BYD electric car price cuts: what is the logic behind

BYD electric vehicles

At the beginning of 2024, BYD electric cars began to cut prices, so what is the underlying logic? Wenzhou Bluesky Energy Technology Co., Ltd analyzed the data.

1. Lithium carbonate cost reduction

Lithium carbonate prices have fallen rapidly from the high point, and now, the cell cost is two-way compared to that 1-2 years ago, and the entire electric vehicle industry has benefited from this further cost reduction. When the price of lithium carbonate cuts across the board, the cost of raw materials is significantly reduced, and when BYD does everything itself, the cost will decrease. Combined with the first point of expansion, price cuts can improve market share.

2. Research and development costs have been shared equally

The existing reduced price of the Glory version includes models that have been listed for more than 1-2 years. The BYD DMI includes Qin Plus, destroyer 05, Song Plus, Pro, Han, and Tang. The first DMI of this generation was released on March 21, Qin PLusdmi, which has been in operation for nearly three years. According to BYD‘s statement, the DMI has accumulated sales of 312 W+. Various R&D costs, mold costs, and other costs that need to be shared through production have been fully diluted in the past two years of rapid growth, and the price reduction will not have exaggerated damage to the gross profit margin. Taking Song PLUS EVs and Song L EVs as examples, these two types of cars are at the same level, and the product force is too large to be considered a contemporary product. The price of Song PLUS EVs is bound to decrease.

PLUS EV

3. Integration of the industrial chain

The vertical integration of the industrial chain has further strengthened BYD’s cost advantage. Taking the battery as an example, the 70°C lithium iron phosphate pack cost may be approximately 3 w (or even lower); for the Ningde era, the gross profit calculation is 20%, and BYD alone can provide more than a 5k cost reduction space (that is, the internal 0 gross profit settlement scenario). This is true of other components, such as power semiconductors, cast parts, and chassis components.

4. Enormous purchase volume

BYD’s enormous shipments have brought enormous advantages to the procurement side, the automotive industry has an annual reduction mechanism, and BYD can also have more radical cost reduction actions on the supplier side. Byd has the advantage of the whole industry chain; the more cars sold, the lower the cost. The more independent brands are sold, the fewer joint venture cars are sold, the greater the cost of joint venture cars, the greater the decline in profits, and the less research and development investment, resulting in a negative cycle.

Huge purchase volume

5. It includes the production of various models

In recent years, the various models of the Wang Dynasty and ocean series have formed a strong new energy model structure, basically from cost-effective models to comfortable models. BYD’s idea is to eat all models and to form a stronger sales momentum in the case of strong sales.

This makes many people choose cars in the field of new energy, more or less around BYD’s models, so I say that BYD has experienced a relatively strong brand cycle in recent years.

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