Engage in Low Prices, BYD “Rolls Up” BYD

Engage in Low Prices, BYD "Rolls Up" BYD

In February, the NEV market picked up significantly. According to data released by the China Passenger Association, retail sales of new energy passenger vehicles reached 439,000 units in February, up 61.0% year-on-year and 32.8% month-on-month.

BYD is still the “leader” and firmly occupies the first position. BYD’s sales of new energy vehicles exceeded 190,000 units in February, up 27% month-on-month. It can be seen that BYD’s price reduction strategy this year is still very effective.

In the new energy industry, BYD has always been a pioneer, first “stopping the production of fuel vehicles” to completely become a new energy vehicle company, and then opening the “same price of oil and electricity” to trigger a chain reaction in the car market.

In 2023, BYD took the initiative to “attack”. So far, BYD has participated in the price reduction of a number of models, and the price reduction has become a quick-acting drug for its rapid increase.

When “rolling” wins opponents and stabilizes sales, it is inevitable to bury hidden dangers. The so-called “lips and teeth are cold”, when sharpening the knife Huo Huo to the companion, BYD is only afraid that it will “hurt the enemy by a thousand and damage itself by eight hundred.”

New Energy Vehicle Market Picks Up in February, Byd Takes the Lead in “low Prices”

Compared with the dismal results in January, new energy vehicles entered the first growth month of the year in February, and most car companies increased month-on-month.

BYD still shows an irreplaceable position in new energy vehicle companies, with monthly sales of more than 190,000. According to this calculation, BYD accounted for nearly 40% of the market share of new energy vehicles in February.

Tesla’s performance in February was unsatisfactory, with sales exceeding 70,000, 32% year-on-year and 13% month-on-month, occupying the first echelon of new energy vehicle companies with BYD, and opening a big gap with the car companies behind.

GAC AION’s monthly sales exceeded 30,000 yuan, exceeding 190% month-on-month, and the growth trend was the strongest.

Among the new car-making forces “Wei Xiaoli”, NIO and Ideal have sold more than 10,000 vehicles per month, and Xpeng still continues its previous decline, and the gap with Ideal and NIO has further increased. From a month-on-month perspective, NIO had the largest month-on-month increase, reaching 43%, and both Li and Xiaopeng had an increase of less than 15%.

Among other car companies, Qianjie, Extreme Krypton and Leap Auto worked hard to break the list, and Nezha Automobile’s sales exceeded 10,000 in February.

Dongguan Securities believes that in the short term, passenger car production and sales in February are expected to achieve positive growth year-on-year. In the long run, it is expected that automobile production and sales will maintain a low and positive growth trend in 23 years.

Engage in Low Prices, BYD Rolls Up BYD
Engage in Low Prices, BYD “Rolls Up” BYD

the car market showed a recovery trend in February, which is not due to the “price for volume” of driving companies

In 2023, Tesla once again announced a price reduction, and in just 3 days, Tesla received orders for 30,000 new cars, and the delivery time of Tesla’s official website has changed from the original 1-2 weeks to 2-5 weeks.

In order to “roll” to win the opponent, BYD also joined the price reduction team. On February 10, BYD launched the new Qin PLUS DM-i 2023 Champion Edition, which has the same power and energy consumption advantages as the joint venture brand fuel vehicle, and its low-end version is priced at only 99,800 yuan, which is the first plug-in hybrid model with a price as low as 100,000 yuan in BYD and even China.

The launch of the Qin PLUS DM-i 2023 champion version model means that BYD has achieved the “same price of oil and electricity” or even lower.

At the same time, BYD Dynasty series products have started to reduce prices, the preferential range of old models is more than 10,000 yuan, and some popular current products also have discounts of thousands of yuan, and the delivery cycle is shortened to varying degrees compared with last year.

In addition to BYD, new energy vehicles have almost kept up with the tide of price reductions. According to the chief statistics, more than 20 automobile brands such as BYD, Great Wall, Extreme Krypton, Wenjie, Xpeng, Zerorun and NIO have participated in the price reduction.

This year, there are two main reasons for the general price reduction of new energy vehicle companies.

Engage in Low Prices, BYD Rolls Up BYD
Engage in Low Prices, BYD “Rolls Up” BYD

First, the state subsidy for new energy vehicles is officially canceled, and new energy vehicles have no choice but to “exchange price for quantity”.

At the end of last year, the 13-year-old new energy subsidy officially ended. After the “national supplement” tide receded, new energy vehicles could not be sold. In January 2023, NEV sales fell sharply, with wholesale sales of 389,000 units, down 7.3% y/y and 48.2% m/m. In order to alleviate the pain caused by the termination of subsidies and to prevent overcapacity, new energy vehicles can only be exchanged for incremental price reductions.

second, the price of raw materials has fallen, and the production cost of new energy vehicles has declined. Take lithium carbonate, the price of lithium carbonate has continued to fall recently, falling below 400,000 yuan / ton in March.In 2019, the average price of lithium carbonate was 40,000 yuan / ton, and the average price of lithium carbonate in 2022 increased 15 times to 600,000 yuan.

Engage in Low Prices, BYD Rolls Up BYD
Engage in Low Prices, BYD “Rolls Up” BYD

BYD’s “Price Reduction” Triggered a Chain Reaction, and Peers Had No Choice but to “Lose Blood” to Save Themselves

Unlike other domestic new energy vehicle companies, BYD takes the route of “integration of production, research and marketing”.

Relying on self-developed technologies such as blade batteries, DM-i platforms, and suspension systems, BYD continues to crush peers on the road of technology cost reduction.

In 2021, BYD’s new energy vehicle sales surpassed that of fuel vehicles for the first time, achieving sales of 603,800 units, accounting for 81.6% of BYD’s total automobile sales. In 2022, BYD’s total sales of new energy vehicles will be 1.8635 million units, a year-on-year increase of 208.6%, surpassing Tesla to become the global “sales champion” of new energy vehicles.

The annual sales of the new domestic car-making force “Wei Xiaoli” are not even a fraction of BYD’s. In 2022, the sales volume of “Wei Xiaoli” will be 122,000, 120,000 and 133,000 respectively.

Engage in Low Prices, BYD Rolls Up BYD
Engage in Low Prices, BYD “Rolls Up” BYD

in order to grab the market in BYD’s hands, peers generally sell cars at a loss. new car-making force Wei Xiaoli “sold one at a loss”, Zerorun and Nezha car companies are also continuing to lose money…

This year, in the case of BYD’s big price reduction, peers are even more “losing blood and then falling”. NIO opened a price reduction promotion, with a maximum reduction of 100,000 yuan; AITO announced a price reduction, the starting price of M5 was adjusted from 259,800 yuan, and the starting price of M7 was adjusted from 289,800 yuan; Zerorun even shouted the slogan “We don’t engage in the same price of oil and electricity, we have lower electricity than oil”, and the maximum price reduction of some models of Zerorun reached 60,000 yuan.

more interesting, BYD’s “same price of oil and electricity” has also affected the fuel vehicle market.

In the past, new energy vehicles were generally 450,000 yuan more expensive than fuel vehicles at the same model level, but this time BYD engaged in the same price of fuel and electricity, which really makes fuel vehicles, especially the joint venture brand “Alexandria”.

Originally, the life of fuel vehicle manufacturers in the past two years was difficult.Under the dual impact of new energy vehicles and the epidemic, the sales of fuel vehicles have plummeted, which has brought great inventory pressure to traditional fuel manufacturers.

In order to quickly return funds, Hubei dealers took the lead in selling at a broken price. The minimum Civic is 109,900 yuan, the minimum UR-V is 178,800 yuan, the minimum Tianea is 139,800 yuan, and the minimum Qashqai is 119,900 yuan…..

Hubei Province has pulled local enterprises such as Dongfeng Honda, Dongfeng Peugeot, Dongfeng Citroen, and Dongfeng Nissan to launch limited-time government and enterprise subsidies, with preferential amounts ranging from 5,000 to 90,000 yuan. According to media reports, a Hubei Citroen store sells more than 400 units a day.

The price reduction event of Hubei dealers has once again increased the competitiveness of fuel vehicles, which has put certain pressure on the current new energy pure electric and hybrid market.

At the same time, it also grabbed BYD’s incremental market. After all, the use cycle of automotive bulk products is long, generally more than 4~5 years, and customers will have one less.

Engage in Low Prices, BYD Rolls Up BYD
Engage in Low Prices, BYD “Rolls Up” BYD

Using Price Cuts to Supplement Sales, BYD is Trapped in the “Middle and Low End”

The chief believes that the price cut is not a good thing for BYD, although it will increase sales in the short term. However, it is not conducive to the long-term development of BYD.

Why can Tesla cut prices but not BYD? The answer is simple, Tesla goes down, but BYD goes up.

Different from Tesla’s “tall” image, BYD has always been entrenched in the middle and low end of new energy. For a long time, people’s perception of BYD’s brand image was ride-hailing.

BYD did not have a “high-end dream”, but it all ended in failure.

As early as 2010, BYD established a joint venture with Daimler (the parent company of Mercedes-Benz) to launch the new energy vehicle brand “Denza “, focusing on the high-end market. However, for more than ten years, Denza has not had the momentum of “taking off”, but has lost money year after year, relying on BYD’s “blood transfusion” for a long time to survive.

In 2021, Denza performance made Daimler frustrated, and finally transferred part of its shares to BYD, which held 90% of the shares and became the largest shareholder, and in May the following year, BYD intended to reshape Denza and released its first MPV model D9, but sales were still flat.

At the beginning of this year, BYD released a new high-end brand – Yangwang, launching the off-road vehicle U8 and super sports U9. Looking up at the million-dollar luxury car, but there is no “hard goods” in terms of automotive intelligence, such as intelligent driving and intelligent cockpit.

Moreover, jumping from 300,000 yuan to more than one million yuan, BYD lacks transitional products in the middle, and the huge price span makes it difficult for users to accept for a while.

Looking closely at BBA’s product line, the price is gradually upward. For example, BMW 3 Series covers 300,000-400,000 yuan, BMW 5 Series sedan and X3 Series start at about 400,000 yuan, BMW X5 and X6 Series cover 500,000-1 million yuan, and BMW X7 Series starts at more than 1 million yuan.

To put it simply, looking up is at most a work of showmanship, and it is unrealistic to rely on its volume. Nowadays, BYD’s main sales models are in the range of 10~200,000.

It is worth mentioning that it is a high probability event to win sales and lose net profit by reducing prices. According to the 2022 results released by BYD, in 2022, BYD earned a net profit of 160~17 billion yuan, while Tesla’s annual net profit was 12.556 billion US dollars.

The net profit gap between BYD and Tesla is close to ten times, which is already difficult to equalize, and it is even more difficult after the price cut.

In this year’s new energy market, price war is the main theme, but it is easy to reduce prices and difficult to increase prices. Next, it is becoming more and more difficult for car companies to earn money at the brand premium, which is very unfavorable to BYD, which is still entrenched in the “middle and low end”.

Chairman Wang Chuanfu said on the conference call that BYD will attack 4 million vehicles in 2023. this year, BYD “looks up” and rushes to the high-end, but “engaging in low prices” may shoot itself in the foot.

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