Introducing BYD (Part 2)

In Part 1 of our BYD series, we introduced the history and business model of Build Your Dreams (BYD) Group (Chinese: 比亚迪)(HKEX: 1211)(SZEX: 002594). This article is the continuation of and final article in the series, which includes a financial overview of BYD, an examination of the company's auto sales data, and a summary of management's future strategies going forward.


This article is part of our China auto industry series, which includes:

  • An Overview of China's Auto Industry (forthcoming)

  • State-Owned Auto Companies: Chang'an Automobile, SAIC (forthcoming)

  • Traditional Private Auto Companies: Great Wall Motor, Geely, BYD (Part 1 and Part 2)

  • Value-For-Money Auto Companies: Wuling Motors (forthcoming)

  • Electric Vehicle Start-Ups: NIO, XPeng, Li Auto

 

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Financial Overview

Revenue and Profit Margins


#1: BYD Generated Total Revenue of RMB211 Billion In 2021, With a 10-Year CAGR Of 17%

Over the past decade, BYD's total revenue grew from RMB44.4 billion in 2012 to RMB211.3 billion in 2021, with a 5-year and 10-year CAGR of 15.5% and 16.9% respectively. The last fiscal year, BYD reported operating income of RMB3.8 billion and net income of RMB4 billion.


BYD Revenue and Income
Data Source: BYD Annual Reports (click image to enlarge)

Note: BYD does not explicitly report an operating income metric. We calculate the company's operating income as gross profit minus operating expenses (comprising of selling and distribution expenses, research and development costs, and administrative expenses).



#2: The Group's Automobile Business Accounts For 50% Of Total Revenue

As mentioned in Part 1, BYD has three operating segments: (1) automobiles and related products, (2) handset components and assembly services, and (3) rechargeable battery and photovoltaics. As shown below, BYD's revenue mix has been relatively constant over the past ten years, with automobiles and related products contributing to approximately half of total revenue, handset components and assembly services comprising about 40% of total revenue, and rechargeable battery and photovoltaics generating slightly less than 10% of the Group's total revenue.


BYD Revenue Breakdown By Segment
Data Source: BYD Annual Reports (click image to enlarge)

Note: the individual segment revenue figures above do not add up to total revenue as a small amount of BYD's total revenue is classified as Corporate and Others



#3: BYD Has A Gross Profit Margin Of 11%-19% And Operating Profit Margin of 1%-8%

BYD's gross profit margin fluctuated in the 11% to 19% range over the past decade, with fluctuations in earlier years driven by profitability changes in the handset components and assembly services segment and fluctuations in later years driven by profitability changes in the automobiles and related products segment. While a breakdown of gross profit margin by segment would be valuable, management only reports a single aggregate gross profit margin figure each year.


BYD's operating profit margin fluctuated between 1% and 8% over the past ten years. The Group has shown a very consistent track record in terms of cost control, with operating expenses kept at 9% to 12% of total revenue throughout the entire period, as changes in operating profit margin were mostly driven by fluctuations in gross profit.


BYD Profit Margins
Data Source: BYD Annual Reports (click image to enlarge)

#4: BYD Predominantly Generates Revenue From The Domestic Chinese Market

Historically, 85% to 90% of BYD's revenues were generated from the domestic Chinese market (including Hong Kong, Macau, and Taiwan), while overseas markets only accounted for 8% to 15% of total revenue. However, over the past couple of years, BYD has ramped up its international diversification efforts with overseas markets accounting for 30% of total revenue in 2021.


BYD Revenue Breakdown By Region
Data Source: BYD Annual Reports (click image to enlarge)

Note: 2017 China and Overseas revenue do not add up to total revenue due to rounding



Vehicle Sales Data


Next, we examine BYD's vehicle sales data. The Group only released vehicle sales data starting in 2018, while production volume data is only available from 2020 onwards.


#1: BYD Sold 740,131 Vehicles In 2021 And 646,399 Vehicles in 1H2022

BYD's vehicle sales (including cars and other vehicles such as buses) declined from 2018 to reach a low in 2020 with the onset of the COVID-19 pandemic. Subsequently, the Group's vehicle sales made a significant rebound in 2021, largely driven by new energy vehicle sales as electric vehicles surged in popularity that year alongside the economic normality that resumed in China.


BYD sold 740,131 vehicles in 2021 and 646,399 vehicles during the first half of 2022, with production numbers closely resembling sales figures in each time period.


BYD Total Vehicle Sales and Production Volume
Data Source: BYD Reports (click image to enlarge)


#2: Almost All Of BYD's Cars Sold Are For Passenger Use

BYD classifies its vehicles sold as being either for passenger or commercial use. As shown below, passenger use vehicles comprise almost the entirety of BYD's vehicle sales.


BYD Vehicles Sold (Passenger vs. Commercial)
Data Source: BYD Reports (click image to enlarge)


Furthermore, BYD's passenger cars can be classified as either traditional internal combustion engine (ICE) vehicles or new energy vehicles. In contrast, during the time period under consideration, all of the Group's commercial use vehicles fall under the new energy vehicle category.


#3: BYD's Passenger Vehicle Sales Are Increasingly Dominated By New Energy Vehicles

New energy vehicles (defined as including both pure battery electric vehicles and plug-in hybrid electric vehicles, see Part 1) account for an increasing percentage of BYD's total passenger car sales, reaching a high of 99.2% in 1H2022 as the Group announced it would stop producing traditional internal combustion engine cars going forward (see Part 1).


According to the company's reports, approximately 67% to 74% of BYD's ICE vehicle sales comprise of SUVs, another 17% to 30% comprise of sedans, while the remaining are multi-purpose vehicles.


BYD Breakdown of Passenger Car Sales
Data Source: BYD and Tesla Reports (click image to enlarge)

Note: in the graph above, we also plot Tesla's reported number of cars delivered in each time period for reference. BYD just overtook Tesla in terms of number of new energy vehicles sold/delivered in 1H2022.



Breaking down the Group's new energy vehicle sales further, we see that battery electric vehicles superseded plug-in hybrids in terms of popularity during 2019 to 2020, before hybrids caught up to reach a 50-50 split in 1H2022. The surge in popularity of plug-in hybrids over the past one and a half years is at least partly attributable to the positive reception of BYD's DM-i hybrid system fuel efficiency technology launched in January 2021 (see here for further information).


BYD Detailed Breakdown of Passenger Car Sales
Data Source: BYD and Tesla Reports (click image to enlarge)

Note: we include Tesla's car delivery volume here again for comparison. All of Tesla's cars sold are pure battery electric vehicles, while BYD sells a mix of pure battery electric vehicles and plug-in hybrids. Notably, although BYD sold more new energy vehicles in aggregate than Tesla during 1H2022, the Group actually sold fewer pure battery electric vehicles than Tesla, due to the company's mixed reliance on both pure battery and plug-in hybrid sales.


Future

Management is less clear with regards to specific business strategies for BYD going forward, however, we summarize some key overaching themes for future growth below.

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