BYD Auto do e-cigarette industry?
According to BYD Electronics, a listed subsidiary of BYD, its wholly-owned subsidiary BYD Precision Manufacturing Co. was granted a “Tobacco Monopoly Production Enterprise License (Electronic Cigarette Substitute Processing Enterprise).
Several netizens joked: “Later, open your BYD car, and smoke BYD cigarettes.”
1. "not a legitimate business" BYD
In comparison to other new energy vehicle manufacturers, BYD is the most “unprofessional.”
Looking at BYD’s development history, we can see that this company has almost always been involved in cross-border innovation.
BYD was founded in 1995 to manufacture secondary rechargeable batteries; in 2002, it entered the semiconductor industry; in 2003, it acquired Qinchuan Automobile and entered the automobile industry; and in 2019, it entered the mouthpiece and disinfectant industries……
BYD’s business has since grown to include batteries, semiconductors, electronic equipment R&D and manufacturing, automobiles, photovoltaics, and rail transportation.
BYD is also not a passing fad in the e-cigarette industry.
In fact, BYD Electronics completed the market analysis and product design of electronic cigarettes, the initial product shape, as early as 2019. BYD Co., Ltd. launched the ceramic atomization technology brand in early 2021 and is planning the technology brand logo “BEEM CORE.”
BYD Electronics introduced the original spherical granulation process into the production process of electronic atomization cores, with atomization core porosity of about 60%, which is higher than the industry’s universal standards, and cigarette oil penetration rate is higher than conventional ceramics.
According to the sky-eye search, BYD Precision Manufacturing Co. has applied for the trademark “BEEM CORE.”
BYD Electronics completed the atomized cigarette device, ceramic cores, and smoke samples by the second quarter of 2020, and with the successful development of ceramic atomization cores and smoke system, the company began to the patent layout.
Recently, BYD Electronics announced that it has completed the full range of electronic atomization products patent layout and automated production line investment, which is fully integrated with its own new materials research and development, precision molds, product design and development, intelligent manufacturing, and other comprehensive capabilities.
So, why did BYD Electronics decide to go with electronic cigarettes?
2 What is the unspoken secret of BYD?
The author believes that the main reason BYD Electronics is switching to electronic cigarettes is to reduce risk.
BYD electronics and BYD split in the early years, with the main business being OEM production of smart phones, etc.
Unfortunately, cell phones are no longer available for purchase. According to CINNO Research, China’s smartphone SoC terminal shipments in the first half of 2022 will be around 134 million units, a 16.9% decrease year on year. At the same time, global smartphone shipments continue to fall.
This is extremely unfavorable for BYD, which is primarily engaged in OEM smartphone production, and in the new energy market, despite BYD’s leading sales, it is also accompanied by spontaneous combustion accidents and the long-term worry of declining net profits.
There were numerous incidents of spontaneous combustion of BYD’s new energy vehicles in the first half of this year, which initially alarmed consumers.
On May 31, a BYD Tang owner in Shanghai posted on Weibo that the car spontaneously combusted in a static state; on June 6, a BYD Tang new energy car caught fire on the road in Guigang, Guangxi; and on June 12, a suspected BYD Song Pro DM-i caught fire in Yinxia Square, Zhuhai, Guangzhou……
Consumers are also complaining about safety hazards in BYD vehicles on third-party platforms such as Black Cat Complaints, such as power stalls and limited power on rainy days.
BYD recently filed a recall plan with the State Administration of Market Supervision and Administration, deciding to recall some Tang DM electric vehicles manufactured between April 5, 2021 and April 18, 2022, for a total of 53,928 units beginning July 29, 2022.
This is in addition to the expanded recall plan announced at the end of April this year. Two recalls of more than 60,000 units, one after another spontaneous combustion accidents, and official recall plans can only serve to erode consumer trust in BYD’s products.
Furthermore, BYD has a major hidden problem: consecutive years of declining net profit. In 2021, for example, BYD sold 730,000 units but earned only 3.045 billion yuan in profit, whereas Tesla sold 936,000 units and earned a net profit of $5.524 billion (about RMB 37.132 billion) that year.
This, as well as BYD’s electric car languishing in the low-end positioning, has a lot to do with the average price of a BYD single car being more than 100,000 yuan, BYD’s gross profit margin being lower than the industry level, and BYD’s poor profitability being a major headache.
Furthermore, in the fight against the “Wei Xiaoli,” BYD has obvious flaws. “The first half of new energy vehicles is electrification, the second half is intelligence,” Wang Chuanfu once said.
Intelligence is gradually becoming a competitive point in the automotive industry’s next era. However, in terms of intelligent cabins, autonomous driving, and other key technologies required in the intelligent car era, BYD and “Wei Xiaoli” and other new car-making forces are very far apart. And now that Apple, Google, Xiaomi, Huawei, and other Internet behemoths have joined forces to manufacture automobiles, their power should not be underestimated.
It is worth noting that, due to “lack of core less electricity,” new energy car companies experience delayed delivery, reduced delivery, and other phenomena, and BYD’s new energy road is far from easy.
There is an old adage that “before the horse moves, food and grass first,” and doing business is the same. Smartphone business setback, new energy long road, requiring BYD to urgently find a second growth curve
3. What are the future prospects for the electronic cigarette industry?
According to Euromonitor, the market size of atomized e-cigarettes in China in 2021 will be 19.637 billion yuan, an increase of 38.33% year on year, with a penetration rate of 4.17% and a per capita consumption of 1,641.29 yuan, an increase of 31.58% year on year.
According to the Blue Book of Electronic Cigarette Industry Exports 2022, the global e-cigarette market will exceed $108 billion in 2022, with the overseas e-cigarette market expected to grow at a 35% annual rate. The growth rate of China’s e-cigarette market remains high, and penetration remains low when compared to developed countries such as Europe, America, and Japan, indicating that there is still plenty of room for expansion.
The electronic cigarette industry is a lucrative one. The industry’s leading OEM fog core technology has a gross margin of 43.1% in 2021. Despite the influence of various negative factors, Fog Core Technology’s gross profit margin was 38.3% in the first quarter of 2022.
The e-cigarette industry is characterized by rapid growth and high profitability, so it’s no surprise that BYD is encouraged.
On the other hand, strict regulation of electronic cigarettes has allowed this industry to gradually move in the right direction, giving BYD the opportunity to bend the road.
Since this year, regulatory authorities have promulgated “electronic cigarette management measures” and “electronic cigarettes” national standards, prohibiting the production and sale of electronic cigarette products other than tobacco flavors, while requiring electronic cigarette production and sales enterprises to obtain relevant licenses before engaging in e-cigarette-related business; in June, the State Tobacco Administration on line electronic cigarett In a nutshell.
As a result, the “reckless” era of e-cigarettes has come to an end, non-compliant companies will be eliminated, and the era of orderly and full competition for compliant e-cigarette companies has begun.
The competition landscape for e-cigarettes has shifted since the new regulations went into effect. Previously, e-cigarettes were primarily focused on the selling point of “taste,” with claims of “smoking cessation,” “health,” “personality,” and other selling points being secondary. However, due to the ban on sweet e-cigarettes, e-cigarette companies must master the differentiation code. Popularity, price, product, and technology will all play a role in influencing consumer choice in the future.
Overall, compared to the upheaval of March and April, the e-cigarette industry is now calming down, the industry standard is becoming more standardized, and the e-cigarette industry is constantly evolving in the direction of specialization and refinement.
SiMore International (06969.HK) is currently the undisputed leader in the field of e-cigarette foundry. According to Sullivan’s report, Seymour will maintain its position as the world’s largest manufacturer of electronic atomization devices in 2021 by increasing its global market share to 22.8%, surpassing the sum of second to fifth place.
There is no doubt that more International will be BYD’s main competitor in the future.
Furthermore, A-share listed companies Jinjia, Shunhao, Jincheng, Boten, and Huabao have all received production qualification. More than 130 businesses have been licensed so far.
The institutional view is more optimistic now that BYD Electronics has completed a full range of electronic fogging products patent layout and automated production line investment construction. Guotai Junan has assigned a “buy” rating to BYD Electronics, with a target price of HK$ 24.97 per share.