On the evening of March 26, NEV giant BYD announced its 2023 annual results. Three million sales were exchanged for 30 billion dollars in profit, which allowed BYD to break through the price war.

In 2023, BYD achieved operating revenue of 602.3 billion yuan, an increase of 42% year on year; net profit to mother was 30.04 billion yuan, up 80.7% year on year; gross margin increased 3.17 percentage points year on year to 20.21%, successfully surpassing its old rival Tesla (18.2%).

However, the impact of the industry price war still affected BYD in the fourth quarter. 24Q4's net profit declined for the first time in the year. Net profit to mother was 8.674 billion yuan, up 18.6% year on year and 16.7% month on month. The gross profit margin for the quarter was 21.22%, up 2.22 percentage points year over year, but also decreased by 0.9 percentage points from month to month.

1. Sales volume and profit reached record highs in 2023, but there are minor flaws

In 2023, BYD's annual sales volume of new energy vehicles reached 3.024 million units, achieving the annual sales target of 3 million units, an increase of 62.3% over the previous year. While successfully taking the top spot in the global electric vehicle sales rankings, BYD also overtook Tesla (1.81 million units).

Specifically, BYD's pure electric models continued to grow rapidly, with annual sales of 1,575,000 units, up 72.8% year on year; however, the plug-in hybrid model, which had grown rapidly before, fell cold in 2023, with annual sales volume of 1,438,000 units. The year-on-year growth rate fell from nearly 250% to 52%, and the share of sales also fell from 51% to 47%.

Today, BYD's mixed market share has dropped to around 35%, which is nearly half the drop from the highest point in 2022. It can be seen that in 2023, many NEV companies such as Geely, Changan, and Zero Run simultaneously entered the hybrid and extended range markets, which still had an impact on BYD's sole plug-in hybrid situation.

As for profit, in 2023, BYD's net profit to mother was 30.04 billion yuan, up 80.7% year on year, reaching a record high.

However, in the fourth quarter, when the car market was at its peak, BYD experienced its first decline in sales compared to the previous year.

According to the Wall Street Insights and Insights study, there are still two main reasons:

On the one hand, in order to sprint to the annual sales target of 3 million vehicles, BYD implemented a larger price reduction in Q4. BYD offered price concessions ranging from 30,000 yuan to 15,000 yuan for the Dynasty series models, causing bicycle profits to decline in the fourth quarter.

On the other hand, at the end of the year, BYD distributed an additional 2 billion yuan in rewards to its major car dealers. If this amount is added back, it is not much different from 10.4 billion yuan in the third quarter.

However, the price war in the car market became even more intense in 2024. At the beginning of '24, BYD once again mixed up the price and drastically cut prices for models under 100,000 yuan. Among them, the Qin PLUS Honor Edition directly cut the price by 20,000 yuan to 79,800 yuan. Although price reduction offers boosted BYD's sales volume at the beginning of the year to a certain extent, profit margins are likely to continue to decline in the first quarter.

2. Analysis of the two major businesses

BYD's two major businesses are the mobile phone business (including mobile phone parts, assembly, and other consumer electronics businesses) and the automobile business (including new energy vehicles, urban rail transit, rechargeable batteries, etc.).

(1) Mobile phone business

In 2023, the global consumer electronics market was in a downturn. Shipments of smartphones, PCs, and tablets were 1.17 billion units (the lowest level in ten years), 260 million units, and 129 million units, respectively, down 3.2%, 13.9%, and 20.5% year-on-year.

This has also caused BYD's mobile phone business, which mainly focuses on consumer electronics, to show a relatively obvious sluggish growth, and its share of BYD's revenue is getting lower and lower.

In 2023, BYD's mobile phone business revenue was 118.6 billion yuan, up 20% year on year. The gross margin was only 8.78%. The share of revenue also fell below 20% for the first time, from 23.2% to 19.68%.

(2) Automobile business

As a pillar business of BYD, the automotive business has benefited from a significant increase in the sales scale of automotive products, as well as the addition of mid-range and high-priced model brands such as Tenshi, Equation and Hope, and increased revenue and profits.

Specifically, BYD's annual sales of new energy vehicles reached 3.024 million units, an increase of 62.3% over the previous year. Among them, the Looking Up U8, Tense N8, and Equation Panther 5 were only officially delivered at the end of the third quarter of 2023, so sales only account for about 4% of total sales, but the overall revenue accounts for nearly 12%.

In 2023, BYD's automotive business achieved revenue of 483.5 billion yuan, a year-on-year increase of 48.9%, accounting for 80.27% of revenue, and a 2.63 percentage point increase in gross margin to 23.02%.

The reason why the revenue growth rate of BYD's automobile business (48.9%) is lower than the sales growth rate (62.3%) is that BYD's year-round price reduction promotions have more driven sales of low-end models, and the growth of high-end models is limited.

3. Overseas business enters an accelerated mode

Since mid-2021, after BYD made a high-profile statement about expanding overseas markets, overseas business entered a period of rapid growth.

In 2023, BYD has completed market development through passenger car exports, electric buses, and taxi operations in more than 400 cities in more than 70 countries and regions on six continents. Not only did it win the sales title of pure electric models in many countries such as Thailand and Brazil through exports, but it also began building factories in countries such as Hungary, Brazil, and Thailand to expand the local market.

Looking at the level of export volume, in 2023, BYD's export volume reached 243,000 vehicles, an increase of 337% over the previous year. Overseas sales growth not only far exceeded BYD's domestic sales growth rate (61%), but also surpassed the overall domestic electric vehicle export growth rate (80.9%).

This also enabled BYD's overseas business revenue to reach 160.22 billion yuan in 2023, an increase of 75.2% over the previous year, far higher than the domestic business's 32.9% growth rate; at the same time, the revenue share also increased by 5 percentage points to 26.6%.

As the domestic NEV market share ceiling approaches, overseas markets are expected to be the key to continued growth in BYD's sales and profits.

4. Intelligent driving solutions become BYD's next focus

In 2023, BYD's R&D expenses reached 39.57 billion yuan, an increase of 112.15% over the previous year. In addition to the development and launch of new models and the upgrading of battery technology, the active layout in the field of intelligent driving is an important reason why R&D investment suddenly saw a high three-digit increase. In 2023, the number of R&D personnel at BYD increased by 47.6% to 10,2844.

BYD, which had previously been quite low-key in the field of intelligent driving, suddenly “shone” in early 2024, showcased the carefully crafted BYD intelligent architecture - Xuanji architecture, and the use of BYD's own research and calculation

The law realized the “Eye of Tenjin” advanced intelligent driving assistance system developed in-house with a full stack of core content in the field of intelligent driving.

At present, BYD's intelligent driving system has been installed on high-end models such as the Tension N7 and the Upward U8. In the future, more than 200,000 models will provide intelligent driving options, and more than 300,000 models will be equipped with intelligent driving solutions as standard.

In the future, BYD will continue to invest 100 billion yuan in the field of intelligence to occupy a certain advantage in the second half of the battlefield of new energy vehicles — the intelligent battlefield, and get closer to the first tier of Tesla and Huawei.

After the domestic market share is close to the ceiling, BYD's next growth point will depend on overseas.