On August 28th, BYD Company Limited (002594.SZ), commonly referred to as BYD, released its interim report for the year 2024. The report revealed some intriguing financial metrics highlighting the electric vehicle giant's performance in the first half of the year. Notably, BYD reported a revenue of 301.1 billion Yuan (approximately $43 billion) for the first six months, marking a 15.76% increase year-over-year. Alongside this growth in revenue, the company also posted a net profit of 13.63 billion Yuan (about $2 billion), reflecting an impressive 24% increase from the previous year. However, despite these positive figures, there was a significant reduction in cash and cash equivalents, which decreased by 54.285 billion Yuan (around $7.9 billion), representing a staggering 293.56% decline from the previous year.

When dissecting the business segments, it's clear that BYD's automotive, related products, and other income streams generated 228.3 billion Yuan, showing a modest year-on-year growth of 9.33%. In contrast, the revenue from mobile phone components, assembly, and other products soared by 42.45% to 72.78 billion Yuan, indicating a strategic diversification in their business model. This division now accounts for 75.82% of overall revenue from automotive segments and 24.17% from mobile components, highlighting BYD’s broader market engagement. The gross profit margins reflect a mixed bag of results: automotive and related segments yielded a margin of 23.94%, up by 3.27 percentage points, while the mobile segment's gross profit margin fell by 1.06 percentage points to 7.71%.

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In the automotive sector, insights from the China Association of Automobile Manufacturers painted a positive picture for the nation's vehicle production and sales. In the first half of 2024, both production and sales saw increases of 4.9% and 6.1%, reaching 13.891 million and 14.047 million units respectively. Among these, the new energy vehicle (NEV) sector stood out, with production and sales figures of 4.929 million and 4.944 million units, culminating in remarkable year-on-year growth of 30.1% and 32.0%. In this competitive landscape, BYD's NEV sales reached approximately 1.613 million units, gaining traction with a 28.46% increase compared to the previous year. Additionally, overseas sales surged by a staggering 173.8% to exceed 203,000 units, further solidifying BYD's position as the leading player in the electric vehicle market, both nationally and globally.

The first half of 2024 also witnessed BYD kickstarting a 'price war' in the domestic auto market, particularly with the introduction of its Honor Edition vehicle line. This move significantly boosted monthly sales back to the 300,000 range. Coupled with this initiative was BYD's intense focus on advancing technology and product development—spending an impressive 20.177 billion Yuan (approximately $2.93 billion) on research and development, marking an increase of 41.64% from the previous period. In the realm of electrification, BYD unveiled the 'e-platform 3.0 Evo' along with the fifth-generation DM technology, achieving an incredible low fuel consumption rate of just 2.9 liters per 100 kilometers and enabling a comprehensive range surpassing 2000 kilometers. Such advancements have been pivotal in maintaining their high sales figures, particularly following the launch of models with the fifth-generation DM technology in their Dynasty and Ocean Series.

The company's commitment to automating and enhancing smart solutions has also been emphasized through its 'whole vehicle intelligence' strategy announced earlier in the year. By showcasing developments in autonomous driving, intelligent parking, and smart cockpit technologies, BYD has positioned itself as a key innovator in this field. In July, the company was recognized as part of the first batch of intelligent connected automotive pilot programs (Level 3) for road access, marking a significant achievement in its smart technology journey. Furthermore, BYD is pursuing collaborations with tech giants like Nvidia, Horizon Robotics, and Huawei, underlining its dual approach of independent research and external partnerships.

Additional news from BYD includes updates on its various sub-brands. The Equation Leopard brand launched its '2+X' product system, while the Tengshi brand introduced the 2024 models for the D9 and N7. Moreover, the Yangwang brand successfully launched its U9 and U8 adventure versions earlier this year. Importantly, BYD is also engaging the market more aggressively through a dealer partner model particularly for its Tengshi and Equation Leopard brands, effectively reaching deeper into second and third-tier cities within China.

The company's international expansion has seen significant strides, with a rapid push towards localizing production capabilities. Factories in Uzbekistan and Thailand have commenced operations, while BYD is preparing for site selection of new factories in Mexico, Turkey, and Cambodia. As of June 2024, BYD's new energy passenger vehicles have penetrated 77 countries and regions, including Brazil, Germany, Japan, and Thailand, reflecting a robust global footprint.

Turning to the mobile component segment, a market study by IDC reported a 7.1% increase in global smartphone shipments, reaching 575 million units during the first half of the year. The China Academy of Information and Communications Technology noted a 13.2% annual increase in domestic smartphone shipments to 147 million units, with 5G smartphones accounting for 84.4% of this figure. The personal computer market also saw a slight growth of 2.2%, with 125 million units shipped globally. While BYD's revenue from mobile components grew significantly compared to the automotive sector, the gross profit margin faced a decline, suggesting potential challenges ahead for long-term profitability in this segment.

Notably, BYD's cash flow experienced a considerable downturn in the first half, particularly reflecting in the net cash flow from operating activities, which stood at approximately 14.178 billion Yuan, down 82.7% from the previous year. This backdrop includes rising expenses in sales and marketing, administrative and office overheads, and research and development costs—each escalating by 81.94%, 15.26%, and 21.07% respectively. Furthermore, the net cash flow used in investing activities was an alarming -55.874 billion Yuan, accompanied by a net financing cash flow of -12.358 billion Yuan. The company attributes the sharp drop in cash inflows primarily to increased cash payments for goods and services. Despite such financial challenges, BYD employed around 750,000 staff in the first half of the year, with total employee-related costs contributing approximately 17.54% to its revenues.