SWOT Analysis BYD company PDF

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COMPANY PROFILE

BYD Company Limited

REFERENCE CODE: 70393585-5586-4B07-BAD0-27B0903CA18B PUBLICATION DATE: 10 Feb 2021 www.marketline.com COPYRIGHT MARKETLINE. THIS CONTENT IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED OR DISTRIBUTED

BYD Company Limited TABLE OF CONTENTS

TABLE OF CONTENTS

Company Overview ........................................................................................................3 Key Facts .........................................................................................................................3 SWOT Analysis ...............................................................................................................4

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BYD Company Limited Company Overview

Company Overview

COMPANY OVERVIEW BYD Company Limited (BYD or ‘the company’) manufactures and sell automobile and related products. Apart from this, the company is engaged in information technology (IT), new energy automobiles, handset components, and assembly business as well as a rechargeable battery and photovoltaic business. The key customers of the company include the top brands such as Huawei, Samsung, Apple, Lenovo, Vivo, Xiaomi, Dell, and global leading professional robot brands such as Ecovacs and iRobot. The company has operations in China, India, Australia, the US, the UK, Malaysia, Japan, Brazil, Chile, Peru, Colombia, South Korea, Ecuador, France, and Hungary. BYD is headquartered in Shenzhen, Guangdong, China. The company reported revenues of (Renminbi) CNY121,778.1 million for the fiscal year ended December 2019 (FY2019), a decrease of 0% over FY2018. In FY2019, the company’s operating margin was 5.2%, compared to an operating margin of 6.3% in FY2018. In FY2019, the company recorded a net margin of 1.3%, compared to a net margin of 2.3% in FY2018. Key Facts

KEY FACTS Head Office

BYD Company Limited Pingshan New Area No. 3009, BYD Road Pingshan Shenzhen Guangdong Shenzhen Guangdong CHN

Phone Fax

86 755 89888888

Web Address

www.byd.com.cn

Revenue / turnover (CNY Mn)

121,778.1 17,630.6

Revenue (USD Mn) Financial Year End

December 229,000

Employees Shenzhen Stock Exchange Ticker 002594

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BYD Company Limited SWOT Analysis

SWOT Analysis

SWOT ANALYSIS BYD Company Limited (BYD or ‘the company’) is engaged in rechargeable battery business; handset and computer components; assembly services; and automobile business. Focus on research and development, broad services, and increasing cash position are the company’s key strengths; even as geographic diversification remains a cause for concern. Increasing global hybrid automotive market, Chinese mobile market, and strategic initiatives could provide ample growth opportunities for the company. However, foreign exchange risks, intense competition, and increasing prices of raw materials could affect its future growth operations. Strength

Weakness

Robust research and development capabilities Broad services Increasing cash position

Geographic concentration

Opportunity

Threat

Increasing global hybrid automotive market Positive outlook for Chinese mobile phone market Strategic initiatives to expand business operations

Foreign exchange risk Intense competition Increasing costs of inputs

Strength Robust research and development capabilities BYD’s research and development and promotion of new energy vehicles in the world made it a pioneer in the global new energy vehicles sector. In FY2019, the company invested CNY5,629.4 million in its R&D activities, as compared to CNY4,989.4 million in FY2018. The company strengthened the research and development and investment in the business of new energy automobiles to satisfy the demand for these vehicles. BYD reinforced its technological advantages and introduced superior new models and enhanced its battery production capacity. In FY2019, the company and Toyota signed an equity joint venture agreement for the establishment of a research and development company for pure electric vehicles. Broad services BYD is involved in the manufacture and sale of IT products, automobiles, and related products. The company also develops green products such as solar farms, battery energy storage stations, electric vehicles, electric forklifts, and LEDs. The company operates through three segments: automobiles and related products; mobile handset components and assembly service; and rechargeable battery and photovoltaic business. BYD's automobiles and related products segment is engaged in the manufacture and sale of automobiles and auto-related molds and components. The company's mobile handset

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BYD Company Limited SWOT Analysis

components and assembly service segment is engaged in the manufacture and sale of mobile handset components such as housings, keypads, and the provision of assembly services. The key customers of the company include the top brands such as Huawei, Samsung, Apple, Lenovo, Vivo, Xiaomi, Dell, and global leading professional robot brands such as Ecovacs and iRobot. BYD's rechargeable battery and photovoltaic business segment comprise the manufacture and sale of lithium-ion batteries and nickel batteries for mobile phones, electric tools, and other portable electronic instruments and photovoltaic products. Its customers include Samsung, Microsoft, and Huawei, as well as global electric power tools and other portable electronic equipment manufacturers such as Bosch and TTI. Increasing cash position BYD reported an increase in its cash reserves during FY2019, which could strengthen its short-term operations. In FY2019, the company reported a 4.7% increase in its cash and short-term investments to CNY11,674.3 million as compared to CNY11,151.1 million in FY2018. The increase in its cash and shortterm investments was due to CNY14,741 million cash generated from operating activities. In FY2019, the company’s cash component accounted for 10.9% of its total current assets as compared to 9.7% in the previous year.

Weakness Geographic concentration Geographic concentration is a cause for concern to the company. Though the company operates operations in PRC (including Hong Kong, Macau, and Taiwan), India, Australia, the US, the UK, Malaysia, Japan, Brazil, Chile, Peru, Colombia, South Korea, Ecuador, France, and Hungary, it generates the majority of its revenue from PRC (including Hong Kong, Macau and Taiwan). Dependence on PRC (including Hong Kong, Macau, and Taiwan) could affect the company’s operational and financial performance and increase its business risks by exposing it to the economic and geopolitical risks associated with the region, which could affect the demand for its products or disrupt the supply chain, and reduce its market share and growth opportunities in the future. It also hinders the company’s growth in international markets. In FY2019, the company generated 84% of its revenue from PRC (including Hong Kong, Macau, and Taiwan).

Opportunity Increasing global hybrid automotive market The positive outlook of the global automotive industry provides opportunities for the company across its operating markets. According to the Organization for Economic Cooperation and Development/International Energy Agency, demand for low emission vehicles such as plug-in hybrid electric vehicles (PHEVs) and battery electric vehicles (BEVs) is expected to reach 27 million by 2020 and over 100 million by 2050. According to Energy Information Administration (US Government), the sale of unconventional vehicles would account for 40% of the total Light-Duty Vehicles (LDV) sales by 2035.

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BYD Company Limited SWOT Analysis

Positive outlook for Chinese mobile phone market The company stands to benefit from the growing Chinese mobile phone market. According to in-house research, the Chinese mobile phone market is expected to reach a value of US$154.8 billion by 2023. In terms of volume, the market is expected to reach a volume of 679.4 average MOU by 2023. China accounts for 46.9% of the Asia-Pacific mobile market value. The company is a leading supplier for handset components and assembly services. It also offers vertically integrated one-stop services from whole product design, components manufacturing to whole product assembly services. Strategic initiatives to expand business operations The company continues to view strategic initiatives as a major part of its growth strategy. These strategic initiatives are intended to augment growth, expand its business with new technologies and products, and enhance its geographical reach. In December 2020, BYD entered into a strategic partnership with Hokkaido Nippon-Ham Fighters to provide green transport solutions to F Village. Under this partnership, the company would provide a range of emissions-free products, including forklifts, pure electric buses, and more. Pure electric buses would be used for ferrying players and tourists around F Village. In October 2020, the company's subsidiary, BYD Auto Industry, and Hino Motors Ltd entered into a joint venture agreement to establish a new company for the development of commercial battery electric vehicles.

Threat Foreign exchange risk BYD is an enterprise with global operations. The company is exposed to foreign exchange risk arising from a high proportion of export in sales amount, which is denominated in foreign currencies. The company sells its six continents across the globe. It generates its revenue from China, the US, India, Europe, and other markets. As the procurement of production material and funding are also organized on a worldwide basis, the currency risk is an extremely important factor for BYD’s earnings. Any changes in demand and refinancing conditions, fluctuations in exchange rates have a significant impact on the company's earnings. This related in particular to the Chinese Renminbi, US Dollar, Euro, and Indian Rupee. In addition, the value of the company's equity investment in foreign countries may fluctuate based upon changes in foreign currency exchange rates. These fluctuations, which are recorded in a cumulative translation adjustment account, may result in losses in the event a foreign subsidiary is sold or closed at a time when the foreign currency is weaker than when the company initially invested in the country. Thus, any unfavorable change in other currencies would have an adverse impact on the profitability of the company. Intense competition The worldwide automotive market is highly competitive. BYD faces strong competition from large automotive manufacturers across various markets. The competition among various auto players is likely to intensify in light of continuing globalization and consolidation in the worldwide automotive industry. The factors influencing competition include product quality and features, the amount of time required for

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BYD Company Limited SWOT Analysis

innovation and development, pricing, reliability, safety, fuel economy, customer service, and financing terms. Some of its key competitors include CBAK Energy Technology, China FAW Group, Scud Group, Hunan Corun New Energy, and Shanghai Automotive Industry, among others. Thus, increasing competition may lead to lower vehicle unit sales and increased inventory, which may result in a further downward price pressure adversely impacting the company's financial condition and results of operations. Increasing costs of inputs The increasing prices of raw materials could affect the company’s business. The major raw materials include iron and steel castings, forgings, alloy wheels, fuel injection systems, batteries, electrical wiring systems, electronic information systems, and others. It also uses interior systems such as plastic finishers, glass and consumables, and fuels. Its manufacturing facilities rely principally on natural gas, electricity, and other energy sources. There has been a significant increase in processed metal and steel prices. Increasing input costs could have a major impact on the operational costs of the company, which could not be easily transferred to the customers as intense competition could lure away its customers through low price offerings. As a result, the margins of the company could be affected.

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