[China]BYD's market cap breaks a trillion yuan, what does it mean?
Yang Zhongyang, China Economic Network
BYD has become the "top stream" of the recent A-share market, with its share price hitting a record high on June 10, reaching an intraday high of 350 yuan per share, the first time its market value exceeded a trillion yuan. This is also the second company in China's new energy vehicle industry chain to have a market value of over a trillion yuan.
As early as last year when CATL(Contemporary Amperex Technology Co. Limited) market value exceeded trillion yuan, people were expecting BYD to join the trillion yuan club. This is not only because BYD's power battery production and sales volume has jumped to the second place in China, but also because it has a broader industrial layout than other vehicle companies. From the 1990s, when Wang Chuanfu started BYD with batteries, to the beginning of this century, when he crossed over to automobile manufacturing, and then to the transformation to new energy vehicles, BYD's industry today has involved batteries, vehicles, semiconductors and consumer electronics. The breadth of BYD's layout leaves much to the imagination.
The reason why BYD has recently entered the trillion yuan club in market value is not difficult to analyze. On the one hand, the long-rumored BYD battery will enter the Tesla supply chain, which opens up new growth space for BYD batteries; on the other hand, since this year, BYD vehicle sales have grown significantly, only the first five months of cumulative sales of new energy vehicles has reached more than 500,000 units, far more than the new car manufacturers, and also higher than Tesla. According to such a trend, this year's annual sales crossed the one million mark without a doubt, and Tesla has a fight.
Behind the hot selling products is strong technical support. After years of deep ploughing, BYD now has not only safe and high-powered blade batteries, but also the world's leading ultra-low fuel consumption DM-i hybrid technology, and self-developed IGBT chips. With the support of these technologies, BYD is not lacking in confidence to be the king this time. The rich product lineup and wide price range of vehicles also give BYD an edge over the competition. In addition, after the official announcement in April to stop selling fuel vehicles, BYD's sense of technology has been significantly enhanced in the minds of investors, which to some extent has also strengthened BYD's image as a technology company in the capital market.
Of course, BYD's entry into the trillion-dollar market capitalisation club is due to the capital's bullishness on the development of new energy vehicles in China under the global vision of "double carbon". China's new energy vehicles are not only large in scale, with a comprehensive industry chain, but also dynamic in innovation, and have become an important force in driving and leading the transformation of the global automotive industry. No other market can reflect the undertone and pulse of a country's economic transformation as vividly as the stock market. If in the U.S. capital market, Tesla overturned the traditional fuel car Ford, Amazon defeated Wal-Mart in the retail sector, and more technological companies came to the fore and were pursued by capital has become the faith of investors, then in the Chinese capital market, the story of CATL and BYD as king can be said to be just the prologue.
Remember, when CATL power battery sales overtook Japanese giant Panasonic to become the world's No. 1 supplier of installed electric vehicle capacity, Warren Buffett's "best mate" Charlie Munger said, "If you don't invest in BYD stock now, you'll miss a Jack Welch, plus a Thomas Edison." At present, only a bottle of liquor, a barrel of oil and a few financial companies remain ahead of CATL and BYD, while behind them a number of national technology companies, including SMIC and BOE, are riding the wave. This shows that today the replacement of finance and traditional energy by Chinese technology companies has quietly arrived.
Trillion yuan market capitalisation is just a benchmark for the capital market. Despite joining the trillion yuan market capitalisation club, it does not mean that BYD can slacken off from now on. Capital markets are inherently volatile, and "if you don't advance, you'll fall back". In the face of intensifying global competition in technology and industry, BYD still faces new challenges: First, BYD's brand power needs to be enhanced. BYD lacks corresponding high-end products in the price range of over 300,000 RMB. Second, BYD's overseas market share is not high. Without a certain share of the overseas market share, it does not reflect the global nature of a brand and the global competitiveness of a company. Third, the company's gross profit margin is low. From the first quarterly report, BYD's auto business gross margin is lower than Tesla and new car-making forces such as Weilai and Ideal, "increasing revenue but not profit". In addition, BYD product intelligence level also needs to be further improved. Currently, BYD ranks third in market capitalisation among listed car companies worldwide, behind only Tesla and Toyota. If BYD has new breakthroughs in these issues, I believe that BYD's market value is sooner or later to surpass Toyota's advantage of occupying the new energy track slope long snow thick.