Roberto’s Path
I wrote in early August about how BYD Auto (OTCPK:BYDDF) was preparing to become a global superpower in the automotive world. Since then, the company has temporarily evolved to take advantage of this potential. It is already the world’s largest supplier of electric vehicles. , Tesla (NASDAQ: TSLA) forward.
Its vertically incorporated strengths allow it to be a source of disruption experienced by many automakers. Sales have grown at an immediate rate this year. In my opinion, its medium- and long-term attractiveness for investors is very strong.
However, in the short term, its percentage value may continue to suffer from the drip feed of Berkshire Hathaway stock sales through Warren Buffett (BRK. B)
My October article provided the main points applicable to the key facets of the business. So I will repeat it in detail here.
In short, BYD’s vertically incorporated strengths and wide product diversity and geographic distribution are its greatest assets. It is the third largest manufacturer of lithium batteries in the world. In fact, it plans to soon export its “Blade” battery to competitors like Toyota. (TM) and Tesla (TSLA). Possibly he would have already done so in fact.
Your battery experience is a plus. It is reported that they have already undergone successful tests with a new sodium-ion battery. Sodium is much less expensive than lithium and less flammable, but heavier. If BYD had made a breakthrough, it would be really significant.
The company has the largest number of international workers of any automotive company, with 418,700. The largest is Volkswagen with 641 900. Il has the fourth highest market capitalization of all automotive companies, Tesla, Toyota and Porsche (OTCPK: POAHF).
It is the world’s largest electric vehicle manufacturer. Six of the world’s ten smartest electric vehicle models come from BYD. It manufactures semiconductors. Its network of electric buses and electric trucks around the world is greatly helping to charge cars on its global network of electric buses and electric trucks. It has 30 production sites for a diversity of interconnected products around the world. It recently placed an order for the acquisition of 8 PETC railcars for cars and trucks, in order to have a greater destination. Each vessel will have a capacity of 7,700 vehicles. This shows the intent of your export campaign.
U. S. analysts U. S. officials have been slow to recognize BYD’s perspective. However, recent updates based on the prospect of higher sales and increased profitability show that they are nonetheless seeing what is happening. Such updates are likely to interest U. S. investors more than anything. more.
In the third quarter of 2022, BYD’s profit rose 350% year-on-year to 5710 million yuan (800 million U. S. dollars). It has sold 538. 70 four games and is targeting four million next year. Automotive production sites in China. Si the company reaches four million cars next year, it will generate profits of about $100 billion. sit back and notice.
Its sales expansion rate is staggering. The representation below shows this:
Automatic BYD
In November, the company sold 229,942 cars and 485 electric trucks in China. This represents a year-on-year increase of 83%. This has made it the largest manufacturer in the world’s largest automotive market. reports (I think this is possibly an understatement). This topped 9259 games in October, but still accounts for only a small proportion of sales. This number will increase in the coming months depending on the orders already received.
This amazing expansion is subsidized through a healthy valuation for such a fast-growing company. My October article detailed it.
In the third quarter, in EV sales globally, BYD is by far the largest maker of electric vehicles, according to research firm Counterpoint. This is illustrated below:
counterpoint
The company is already the fourth largest automotive company in the world through market capitalization despite a recent decline in percentage price, as illustrated below:
capitalization boursière. com
BYD’s culture is very engineering-oriented with a strength also in software. Tesla is very software-oriented. Both are getting tougher as the old auto corporations fail to settle for the transition. The expulsion of Herbert Diess from the long-suffering Volkswagen (OTCPK:VWAGY) is a stark reminder of this. Their software projects have caused a lot of problems. The inertia of the old automakers leaves them transitioning to electric vehicles. They struggle to cope with the mix of mechanical engineering skills with the demanding new situations of computer and digital science.
BYD’s product diversity is the broadest of any electric vehicle manufacturer. It encompasses both fully electric and hybrid cars, incorporating its new generation DM-i and the new “Blade” battery.
His recently introduced “Atto 3” style, in particular, was aimed at the export market in Europe and Asia. It is illustrated below:
by car
Another recently introduced model, the “Seal”, is being promoted very well. It is illustrated below:
MIIT from China
The company is believed to have recently had an e-book order of 700,000 games. It expects to increase its monthly production capacity to 280,000 very soon. This would only give them an annual capacity of 3. 36 million games while targeting four million through 2023. .
Historically, BYD has focused primarily on the low-end electric vehicle market. Their models are moving towards the top market. In the first quarter of 2023, they are making plans for a new brand, “Yangwang”. It will be a premium lineup starting with a luxury SUV that will retail for approximately US$117,000.
In addition, they plan to rejuvenate the “Denza” logo. It is a high-end logo manufactured in China in collaboration with Mercedes-Benz (OTCPK:MBGAF) that has had limited success.
In December, the company introduced a mid-range five-seater called “Frigate. “As shown below, it will cost around $35,000:
Automatic BYD
This is the continent that will be in the midst of BYD’s push to achieve four million sales next year. This year, they have established concessions in country after country in Europe. Its executive vice president, Stella Li, recently said that the company will build one or perhaps two car production plants in Europe (it already has two electric bus production plants there).
Other Chinese electric vehicle brands are also targeting the mainland. Companies like NIO (NIO), Geely (OTCPK:GELYF) with its “Polestar” logo, XPeng (XPEV) and SAIC with its “MG” logo are also more likely to thrive. thanks to China’s strong chain of origin. BYD is by far the strongest.
It was introduced in Europe with 3 styles. These come with the “Han”, the “Tang” and the Atto 3. Norway was their first cheque market and initial feedback was very positive. They sold more than 1500 Tang-style games. there. This is probably what prompted the company to identify strongly elsewhere in Europe at a safe speed.
In Israel, they sold 2,333 Atto 3s in their current month of operation. This places them in the 3rd position in vehicle sales in the country.
BYD already has meeting and sales services for its e-buses throughout the continent. BYD already has a solar panel factory in the country. This is an example of the benefits of their vertical integration over the competition. fleets in countries. They are now fully embarking on the customer market.
Last month, the company announced it expected to build a $579 million plant in Brazil. It will be on the site of a Ford plant that was deserted a few years ago. This turns out to be an applicable example of the new wave replacing the BYD has been encouraged by the new government of Lula da Silva, the allocation is still pending final confirmation. Illustrating once again their vertical integration benefits, they also plan to manufacture bus and truck chassis there. They can also set up a lithium processing plant to ship them back to their battery production operations in China. They hope to have a hundred retail outlets by the end of this year.
The opening rite in the style of “Song” is illustrated below:
Automatic BYD
They promote their hybrid Song style and the all-electric “Yuan Plus” style in Colombia, Costa Rica, Uruguay and the Dominican Republic.
In November they announced the initial commercialization of BYD products in Mexico. The goal is to deliver 10,000 cars in 2023 and 30,000 cars in 2024. They start with the Han and Tang models, as shown below:
Automatic BYD
However, BYD will export to the United States at this time. This is due to subsidy regulations that discriminate against Chinese companies.
The company produced new models in particular for sale in countries such as Japan, Thailand and India. Japan is interesting. So far, the world’s third-largest auto market has most often resisted electric vehicles. The reaction to Tesla has been quite lukewarm so far. BYD says they will begin their adventure there in the first quarter of 2023 with the Atto 3 model. Open 22 outlets and plan to start deliveries in March. They already have a foothold in the market by owning 70% of the country’s electric bus market. The value of about $32,000 will be less than Tesla’s Model 3 and Nissan’s “Ariya. “
They have recently opened sales in Cambodia, Laos, Thailand, Vietnam, Malaysia and Mongolia. Singapore has been receiving BYD models since the beginning of the year.
They exhibited at the recent Bangkok Motor Show and said they would send 5,000 Atto 3-style issues in the coming months. Thailand is traditionally the center of automobile production in Southeast Asia. It could become a production base for BYD in the next to long term and in the middle of operations for Southeast Asia. At the recent Bangkok Motor Show, they showcased a full diversity of products that aren’t just a flag. This is illustrated below:
by car
The company exhibited its hybrid models “Qin Plus DM-!”and “Song Plus DM-!” its new hybrid technology. These were added to the BEV, Tang, Han, “Dolphin” and “Seal” models. No other company comes close to offering this line of products.
A push towards the developing Australian market position has started well. It occupies the position at the moment in the EV area the ubiquitous Tesla, although it is just beginning its operations there. In November, the Tesla Model Y was the best-selling electric vehicle with 1805 games. The BYD Atto 3 was just right with 845 games and the Tesla Model 3 third with 391 games.
BYD is believed to have a committed meeting line of 3000 Atto 3 right-hand drive per month for the Australian market. Starting in 2023, deliveries of the low-priced “Dolphin” and higher-priced “Seal” are expected to begin. It is noted that the Seal is in direct festival with the Tesla Model 3, which is very popular in Australia.
This is unlikely to be a market source of revenue for BYD due to the continent’s low source of revenue points and electricity shortages. BYD has distribution problems in some countries such as Kenya, Mauritius and Zimbabwe. Recently, the company placed an initial order for 15 e-buses in Kenya. This is another example of their merit of vertical integration that opens doors for them.
A more fruitful path can also be illustrated through the recent memorandum of understanding signed with a company in Morocco, JV Auto Nejima. Morocco plans to be an automotive production hub for Europe. Citroën already has an operation there. A few years ago, it was rumored that BYD was making plans to manufacture in the country. Then nothing happened. With the company’s new global expansion plans, the time may be right. The company already has Europe.
It is well known that Warren Buffett invested in BYD early on. However, he sold shares in recent months. The last transaction I know of was in November, when he sold 3. 23 million shares for $80. 16 million. Berkshire now owns 15. 99% of the company. That’s about $4. 5 billion. They have reduced their equity stake from 225 million shares to 175 million shares since July.
It’s unclear why they’re promoting this year. In fact, this is somewhat contradictory, as it has caused a slow decrease in the percentage value of BYD. As a result, Berkshire gets less return on its investment with each sale. There is a general consensus that those inventory sales will continue and that this in turn will continue to keep value in a vicious cycle.
BYD’s 10-year inventory chart is illustrated below via Seeking Alpha:
In Search of Alpha
The drop from the peak reflects the effects of Berkshire’s sale and the overall percentage value reached this year. There are any and all reasons to assume that the value will exceed previous highs over time to reflect the steady improvement in the company’s sales and margins, once the global economy improves.
It is expected that in 2024, the company will have an EPS of $5. 24 and reduce its PE index to 25x. Its net profit margin is expected to reach 3. 7% from 1. 4% last year.
The company has the fourth largest market capitalization of any automotive company, Tesla, Toyota and Porsche. It leads the Chinese rate worldwide, as illustrated in the detail below of the SA Quant assessments:
Alpha Search
Other figures show its valuation advantages:
Alpha Search
This shows how well the giant of Chinese new manufacturers is doing. The fact that it is much less covered by analysts than its much smaller rivals shows how analysts tend to lose corporations that are not directly indexed on U. S. stock exchanges. (BYD is an OTC counter). That turns out to be slowly changing.
* Risk No. 1 is the political threat to China’s relations with the rest of the world. This is quite low because the most affected market would be the United States. This is a market that BYD has largely avoided lately. The COVID scenario in China is also a matter of uncertainty.
* Revenue will undoubtedly increase, but if BYD fails to maintain its profit margins, the percentage value may suffer. However, there are signs that profit margins lately are improving considerably.
* BYD expansion, of course, is about significant long-term investments at a time when interest rates are rising.
* It can be argued that the company relies too much on its visionary founder and CEO, Wang Chuanfu.
Previously, BYD was a leading manufacturer of ICE. It now focuses its car production solely on electric vehicles. He understands that they are the indisputable long-term of the automotive industry. They are experiencing a meteoric expansion in sales and a step forward in profitability despite the fact that their great export crusade is just beginning.
Legacy automakers like Ford (F) and General Motors (GM) face huge obstacles. They want to increase the capacity of electric cars while also servicing massive debts and locked assets.
BYD has forged investment for long-term capital investment. It has a strong (and growing) design range. Its vertical integration makes it very master of its destiny.
The Berkshire Hathaway scenario is a short-term obstacle. BYD is a solid purchase for the long-term investor.
This article written by
Disclosure: I have/have a long advantageous position in the shares of BYDDF TSLA, whether through ownership of shares, features or other derivatives. I wrote this article myself and it expresses my own opinions. I don’t get any refunds for this (other than from Seeking Alpha). I have nothing to do with a company whose actions are analyzed in this article.