Source: "ID: diandongyihao" Author: Li Xin
About how the name of BYD came from, founder Wang Chuanfu answered very honestly. In a video program, he said:
"There are many enterprises in Shenzhen. It is not easy to pass a two character name, so I thought of five character names again. When I checked all the names, I could only take three characters. The name 'BYD' is strange, but it is also good. It is easy to pass."
In fact, BYD did not have a clear meaning at that time, which was to facilitate the registration of enterprise names. As for BYD's so-called Build Your Dream, it was completely added later.
According to Wang Chuanfu, "it was difficult to start a business at that time, and it was still unknown whether we could survive. We should first establish it and then register it."
In 1995, 29 year old Wang Chuanfu borrowed 2.5 million yuan from his real estate cousin to set up BYD and plunged into the mobile phone battery industry. From nickel battery to lithium-ion battery, BYD went step by step, once making Sony , Sanyo and other industry leaders fear.
Later, BYD entered into mobile phone OEM, car manufacturing and other fields, and achieved great success.
Over the past 27 years, BYD has grown into a giant with an annual income of more than 200 billion yuan and a market value of 670 billion yuan.
Big is not necessarily strong.
I wonder if the name was too casual in those years. Even with such a size, BYD's high-end brand in the automotive field has always been difficult to improve, and can only rely on the scale effect to maintain a certain competitive advantage.
This phenomenon has been obvious in the first quarter report of this year. According to the data, the growth rate of BYD's high-end models is far lower than that of low-end models.
Why is it so difficult to develop high-end brands? If we observe from the financial report and BYD's brand construction, we will find that everything seems to have signs.
01. Worries in the quarterly news
On April 27, BYD released its first quarter financial report, with an operating revenue of 66.825 billion yuan, up 63.02% year on year. Of which, the net profit attributable to the parent company was 808 million yuan, up 240.59% year on year.
Previously, BYD gave a hint of 65-95 million yuan in the first quarter's performance forecast. Overall, the profit figure of 808 million yuan fell above the average.
Joy mingles with sorrow.
Although the net profit grew at a high triple digit rate, BYD's comprehensive gross profit margin fell from 13.12% in the fourth quarter of 2021 to 12.4%, down 0.72% month on month.
This has been two consecutive quarters of decline since the third quarter of 2021.
Generally speaking, there are three reasons for the decline of gross profit margin: the decline of profitability of core businesses, the increase of low gross profit margin products in core businesses, and the increase of the proportion of low gross profit margin businesses.
What kind of BYD belongs to?
The answer is the first two.
From the perspective of public perception, BYD is an electric vehicle company. In fact, as a listed company, BYD's automobile business is only one of its important business segments. Other business segments are: mobile phone parts and assembly business, rechargeable batteries and photovoltaic business.
Among them, the mobile phone parts and assembly business is operated by BYD Electronics, a subsidiary of BYD listed in Hong Kong.
Since BYD did not provide detailed business income distribution in the first quarter, the following is the annual distribution of business income in the three years 2019-2021.
In general, automobile and mobile phone business are BYD's two core businesses, accounting for more than 90%.
So, who on earth pulled down the gross profit rate? The answer is that both businesses are responsible, but the core drag factor comes from cars.
According to the independent financial report of BYD Electronics in the first quarter, its gross profit rate in the first quarter of 2022 is 5.47%, down 0.69% from 6.16% in the fourth quarter of last year. The reason why the drag is not serious is that this data is lower than the overall gross profit rate of 0.72%.
In addition, from the perspective of revenue structure, compared with the fourth quarter of last year, the proportion of BYD's electronic revenue with low gross margin has dropped from 32.59% to 31.33%. The decrease in the proportion of low gross profit rate projects means that BYD Electronics' drag on the overall gross profit has weakened.
Therefore, the projects that really drag down the gross profit rate come from automobiles. Excluding BYD Electronics, the gross profit margin of the company was 15.6%, down 2.8% at the same time, down 0.9% month on month, more than the overall gross profit margin of BYD, down 0.72%.
Why will the gross profit rate of the auto sector decline? Using the above ideas for reference, we can consider it from the perspective of product structure and profitability.
The first is the product structure.
According to the data of CCCC, BYD sold 283000 new energy vehicles in the first quarter of this year, an increase of 421.5% year on year.
However, compared with 421.5%, the sales growth rate of BYD Han, the highest price model of BYD, from January to March this year was only 25.3%.
The low price models such as Qin Plus sold well, with the sales volume increasing by 882.8% year on year in the first quarter.
When high-end products are blocked and the number of low gross profit rate auto products increases, the gross profit rate of auto will decline.
In addition, this low and high level also reduced the average unit price (ASP) of cars sold by BYD in the first quarter to 158000 yuan, down 47000 yuan year on year, and down 10000 yuan month on month in the fourth quarter of last year.
So in the first quarter, compared with the low-cost models, BYD's high-end is still difficult to make a breakthrough.
Then look at the profitability of automotive products. For BYD, the upstream impact is relatively real. After excluding BYD Electronics, the cost growth rate is higher than the income growth rate. Taking lithium carbonate as an example, the annual growth rate is as high as 65%, which will continue to be too high for BYD and drag down its gross profit.
However, when the upstream price rises, BYD itself is also adjusting the price to deal with it.
In January and March this year, BYD started price adjustment respectively, with a total increase of about 4.7% - 6.7%.
According to the calculation of Huaxi Securities, the overall delivery period of BYD is about 2-3 months, which means that the effect of price adjustment from January to March on the decline of gross profit is expected to appear in the second quarter of 2022.
However, will this price increase based on cost pressure suppress market demand? It needs to be observed again.
02. The scale effect has risen, but the brand has not yet risen
Although BYD's single car price (ASP) and gross profit margin declined, BYD's expense side was well controlled.
An intuitive expression is that BYD's "net profit of single car" is rising. If the impact of BYD Electronics is deducted, BYD's net profit per car in the first quarter of this year is about 2400 yuan, an increase of 700 yuan month on month.
ASP declined, but the net profit of bicycles increased. The logic behind this is that BYD, to some extent, already has a moat of scale.
The logic of the scale effect moat is that if the expected sales volume is large enough, the fixed cost (such as production line input) allocated to each vehicle will be low, and the vehicle enterprises will dare to offer lower prices to gain users.
The high cost performance ratio naturally has a certain advertising effect, which can help enterprises spend less.
Specifically, BYD's period expense rate in the first quarter was 8.9%, down 1.4% year on year. This figure is lower than Tesla 9.9% of
Among them, the sales expense rate was 3%, down 0.1% year on year; The management expense rate was 2.5%, down 0.3% year on year; The financial expense rate was - 0.1%, down 1.6% year on year; The R&D expense rate is still rising, 3.5%, up 0.6% year on year.
It can be seen that for manufacturing enterprises, scale advantage is a sharp weapon to block competition.
Therefore, for BYD, the next step is to walk on two legs.
First, continue to use the scale advantage to frighten the low price market and seize the share.
Even more, BYD can consider keeping the price down and targeting more users to lay the foundation for charging from auto software in the following years.
Secondly, and more importantly, BYD should learn from Tesla and dig a brand moat.
As for the brand moat, Chaoyuanli once mentioned in its analysis of Tesla Quarterly News that the reason why the brand is called a moat is that the brand reduces the transaction costs of consumers (such as comparison, testing and other troubles). Therefore, consumers should pay brand premium for the brand side. This is also the root of the rise in the gross profit rate of enterprises.
And the process of building a brand is a process of letting consumers "understand, trust and prefer".
According to modern mainstream marketing theory, in order to achieve this process, three parts can be considered when building a brand:
Brand symbols, category construction, brand stories.
How is BYD doing in these three dimensions?
Let's start with the brand symbol.
The strategic marketing company "Huayuhua" once put forward a point of view: to establish a brand is to establish a symbol through which consumers can identify your products. In addition, good brand symbols should be parasitic in a strong cultural matrix, so that they can be easily remembered and spread.
According to the above standards, BYD seems to have done a good job in brand symbol construction. The models of Qin, Han, Tang and other dynasties borrowed the cultural matrix of the dynasties, leaving a sense of familiarity and intimacy.
Then look at BYD's category construction.
The essence of the so-called category construction is to hope to achieve the first place in a specific category, and the purpose is to compete for consumers' minds. The most typical is "fear of getting angry, drink Wanglaoji". We will see that Wang Laoji has been using advertising and variety shows to implant this sentence into consumers' minds.
Looking back at the category construction of medium and high-end models such as "BYD Han", we will find that BYD is pursuing a strategy of dislocation competition, but it is hard to say that it is the first in these dislocation segmentation fields.
BYD Han's pricing is benchmarking Xiaopeng P7 and Tesla Model 3 in the new energy vehicle market, and benchmarking Audi A4L, BMW 3-Series, Mercedes Benz C-Class and other luxury brand mid-level cars in the fuel vehicle market.
It is generally believed that compared with the independent brand of new energy vehicles, Han's characteristics are: more balanced in terms of endurance and comfort; Compared with Model 3, Han's design is more localized and has more space.
Compared with fuel cars, Hanergy offers the best performance and maximum space at the same price. At the same time, the blade battery technology solves the short board of endurance.
On the whole, these advantages are right, but it's hard to say that one is the first.
As for brand stories, there is only sporadic information about product research and development on the network, lacking characters and related conflicts.
The essence of brand stories is to accumulate the trust value and emotional value of users.
From this point of view, the shareholders of BYD should probably urge Wang Chuanfu to set up a micro-blog Like Musk, we should speak out more and bring the style of our own products.
epilogue
How will the relevant BYD brand evolve? At least Wang Chuanfu is full of confidence.
At the previous 2021 performance briefing, Wang Chuanfu said that BYD's brand is not what it used to be. In October, it will promote more high-end brands, "It was released in October. With BYD's more advanced technology, the company must promote a brand based on a good technology platform. The technology must be different, which brings about a different product. In addition to excellent after-sales, it can be a good experience."
BYD has disclosed that the first model of a new high-end brand is a hard driving off-road vehicle, priced at 500000~1000000 yuan. The brand, products, sales service network and operation are all new and independent teams.
It's hard to see if it's not what it used to be. However, BYD should be encouraged to stick to the high-end route.
As mentioned above, the essence of brand is to create brand premium, which is the source of profit.
When the high-end brand value is established, it is easier to promote the user-friendly version. Just like Tesla, after the establishment of high-end image ModelS, civilian models such as Model3/Y can be rapidly scaled up.
Compared with Tesla's penetration from top to bottom, BYD is "face up" this time, and its posture is generally awkward. But as the domestic leader with the same sales volume as Tesla, we still expect BYD to surprise the market.
Now let's see how BYD makes an article from brand symbols, category construction and brand stories.
