Caixin Weekly | BYD Reaches New Heights, Launches Another Smart Driving Offensive in the New Year (AI Translation)

财新周刊｜比亚迪站到新高度 新春再掀智驾攻势

[para. 1] BYD has taken a significant step in the smart driving sector with its "Driving for All" initiative, announced by Chairman Wang Chuanfu. On February 10th, BYD unveiled 21 smart-driving models priced between 100,000 and 200,000 yuan, featuring their advanced "Eye of the Sky" smart-driving systems as standard. Such features were traditionally found in vehicles priced above 200,000 yuan, and BYD's move to lower prices initiated a new round of competitive pricing in the industry.

[para. 2] Over the past few years, BYD has employed strategic price reductions, such as introducing "Champion Edition" and "Honor Edition" models with significant discounts. This approach allowed BYD to surpass competitors like Volkswagen and SAIC Motor to become the top-selling single brand and automaker in China, respectively. BYD's vertical integration strategy, where most components except tires and glass are manufactured in-house, allows it to maintain profitability despite reduced prices.

[para. 3] However, the price cut strategy, revealed in a leaked letter to suppliers urging price reductions, stirred controversy. BYD responded that price negotiations are standard industry practice. Regulatory constraints may limit BYD's previous pricing strategies, influencing its current focus on enhancing product features without raising prices, particularly emphasizing intelligent driving technology.

[para. 4] BYD's effort to expand market presence saw its domestic market share rise to 16.2%, with a substantial 34.1% share in the new energy segment by the end of 2024. With the new energy vehicle market penetration nearing 50% and projected to rise further, BYD's strategies reflect its ambitions to dominate this growing segment, despite domestic challenges and a heightened focus on overseas markets.

[para. 5] As BYD plans to bolster its international presence, sales grew by 73.8% overseas in 2024. Future strategies target sales of up to a million vehicles overseas by 2025. Such expansions underline BYD's aim to remain competitive globally while adapting to the complex dynamics of international markets, including regulatory challenges and local conditions that differ from its domestic market.

[para. 6] The "Eye of the God" intelligent driving system consists of three solutions, tailored for different market segments, with Plan C primarily supporting BYD brand models without LiDAR. This strategy lowers the competitive threshold, compelling competitors to innovate. BYD's entry into intelligent driving features at standard prices further intensifies the competitive landscape, particularly against rivals employing additional fee strategies for such features.

[para. 7] Despite the firm's strategic cost-control measures, the pressure from maintaining a high debt-to-asset ratio persists. The "Di Chain" electronic receivable mechanism and cost-cutting strategies raise external supplier concerns but help reduce financial burdens during capacity expansion. Recently, regulatory draft guidelines for supply chain finance business have sought to enhance oversight, indirectly influencing BYD's financial strategies.

[para. 8] BYD's aggressive international expansion includes operational and upcoming factories across Thailand, Uzbekistan, and Hungary, aiming to capitalize on the potential in markets like Europe and the ASEAN region. However, obstacles such as labor challenges in Brazil and tariff adjustments in Europe and the US signal the complexities of global expansion mirrored by historical lessons from companies like Toyota and Hyundai.

[para. 9] In response to BYD's actions, competitors, including Tesla and domestic brands, have initiated widespread price reductions. This move sets a competitive tone for 2025, demanding strategic adjustments and increasing investment in intelligent driving technologies. However, BYD's legacy in the intelligent driving market prompts significant industry debate about the definition and scalability of advanced autonomous driving technologies.

[para. 10] Incorporating contributions from related automotive sectors like Changan Automobile and others, partnerships with technology firms enhance BYD's offerings and illustrative of BYD's determination to remain at the forefront amid vast market changes. The Chinese automaker's strategic moves are shaping an industry often described as in its "Warring States period," with no clear leader prevailing yet in the rapidly evolving landscape.

[para. 11] BYD's 5,000-strong smart driving research and development team and its plans for advanced intelligent driving deployment by 2025 illustrate their commitment to remaining competitive in this new era of automotive technology. While potential risks persist, such as increased debt and market volatility, BYD's strategic tactics position it to navigate and potentially lead this transformative period in the automotive industry.