Demand analysis: sales are gradually recovering, and new energy sources are still in the early stages of development
Sales in the Latin American light vehicle market are gradually recovering, and demand continues to grow from 2024.1-May. The Latin American light vehicle market sold 4.444 million units in 2023, up 8.0% year on year. It continued to recover after 2020, but has not yet returned to pre-2019 levels. Sales volume in 2024.1-5 was 1.783 million units, up 7.66% year on year. The Latin American new energy market is developing rapidly, but the penetration rate is low. The Latin American new energy light vehicle market sold 29,374 vehicles in 2023, up 268.8% year on year, and 36,735 units sold in 2024.1-5, up 776.52% year on year, and the penetration rate of new energy penetration sources increased to 2.06%. By country, the Latin American light vehicle market is dominated by Brazil and Mexico, accounting for more than 70%. The total market share from 2024.1-May will reach 81.8%. Major Latin American countries have announced new energy transformation goals and support policies to promote the electrification of urban transportation. Sales of new energy are mainly distributed in Brazil, Mexico and Colombia. Among them, Brazil's NEV penetration rate has increased dramatically. From 2024.1-May, Brazil's NEV sales volume reached 30,912 vehicles, with a penetration rate of 3.53%.
Model demand: The preference is for the small and compact class. The mainstream demand for new energy sources is low. Judging from consumer characteristics, the Latin American market generally favors the small, compact class and pickup truck models. In the Latin American light vehicle market from April to May 2024.1, compact cars and compact cars accounted for 18.8%/13.0% respectively, compact SUVs accounted for 21.3%, and pickups accounted for 16.3%. The above class totals about 69.4%. Brazil and Mexico have similar consumer characteristics. Colombia is more focused on small cars and compact SUVs, accounting for 23.4%/35.7%, respectively. In terms of new energy vehicles, Brazil and Mexico are far ahead in the new energy penetration rate for medium and large passenger cars, but the popularity of new energy at the mainstream demand level is still low. Looking at the Brazilian market with the highest sales volume, from 2024.1-May, the penetration rate of new energy in the Brazilian mid-size sedan class reached 42.0%, and the medium to large class reached 19.1%.
BYD's competitiveness: Plug-in models are highly competitive. Pure electric models have been released to improve the product matrix. New cars are well received in the Brazilian market. BYD lays out a variety of popular models, and local factories continue to expand the local market. BYD has successively released a series of pure electric and hybrid models in Brazil, including the Tang EV, Han EV, Yuan PLUS EV, and Song PLUS DM-i. At the same time, it has invested 3 billion reais to set up a large-scale production complex composed of three factories in Camacari City, with plans to produce 0.15 million vehicles per year. Judging from the competitive landscape, the Brazilian market is dominated by Fiat, Volkswagen, and Chevrolet, which currently account for about 50% of the total. However, the supply of new energy models is still low. BYD's pure electric models are highly competitive, and the Song Plus sales performance is a record. From 2024.1-May, BYD sold a total of 27,110 vehicles in the Brazilian market, with a market share of 87.7%. Among them, Song PLUS sold 8,129 units, and the NEV market share reached 26.3%, ranking first. The pure electric model Dolphin/Dolphin Mini sold 8096/7735 units, and the NEV market share was 26.2%/25.0% respectively, ranking second and third 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 20.0X, 16.1X, and 13.9X, 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.