Introduction: In the coming years, we will see if BYD can continue to expand its dominance in the market below 200,000 RMB and successfully counterattack in the market above 200,000 RMB.

Lishi | Author Lishi Business Review | Production

1

Although BYD has become a leader in the new energy vehicle industry in China and even globally, it still faces some doubts. One of the most important doubts is that BYD's current sales mainly focus on models priced below 200,000 RMB, with a less prominent share in the market above 200,000 RMB.

Currently, BYD has four brands: BYD, Denza, Horizon, and Equation Leopard. The BYD brand mainly targets the market below 200,000 RMB, with only a few high-end versions of models like Han, Tang, Song L, and Sea Lion 07 priced above 200,000 RMB, accounting for a relatively low sales proportion. The Horizon brand targets the ultra-high-end market, with several products priced above 1 million RMB currently available or upcoming, but with limited sales volume. The Denza and Equation Leopard brands are BYD's two main sales forces in the market above 200,000 RMB, with starting prices for their models above 200,000 RMB.

Currently, the Denza brand has gained a dominant position in the mid-to-high-end MPV market above 300,000 RMB with its star model D9, but its two SUV products, N7 and N8, have not been successful. The Equation Leopard brand has only launched one mid-sized hardcore off-road SUV, Leopard 5, which received enthusiastic responses initially but suffered from low subsequent sales due to its high starting price of 285,800 RMB.

While BYD struggles to break through in the market above 200,000 RMB, two new forces in the Chinese automotive industry, Li Auto and AITO (strongly supported by Huawei), have excelled in this market with starting prices for their models above 200,000 RMB. According to the latest sales figures for July, Li Auto and AITO performed exceptionally well, with monthly sales of 51,000 and 41,535 units, respectively, while Denza and Equation Leopard sold only 10,340 and 1,842 units, respectively.

The success of Li Auto and AITO in the market above 200,000 RMB underscores the enormous potential of this market, and BYD is naturally not satisfied with the current monthly sales of only 12,181 units combined for Denza and Equation Leopard. Recently, BYD dropped a bombshell by surprising the market with a 50,000 RMB price cut across the Leopard 5 lineup, lowering its starting price from 285,800 RMB to just 235,800 RMB.

Positioned as a professional mid-sized hardcore off-road SUV, Leopard 5 excels in various parameters. However, its initial starting price of 285,800 RMB, close to that of Li Auto's L7 (309,800 RMB) and exceeding that of AITO's M7 (249,800 RMB), hindered its sales breakthrough. After the price cut, Leopard 5's new starting price of 235,800 RMB is not only lower than those of Li Auto's L7 and AITO's M7 but also those of Li Auto's L6 and M5. Notably, L6, a new and highly successful model launched this year by Li Auto with a starting price of 249,800 RMB, has sold over 20,000 units per month for two consecutive months. With its superior product features post-price cut, Leopard 5 is poised to capture a significant share of Li Auto's market.

Apart from directly competing with Li Auto and AITO, Leopard 5 will also significantly impact sales of the professional hardcore off-road SUV brand Tank. Currently, Leopard 5 is in high demand at 4S stores, and monthly sales are expected to exceed 10,000 units.

2

BYD shares many similarities with Huawei in its corporate style. When targeting a specific market, it does not rely on scattered product launches but prefers to launch sustained and intensive attacks.

The significant price cut for Leopard 5 is just BYD's first salvo in its assault on the market above 200,000 RMB dominated by Li Auto and AITO. More intense attacks are to follow, including the upcoming Leopard 8 and Denza Z9 GT.

Leopard 8, positioned as a mid-to-large-sized hardcore off-road SUV, outperforms Li Auto's and AITO's similar models (L7, L8, and M7) and will soon be available for sale. The price cut for Leopard 5 provides ample room for pricing Leopard 8, which is poised to reshape the competitive landscape in China's mid-to-large SUV market.

Denza Z9 GT is a nearly 5.2-meter-long large shooting brake sedan featuring the innovative proprietary technology "Yi Sanfang." With its stunning appearance and groundbreaking intelligent vehicle dynamics, it has no direct competition in the SUV segment. It is expected to replicate the success of Denza D9. Currently, Denza Z9 GT display cars have been shipped to Denza dealerships and will soon be available for sale.

While Leopard 8 and Denza Z9 GT's formidable product capabilities could propel BYD into the first tier of the market above 200,000 RMB, two upcoming core product lines will be crucial in solidifying BYD's lead in this market.

These include three DMi products (N9, N8 Max, and N7) targeting the large, mid-to-large, and mid-sized SUV segments, respectively, which will directly compete with Li Auto and AITO's current flagship models. Additionally, BYD's flagship brand will introduce its first mid-to-large-sized products in sedans, SUVs, and MPVs (Tang L, Han L, and Tang MAX), leveraging its cost-effectiveness advantage. As BYD's premium offerings priced above 200,000 RMB, these products will offer significant value compared to competitors and drive BYD's sales in this market.

Based on this product layout, we can estimate potential sales. Assuming average monthly sales of 10,000 units each for Denza D9, Z9, N9, N8, and N7, they could collectively sell 50,000 units per month. Leopard 5, Leopard 8, and Leopard 3 could sell 6,000-8,000 units on average, contributing 20,000 units per month. Including sports cars, coupes, and urban SUVs, this could reach 40,000 units. BYD's flagship Tang L, Han L, and Tang MAX, each with projected monthly sales of 20,000 units, could sell 60,000 units collectively. In total, BYD could potentially sell around 150,000 units per month in the market above 200,000 RMB, positioning it as a leader in this segment.

3

The business world is characterized by dynamic competition. Besides considering the consequences of one's actions, it's essential to anticipate countermeasures from competitors. The above analysis assumes an ideal scenario for BYD, and whether it can achieve this outcome depends on how effectively competitors like Li Auto and AITO respond.

Currently, BYD enjoys a formidable moat in the market below 200,000 RMB, challenging for rivals to breach. Conversely, Li Auto lacks a clear moat in the market above 200,000 RMB, explaining its vulnerability to competition from AITO in the mid-to-large SUV segments. Consequently, nearly half of Li Auto's sales rely on the L6 model.

As BYD introduces a series of new products in the market above 200,000 RMB, Li Auto's sales will face increasing pressure. Its L7, L8, and L9 sales may further decline, and L6 risks repeating the fate of its predecessors. In the lower-end market beneath L6, Li Auto enters BYD's, Geely's, and Chery's cost-effective territories, where competition will be more passive.

In the coming years, we eagerly anticipate whether BYD can continue to expand its dominance in the market below 200,000 RMB and successfully counterattack Li Auto and AITO in the market above 200,000 RMB.