BYD disclosed net profit boost by 173 percent YoY in Q1 2018 05-08-2018

China’s lithium-ion battery and AEV giant BYD has disclosed a massive jump in net profit for the first quarter of 2018, compared to last year. The company is preparing to be the leader in the energy change and forecasts massive development in the next years.



 


On April 28, 2018, BYD Company Limited (BYD) published its Q1 financial report. Specifically, its sales achieved USD3.89 billion, up by 17.54% YoY. Net loss with non-recurring losses and gains was USD51.67 million, up by 173.58% YoY. It also predicted that its net profit in H1 2018 will be USD47.12 million–USD78.53 million, a YoY decrease of 70.98%–82.59%.


According to market intelligence CCM’s analysis, BYD's alternative energy vehicle (AEV) business will keep the strong upward trend and maintain a high growth rate in Q2 2018. However, its overall profitability in the AEV business, including electrical buses and alternative energy passenger vehicles, will slump compared to last year because of the subsidy reduction.


The cost for AEV has decreased greatly after years of development. Profits can be made from Level A vehicle, given that the subsidy is reduced, and the price of Level A00 vehicle has fallen to a level almost equal to traditional vehicles. Obviously, the cost decline is a solid foundation for the policy adjustment. Now the AEV manufacturers are making profits far higher than traditional vehicle makers.


In Q1 2018, China's production and sales of AEV were both booming. According to China Association of Automobile Manufacturers, the production and sales of AEV respectively reached 150,000 and 143,000 from Jan.–March 2018, up by 156.90% and 154.30% YoY. Of this, the respective figure of battery electric vehicle (BEV) was 108,000 and 102,000, up by 124.70% and 131% YoY, and that of plug-in hybrid electric vehicles (PHEV) hit 42,000 and 40,000, up by 305.30% and 242.60% YoY.

 

Although the sales volume of AEVs in Q1 2017 shrunk from a year earlier due to the impact of new subsidy policy, BYD believes that the global sales volume grows steadily in the whole year and will reach 700,000. With the standardization of AEVs market and the increasing concentration of the industry, China's AEV market is expected to expand in the future.


BYD's mobile phone component business progresses steadily as it receives orders for metallic parts from world-leading mobile phone manufacturers and it achieves large-scale production of glass phone cases.


In 2017, China's subsidy on AEV started linking up with the energy density of power battery. Under this, ternary material gradually became a trend in the market — most of the domestic battery cell manufacturers shifted their focus from lithium-iron material to ternary material. So far, over 80% of the power battery producers who originally gave priority to lithium-iron battery have developed their ternary material business, such as BYD.

 

Specifically, the Chinese administration will support the development of fuel battery vehicle and encourage the development of BEV and premium marketed passenger PHEV. In addition, it will further improve the requirements on the energy density for passenger BEV. The subsidy for AEV will be offered by phases in 2018, which will contribute to the continued and effective supply and demand of AEV. That is to say, the AEV business will develop in a relative


BYD to restructure for revenue of over USD150.83 billion in 2025

In November, BYD announced the medium-and long-term plan and its development goal and reform ideas at the executive conference. First, BYD would be forged to be a century-old company. Second, in around 2025, the total revenue of BYD would reach at least USD150.83 billion. Third, a new brand mission was released-meeting people's expectation for bright future through technological innovation.


Additionally, to match the reform of achieving the revenue, an institutional reform would be carried out inside BYD. As divided into different businesses, an institutional structure of "business group+ business division" would be established to make the best of every group. New profit drivers must be found and new growth points are nurtured. Therefore, BYD has broken the walls between segments and divisions so as to speed up organization operation and react promptly to the market.


BYD sees itself not simply a battery company or vehicle company. Currently, defining itself as a pathfinder in the new energy industry, BYD owns business groups in Skyrail, passenger car, business car, electronics, battery, etc. As CCM analyzed, there are mainly three segments that can bring profit to BYD, namely Skyrail, battery and other components and alternative energy vehicles.


As for the AEVs, BYD is currently deploying the AEV business worldwide. According to the marketing strategy of AEV "7+4" released in 2015, its products include private cars, city buses, taxis, road buses, city logistics cars for goods delivery and city logistics cars for construction, sanitation vehicles and four kinds of dedicated cars. Reportedly, from January to Oct. 2017, BYD sold 82,859 new energy passenger cars, ranking first in the industry.


CCM believed that with the fierce competition in AEV industry, BYD would maintain the first place in the market through three main businesses. As been considered as the leader in AEV industry, abroad, BYD is confronted with the competition with Tesla and crisis of being surpassed by Contemporary Amperex Technology at home, which urges it to increase the operating revenue by seeking larger market share. Compared with other companies, BYD possesses an absolute advantage in technique and market and should cut down the production cost in terms of AEVs while enhancing the energy density in Li-ion battery field.


About the article

The information for this article comes from CCM, China’s leading market intelligence provider for the fields of chemicals, energy, agriculture and life science.


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