BYD prepares to continue selling large numbers of plug-in hybrid electric vehicles (OTCMKTS:BYDDY)

introduction

According to my January 2024 article, BYD LIMITED (OTCPK:BYDDY) was strong in Q4 2023, and we’ve had more recent numbers since then. My thesis is that BYD is poised to continue selling in bulk Numbers of plug-in hybrid vehicles (“PHEVs”). China includes both battery electric vehicles (“BEVs”) and plug-in hybrid electric vehicles (PHEV) in its new energy vehicle (“NEV”) portfolio.

At the time of this writing, 1,000 Chinese yuan is equivalent to 138 US dollars.

Numbers

According to the Hong Kong Stock Exchange, BYD sold 685,960 PHEVs in the first five months of 2024. This is 35% more than the 507,862 PHEVs in the first five months of 2023:

The Wall Street Journal says that two new BYD PHEV cars, the Qin L DM-i and Seal 06 DM-i, start at less than $15,000, and the driving range of the two cars is estimated at 2,100 kilometers, which is more than 1300 miles. We have to reduce the range estimate, and see that it is InsideEVs He says The Chinese CLTC light vehicle testing cycle is unrealistically optimistic. Even if we discount that range by 25% to “just” 975 miles, it’s still very impressive, and it’s very likely BYD will sell significant numbers of these vehicles.

Tesla (TSLA) CEO Elon Musk has said good things about BYD in the past, and said the following about Chinese auto companies in general during Tesla’s 4Q23 call (emphasis added):

Our general observation is that Chinese car companies are the most competitive car companies in the world. So I think they will be very successful outside of China depending on what kind of tariffs or trade barriers are put in place. Frankly, I think that if trade barriers are not put in place, they will destroy most of the other car companies in the world. So they are very good.

China dominates electric vehicles and BYD has the largest market share in the country by far, making it an established brand. FT has a chart showing EV registrations by country and 2023 numbers of 8.1 million for China, 3.2 million for Europe, and 1.4 million for the US, which is consistent with what we see from the IEA:

BYD’s 2023 annual report says China’s automobile sales volume reached 30.094 million units during the year, representing a 12% increase over 2022. The report says 9.495 million new vehicles were sold during the year, representing a 37.9% increase over 2022. 2022. BYD is now a trusted brand, and they don’t have many break-even competitors in China in the NEV space, according to a Wall Street Journal article:

Only four EV brands in the Chinese market sold more than 400,000 vehicles last year — a volume seen as break-even for EVs based on historical financial data from Tesla, AlixPartners’ Dyer said. The four are BYD, Tesla, Aion, and Wuling.

evaluation

A May 14 Reuters article says President Biden is raising tariffs on Chinese electric vehicles to more than 100%, and I think Berkshire Hathaway (BRK.A, BRK.B) CEO Warren Buffett knew it was likely this kind of Things will come eventually. For many years, Berkshire owned 225 million shares, but their interest reportedly fell to just under 219 million shares by August 2022. The selling continued, and they now have less than 88 million shares as of October 2023. In other words, they have sold more than 60% of their shares.

I like to follow this up by going to HKEXnews’ shareholder disclosures list. From there, we go to the Disclosure of Interests page and choose Option No. 1, which is to search for disclosures provided since July 2017. Then we choose Option No. 2, which allows us to search by shareholder/manager. We write “Berkshire Hathaway Energy” as the name and I would like to change the start date to 1/1/2021. This poses the following:

It’s hard to get excited about today’s valuation, given the number of shares Berkshire has sold since August 2022. Another valuation concern is the fact that BYD doesn’t make much money from the large number of electric vehicles it sells. Geely (OTCPK:GELYF) GEO Sheng Yue Gui said BYD is only making money from PHEVs in Geely’s 4Q23 call (emphasis added):

In the world of China’s automobile industry, there has been a unique phenomenon. Chinese automakers are making money. As long as you have your own drivetrain or engine production, you will be able to make money. But if you’re a new energy vehicle maker, you won’t make money. BYD is excellent at pure electric vehicles, but it only makes money from its hybrid models, while Toyota does.

The 2023 Annual Report shows 2023 profit of CNY 30,041 million, gross profit of CNY 121,757 million, and revenue of CNY 602,315 million:

Since the time of the 2023 annual report, CnEVPost says BYD’s numbers are down in the first quarter of 2024:

Converting to US dollars, the 2023 profit is approximately $4.1 billion. I can see bullish investors using a valuation range of 20 to 22 times that amount, about $82 to $90 billion. According to the 2023 Annual Report, there are 2,911,142,855 A&H shares outstanding. 2 BYDDY ADRs are equivalent to 1 common share, so we divide this in half and multiply it by the June 6 ADR price of $58.52 to get a market cap of over $85 billion. This is close to what we see in YCharts, but different from what appears in Yahoo Finance. The market cap seems to be within a reasonable valuation range, and I think BYD Company Limited shares are holding out.

Editor’s Note: This article discusses one or more securities that are not traded on a major U.S. exchange. Please be aware of the risks associated with these stocks.