Introduction: From buses to passenger cars, BYD accelerates overseas layout BYD already relies on pure electric buses to enter overseas markets. With the rise of new energy passenger vehicles, the company has gradually expanded its passenger car business overseas, choosing to cooperate with dealers in various regions around the world and explore localized expansion to accelerate overseas layout. Since the second half of 2022, the company's export volume has grown rapidly. In 2023, BYD exported 0.243 million vehicles, up 334.2% year on year. From January to June 2024, BYD exported 0.203 million vehicles, up 173.8% year on year.
Southeast Asia demand analysis: The car market is recovering rapidly. Thailand is actively promoting the electrification and transformation of the automobile industry. The Southeast Asian light vehicle market is gradually returning to the size before 2019. New energy sales are growing rapidly, but the penetration rate is still low. In 2023, the Southeast Asian light vehicle market sold 2.71 million vehicles, up 3.2% year on year, and gradually recovered to pre-2019 sales levels. From January to May 2024, sales volume was 0.975 million vehicles, down 11.4% year on year, with slight fluctuations. The penetration rate of new energy sources was about 5.0%. New energy in Thailand started relatively fast. From January to May 2024, sales volume was 0.201 million vehicles, -11.6% year-on-year. The penetration rate of new energy was about 17.2%, and the penetration rate in Indonesia and Malaysia in other major markets was still less than 5%. The Thai government is actively promoting electrification transformation, with the goal of building an electric vehicle manufacturing center and export base in Southeast Asia. Chinese brands are seizing opportunities and setting up factories in Thailand to spread the Southeast Asian market.
Demand for Southeast Asian models: There are differences in market segments between countries. Demand for compact models in Thailand is more prominent. Judging from consumer characteristics, countries in the Southeast Asian market have different grade preferences, and Thailand's demand for compact models is more prominent. 1) Countries represented by Indonesia, the Philippines, and Vietnam account for a relatively high MPV. Indonesia's MPV share reached 41.8% from January to May 2024, while the Philippines and Vietnam were 28.9%/22.1% respectively. 2) Low-level models in countries represented by Thailand and Malaysia are in high demand. Thailand's compact cars and compact SUVs account for 29.3%/26.6% respectively, for a total of 55.9%. Looking at the penetration rate of new energy sources, the Thai market is leading in the penetration rate of medium and above new energy, and there is still a lot of room for improvement in the new energy penetration rate of compact cars. From January to May 2024, the new energy penetration rate for mid-size, medium and large SUVs was 63.3%/49.9%/58.7%/41.9%, respectively, far ahead of the overall level of the Thai market.
BYD's competitiveness: Thailand's market share is at the forefront, deepening localization and expansion, and BYD cooperates with local dealers, wholly invests in the first overseas passenger car factory, and BYD accelerates the layout of the Thai market. BYD's plant in Thailand began production on July 4, 2024, with an annual output of about 0.15 million vehicles. The models produced are on the Thai market and spread to neighboring ASEAN countries and other regions. Judging from the competitive landscape, the Southeast Asian market is dominated by Japanese cars. Toyota and Honda have a high share in the Thai market, but in 2024, BYD already ranked in the top ten with various models. In terms of new energy in Thailand, Chinese brands are leading, with BYD Dolphins in first place. From January to May 2024, BYD sold 12,800 units, with a market share of 37.1%, and BYD Dolphin and SEAL sold 5,640/4021 units in January-May 2024, respectively, with a market share of 16.4%/11.7% respectively.
Investment suggestions: The basic market for technology and products is stable. Going overseas and moving towards a new peak The company will usher in a new year of new technology and new products in 2024. With the support of the DM5.0 and e 4.0 platforms, the main models of Dynasty Ocean Network will usher in facelift and replacement, continue to upgrade product strength, and stand firm in the mainstream market. Tension, Yangzheng, and Fangchengbao high-end brand models are rich in reserves, speeding up the deployment of the high-end market. Overseas travel continues to gain strength, and the overseas channel layout and model matrix will be further improved. Supported by the scale effect, with overseas expansion and high-end expansion, profitability is expected to remain high without fear of competition. The company's net profit from 2024-2026 is estimated to be 38.6, 47.9, and 55.7 billion yuan, corresponding to PE 19.7X, 15.9X, and 13.7X, maintaining the “buy” rating.
Risk warning
1. Weak market demand led to lower sales of new energy vehicles than expected; 2. Cost reduction of power batteries fell short of expectations; 3. Demand in overseas markets was lower than expected; 4. Risk that profit forecasting assumptions were not true or fell short of expectations.