales mainly come from the mass market, relying on cost reductions through vertical integration and improved efficiency to provide value for money.

For BYD to truly establish its own technological barriers and create brand premiums based on that, it needs to not only enhance its electrification technology but also lead in intelligence. It should even aim to make intelligence its core competency, similar to Tesla, to enjoy valuation premiums in the capital market.

To transform into a true global automotive giant and stand on equal footing with the objects of its former admiration, BYD needs to give its all amidst skepticism and applause.

Breakthrough

The surge in BYD's sales mainly comes from the explosive growth of hybrid models in the mass market. Through technological innovations and changes in marketing strategies, it still maintains control over the 100,000 to 200,000 yuan market segment.

The rapid development of the hybrid market has fueled BYD's sales sprint. From the specific sales in October, it can be seen that 62% of BYD's sales that month came from hybrid models. Since the launch of its fifth-generation DM technology at the end of May this year, more than ten models equipped with this technology have been newly launched.

The proportion of hybrid models in total sales has gradually increased from around 55% to over 60%. Monthly sales of hybrid models have also risen from 184,100 units in May to 310,900 units in October. In the same period, BYD's pure electric vehicle sales only increased from 146,400 units (May) to 189,600 units (October).

From the evaluation results, models equipped with the fifth-generation DM technology from BYD can achieve a comprehensive range of over 2,000 km. In the past, such range could only be achieved in B-class vehicles from joint venture manufacturers, priced around 200,000 yuan. Models like the Qin L DM-i have directly lowered the long-range threshold to the 100,000 yuan level.

An analyst from a foreign brokerage firm analyzed for Wall Street Insight that for consumers, compared to pure electric vehicles, plug-in hybrids (PHEV) and extended-range electric vehicles (EREV) have more attractive ownership costs, and the range anxiety associated with pure electric vehicles is limited.

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

For mainstream market consumers, the cost of purchasing and using a vehicle are the core factors in their decision-making, and hybrid technology addresses a key issue of ownership costs Moreover, compared to other car manufacturers that focus on numerous technical parameters during their press conferences, BYD has placed emphasis on fuel consumption and range in several of its events this year, directly addressing the cost of ownership that users are most concerned about. For fuel vehicle owners who are replacing their cars with new energy vehicles due to the purchase tax exemption policy, this approach is very effective.

To further address the issue of purchase costs, BYD has strongly promoted the "dual vehicle strategy" for the Dynasty and Ocean series this year. Unlike the past strategy of "having more children" to create differentiated competition, BYD has adopted the "dual vehicle strategy" in multiple new car launches this year, with the same configurations released simultaneously, targeting a specific price range to capture user mindset.

The advantage of the "dual vehicle strategy" lies in its ability to expand the communication momentum at the same time. According to Wall Street Journal, initially, there was some resistance from the Dynasty and Ocean series regarding internal competition, but the group believed that the mass market capacity was large enough, and the "dual vehicle strategy" could serve as a diversion.

This approach has proven effective, with the two brands, Ocean and Dynasty, seeing a month-on-month increase of over 80,000 units in October sales.

More importantly, the "dual vehicle strategy" leads to cost reductions. By standardizing vehicle platforms and components, there are more common parts, making it easier to dilute R&D and production costs. This gives BYD's new models greater price reduction potential, making them more competitive in the market.

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

Defending the Position

If all goes well, BYD is expected to welcome its 10 millionth new energy vehicle off the production line in November. Among these, 9 million were completed in the past three and a half years, marking a success for Chinese manufacturing.

In just over a decade, its employee count has skyrocketed from 100,000 to over 900,000, with nearly 200,000 added in the past three months alone. He Zhiqi, Executive Vice President of BYD Group, revealed that from August to October, BYD increased production by nearly 200,000 units in three months, with nearly 200,000 recruited for vehicle and component production, and all bases are operating at full capacity.

As a result, BYD has surpassed Volkswagen to become the automotive company with the largest number of employees globally.

The rapid changes in scale in the short term pose a significant challenge to BYD's management model. An internal source at BYD stated that in the past, BYD emphasized a "family culture," focusing on employees' sense of belonging to the company. Now, it emphasizes competition, proposing "learning from each other to surpass," to enhance organizational competitiveness and efficiency. This is also a problem that BYD must address after experiencing the fastest growth in sales, which is now gradually slowing down.

Additionally, with the increase in ownership, the number of quality issues with BYD products has also risen in the past two to three years. Recently, BYD announced a recall of nearly 100,000 domestically produced Dolphin and Yuan PLUS electric vehicles due to safety risks.

To truly achieve Wang Chuanfu's goal of "becoming number one in the world," the current monthly sales of over 500,000 units is just a halfway point. Moving forward, it still needs to make more progress in high-end, intelligent, and global strategies.

Currently, BYD's progress in high-end development is slow, with Tengshi hovering around 10,000 units, and the monthly sales of Fangcheng Leopard not exceeding 10,000, while the monthly sales of Yangwang have dropped from over 1,600 at the beginning of the year to less than 300 Going overseas will be a highlight in the coming period. In July of this year, BYD completed its factory in Thailand, which not only radiates to Southeast Asia but also intends to use it as a springboard for exports to other regions; moreover, even after the EU imposed tariffs, models like the Song Plus, which are priced higher in the EU, can still maintain considerable profits.

Sources close to BYD's management revealed that the plan for overseas expansion next year is to double the efforts based on this year. Since the beginning of this year, BYD has been exporting about 30,000 vehicles per month, with cumulative overseas sales exceeding 320,000 units in the first ten months. Based on current sales estimates, the total overseas sales for this year will be around 400,000 units, with a target of 800,000 units next year.

For BYD, it still needs to solidify its position in the domestic market in the short term, but competitive pressure is only increasing. In the hybrid field, competitors like Geely and Chery have launched their latest hybrid technologies to compete with BYD, while CATL has also introduced a range-extended battery brand to help partners explore this market.

In terms of pure electric vehicles, BYD is rapidly launching more products and technologies to respond to market competition. In the future, various models from BYD's Ocean Network will successively be equipped with high-voltage platforms above 800V and mass-produced motors with 23,000 RPM. New power batteries will also be installed in future models of the Ocean Network.

After its rapid rise, BYD must also work hard to maintain its throne.

Breaking Through

For BYD, after trying every means to reduce costs on the production side, the only way to maintain its basic market share and find breakthroughs in the high-end segment is to make breakthroughs in intelligent driving.

As BYD's internal assessment suggests, last year was about competing with fuel vehicles for market share, and the next phase will be competing with new forces, with intelligent driving being the core of competition.

To some extent, this has also led to differences in valuation between BYD and other car manufacturers in the capital market.

Currently, the competition for high-level intelligent driving has shifted from the 200,000 yuan range to the mainstream market around 150,000 yuan. The popularity of XPeng's MONA 03 also indicates that in the mainstream market, intelligent driving will be the watershed for future product competitiveness.

BYD, which has been questioned about its intelligent driving capabilities, is determined not to fall behind. Wang Chuanfu stated earlier this year that BYD will invest 100 billion yuan in the field of intelligence.

To this end, BYD has been conducting internal competitions to develop its own intelligent driving system. Zhang Zhuo, general manager of the sales division of the Ocean Network, revealed that the next goal is to equip the Seagull model with intelligent driving to achieve true technological equality.

This means that BYD will comprehensively equip its self-developed intelligent driving system in all models, from the lowest-priced Seagull to the million-yuan-level Yangwang, promoting the popularization of intelligent driving technology.

Breaking through in intelligent driving is not an easy task. The founder of an intelligent driving solution company told Wall Street Insights that currently, mid-to-low-level intelligent driving has become homogenized competition, and users do not use it frequently after spending money to purchase it. Only a few independent intelligent driving suppliers have truly developed high-level intelligent driving, and doing AI is not an easy task; spending money does not guarantee results.

But BYD has no choice but to do it. Previously, BYD's strategy in the high-end market emphasized "cost performance," which allowed models including the Tengshi D9 to quickly win the market. However, several models launched by Tengshi have not been able to achieve significant sales, prompting BYD to change its strategy by debuting unique technologies in high-end models and vigorously building an intelligent label BYD believes that as it strives for high-end vehicles, intelligent driving is a necessary capability, which is key to differentiating itself from competitors in the same class.

If successful, intelligent driving is also expected to drive BYD's high-end process, allowing it to break through its current bottleneck period.

In a sense, BYD has been moving forward while feeling its way along the paths of Toyota and Volkswagen, focusing on "production and efficiency" to achieve a leap in scale in the era of new energy.

However, just as Mercedes-Benz invented the internal combustion engine and Toyota created lean manufacturing, innovations in technology and craftsmanship have allowed these global automotive giants to leave a significant mark in the century-long history of the automotive industry. BYD, which has already gained the momentum to become the leading Chinese automotive group, is also entrusted with the heavy responsibility of reshaping the global automotive landscape in this era full of uncertainties