BYD Company Limited (SEHK: 1211) is well-positioned for long-term growth. Here’s why. –
BYD Company Limited (SEHK: 1211), a conglomerate with interests in various businesses such as automobiles, batteries, and more, has seen its share price surge more than 100% in the last few months.
Investors in general are optimistic about the company’s future thanks to its exposure to some of the fastest-growing industries such as electric vehicles (EVs), renewable energy, and others.
In particular, the company’s car business has drawn strong attention lately owing to the release of its Han series premium electric car.
In this article, I’ll explore two ways BYD can keep growing its car-related business for the foreseeable future.
Sell more cars
To start with, BYD can grow its revenue by selling more cars. With an annual demand of about 20 million cars, China is a huge market that BYD can capitalise on by selling more traditional gasoline vehicles, as well as new energy vehicles – hybrid, fully-electric cars.
As the top player in the new energy vehicle industry, BYD is well-positioned to maintain or expand its market share as the market shifts towards electric cars over time.
To this end, the company has evolved from supplying affordable cars to a premium car, especially with the latest release of the Han series premium car.
Moreover, the Han series car might open up new opportunities for BYD to expand its business globally. If successful, this model could not only elevate BYD’s branding in overseas markets but also improves its odds of becoming a global automobile company.
Supplying electric auto parts
An early player in the electric car industry, BYD has amassed enormous experience and know-how over the years as an integrated electric car producer.
As the electric car industry is entering a new growth phase, BYD can now monetise its technology by supplying components – which include the battery, electric engine, and electric controller – to other automakers.
To this end, BYD has formed various partnerships with players such as Toyota, Daimler, and other local players to develop electric batteries and electric cars.
Also, the company plans to sell its parts to other automakers under the FinDreams brand. This business segment has good prospects as many traditional automakers may not have the resources to carry up research and development.
Even if they do, it would take them many years to catch up with leaders like BYD or Tesla. Hence, working with BYD (which has the full technology stack) is one of the best options for incumbents to hasten their electrification plan.
In sum, BYD is well-positioned to grow its car-related business in the future as the world continues to adopt electric cars.
Given the size of the opportunity, investors can expect competition to be intense both from traditional car manufacturers.
These will include both local and foreign players, existing electric car players like Tesla Inc (NASDAQ: TSLA), as well as newly established players like Nio.
Hence, investors should keep an eye on how BYD performs over time as the competitive pressure increases.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Lawrence Nga doesn’t own shares in any companies mentioned.
The Motley Fool Hong Kong Limited(www.fool.hk) 2020