Date: 26 September 2024
Broker Name: UOB Kay Hian

Full Ownership of Denza

Recently, BYD acquired Mercedes-Benz’s entire 10% stake in Denza. As a result, BYD’s stake in Denza increased from 90% to 100%, transforming Denza from a joint venture (JV) into a fully-owned proprietary brand. This acquisition follows a long-standing relationship between BYD and Mercedes-Benz, which began in 2010 when they established the Shenzhen BYD Daimler JV, holding equal shares. In 2021, BYD expanded its stake in Denza from 50% to 90%, allowing it to reform Denza’s technology, products, and target markets, positioning itself in the luxury segment.

Sales Performance and Challenges

While BYD’s acquisition marks a strategic move, Denza faces challenges in gaining traction in the high-end market. Denza’s weekly sales remained steady at around 2,000 units year-to-date (YTD). However, it dropped out of the top 10 pure electric vehicle (EV) sales rankings during the 38th week of 2024 (16-22 September 2024), with its sales falling below 1,700 units. This underlines BYD’s difficulties in penetrating the premium EV segment and moving up the price curve.

BYD’s Insurance Registrations

In the 38th week of 2024, BYD’s insurance registrations totaled 80,600 units, marking a 30.6% year-on-year (yoy) increase, but an 8.2% month-on-month (mom) and 6.3% week-on-week (wow) decline. Cumulatively, BYD has achieved 2.20 million insurance registrations in the first 38 weeks of 2024, reflecting a 28.5% yoy growth. These numbers are in line with the broker’s full-year forecast of 3.6 million domestic sales for BYD.

New Model Launches

On 23 September 2024, BYD launched two new compact hybrid SUVs: the Sealion 05 DM-i and the second-generation Song Pro DM-i. Both models are equipped with BYD’s new DM-i 5.0 technology, which offers better fuel efficiency. The starting price for the Song Pro DM-i was set at RMB112,800, an increase of RMB3,000 or 2.7% from the previous model. These new models are expected to bolster BYD’s sales in the domestic market.

Financial Performance and Forecasts

The broker maintains its net profit forecasts for BYD for 2024-2026 at RMB37.07 billion, RMB37.54 billion, and RMB38.87 billion, respectively. These projections are based on sales volumes of 4.0 million, 4.5 million, and 5.0 million units for the respective years, with a net profit per vehicle estimated at RMB8,060 in 2024, RMB7,060 in 2025, and RMB6,400 in 2026.

Market Outlook

BYD remains a key player in China’s passenger electric vehicle (PEV) market, with insurance registrations growing significantly. However, the company faces pressure in the premium segment, with the Denza brand struggling to secure a foothold in the luxury EV market. Despite these challenges, BYD’s continued expansion in the mid-range and lower segments, along with new model launches, keeps it on track to meet its full-year sales targets.