Let’s talk about BYD today, the most attention-grabbing Chinese new energy vehicle brand, which can be well seen from the huge crowds at the BYD booth during the Munich Auto Show. The most important thing that builds BYD's success is its most integrated supply chain among carmakers in the world, even when compared to Toyota and Tesla. The highly vertically integrated supply chain is just like putting on a financial leverage, helping it earn money for all parts and components when car sales are good, while turning to a huge burden when sales is not satisfactory. This also explains BYD's net profit margin fluctuations in the past. From 2009 to 2020, BYD's annual sales hovered between 400,000 to 500,000 units, barely making ends meet. In 2021, BYD sold 710,000 vehicles, with a net profit margin of only 1.4%. In 2022, its sales volume increased to 2.6 times of the previous-year level, and its net profit margin also increased to 3.9%, net profit to RMB16.6 billion. As its sales continued to rise, in the first half of 2023, BYD expects its net profit to increase by more than 192% to RMB10.5 billion. In other words, "those who choose this path often have a strong heart." This is not groundless – according to someone who helped Wang Chuanfu start his business, Wang has always thought it this way, "you can do it all by yourself, as long as you dare to do it." This can be seen from all the industries BYD taps into, including mobile phones, automobiles, batteries, masks, PV, semiconductors, and rail transit. For BYD, everything can be manufactured. In order to achieve this, BYD has embarked on a unique path with Chinese characteristics, i.e. the "301" concept - using 300% engineers to gain technology leadership by 1%. BYD reduces initiation cost through building production lines composed of abundant labor and a small number of necessary machines. In 1995, when BYD's predecessor - a battery manufacturer for mobile phones was founded, Wang Chuanfu was able to fully break down the production line into manual processes. Estimated by the production efficiency at that time, a BYD production line with a daily output of 100,000 lithium batteries required 2,000 workers and an equipment investment of RMB50 million, while the same production lines of manufacturers like Sony and Sanyo only required 200 workers but plus an equipment investment as high as USD100 million. This also made BYD the automaker with the largest number of employees in the world today. When it comes to carmaking, BYD also attaches greatest importance to supply chain construction. The company began to work on the production and manufacturing of automotive electronics in 2003. Between 2005 and 2008, BYD successively added production functions such as injection molded interior parts, car lights and paint, etc. By 2010, BYD had more than 100 parts factories. In addition to glass and tires, BYD's manufacturing extends to almost all automotive components. The strong supply chain system maintained stable operation during the COVID-19 lockdown period, while to the contrast, the production and sales were respectively fully stopped and dropped by half in the same period when it comes to automaking leaders such as SAIC and GAC. When a company develops businesses in various industries, it becomes a question whether it can stay ahead of those who are dedicated to just one or two. In the early days of entering the PV industry, Wang was forced to cut investment in automobile and use automobile business resources to support PV. Today, BYD's subsidiary Fudi Battery has become the second-largest power battery company in the world, while still having much to improve when compared to CATL, the largest. Looking back at auto leaders in the past, the key to their success lies in their contribution to changing the industry technology itself. Ford invented the assembly line and Toyota brought lean production. However, what brought BYD to the first place was obviously not any of this, but rather, China’s hard-working and cheap labor, as well as the determination to pursuing the same strategic focus of its founder Wang Chuanfu.
