In a remarkable turn of events, BYD has recently overtaken Tesla in global electric vehicle (EV) sales, establishing itself as the world's leading electric car manufacturerThis significant achievement has caught the attention of several investors, including Citibank, a leading foreign financial institution, which has raised BYD’s rating to "Buy". This modification in rating reflects a broader positive sentiment in the market toward BYD.

After surpassing Tesla, BYD is not resting on its laurels; instead, it is intensively working to capture more of the global market shareThe capital markets responded swiftly to this development, signaling the strength of BYD's business model and potential for future growth.

On March 13, Citibank released a report indicating that it would initiate a 90-day upward catalyst observation for BYD, setting a target price of 463 HKD for its stock

This represents a potential price increase of over 120% compared to the stock's closing price on that dayWith that in mind, investors are eagerly watching the developments in BYD's journey.

As of the close on March 15, BYD's stock price was recorded at 209.47 HKD per share, which suggests that it is still well below Citibank's target price, with room for substantial appreciationHistorically, BYD's stock had previously reached its highest price of 331.74 HKD per share, indicating that a journey replete with promise lies ahead.

However, BYD's aspirations extend beyond just profits from its automotive divisionAs the company seeks to bolster its profits through a well-structured manufacturing ecosystem, it is ambitiously aiming to make significant inroads into global markets.

With Citibank's recent upgrade to a "Buy" rating, BYD is indeed in the spotlight, garnering interest from multiple investors.

On March 13, Citibank announced its decision to initiate a 90-day upward catalyst observation for BYD with a target price of 463 HKD, reflecting their bullish outlook.

This upward catalyst observation typically indicates that an investment bank believes a company's stock price has the potential to rise in the near future

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This could be due to the anticipation of new product launches, positive financial reports, shifts in industry trends, or other events likely to drive stock price increases.

According to Citibank, BYD's domestic retail sales in China are expected to rebound to 280,000 units in March, while exports are projected to reach around 30,000 unitsAdding wholesale figures and moderate restocking, the total sales estimate for BYD in March is around 320,000 units, deemed quite reasonable by analysts.

Furthermore, Citibank's report highlighted projections for the first quarter of 2024, anticipating that BYD's net profit per vehicle will stabilize at around 6,000 RMB.

With the upcoming model cycle, enhanced economies of scale, revived sales momentum, and optimized product mix, BYD may see its net profit per vehicle further climb to a range between 8,000 and 9,000 RMB in the second quarter

The pace of improvement in its earnings before interest and taxes (EBIT) margin is expected to exceed the rate of recovery in gross margin.

When viewed through the lens of the industry, Citibank posits that the local beta value in the passenger car market is rebounding, largely buoyed by the rise of plug-in hybrid electric vehicles (PHEVs) and extended-range electric vehicles (EREVs). In this landscape, BYD is poised to benefit from the optimal model cycles, upgrades to its DM-i 5.0 series, and an uptick in sales of its mid-range DM-p models.

Earlier in March, Citibank had initiated a 30-day upward catalyst observation for Leap Motor, reinforcing the belief that PHEVs and EREVs will emerge as the next big trend in the market amidst a potential slowdown in passenger vehicle sales.

Notably, just recently, Morgan Stanley analyst Adam Jonas slashed Tesla's target price from $345 to $320, while maintaining an "Overweight" rating

The rationale for the downgrade prominently pointed to the intense competition and price wars within the Chinese marketFor BYD, which has solidified its position in this highly competitive arena, addressing its growth ceiling remains a prioritized objective moving forward.

By surpassing the cap, BYD seeks to break through market constraints with vigorHaving achieved sales exceeding three million units in 2023, the company continues to push its boundaries.

On January 29, BYD released its forecast for 2023, revealing that its net profits attributable to shareholders are expected to range between 29 to 31 billion RMB, reflecting a year-on-year growth of between 74.5%-86.5%. The projected net profit, after deducting non-recurring items, is set between 27.4 to 29.7 billion RMB, marking a year-on-year growth of 75.2%-89.9%. These robust earnings figures echo the successful scaling of BYD's operations.

With over three million units sold in 2023, BYD's growth trajectory remains impressive

Specifically, it recorded 3,024,417 in total sales, translating to a 61.9% increase year-on-yearPassenger vehicle sales alone accounted for 3,012,906 units with a similar growth rate.

Diving deeper into the numbers, BYD's pure electric vehicle sales reached 1,574,822 units in 2023, signifying a dramatic year-on-year increase of 72.84%. Meanwhile, PHEV sales totaled 1,438,084 units, reflecting a commendable year-on-year growth of 51.98%.

BYD's momentum is far from slowing downBetween March 4 and March 10, 2024, the brand achieved sales of nearly 49,400 vehicles, capturing a remarkable 16.3% share of the Chinese automobile market, and marking its position as the top player.

Despite the remarkable growth in recent years, the Chinese new energy vehicle (NEV) market is entering a stage of relative stability post years of explosive expansion

According to the China Association of Automobile Manufacturers, it is forecasted that NEV sales will attain around 11.5 million units in 2024, equivalent to a 20% year-on-year growth.

In light of the preceding data, the numbers for new energy vehicles in China saw a staggering 9.495 million sales in 2023, marking a year-on-year increase of 37.9%. For earlier periods, 2022's sales figures were at 6.887 million (with a growth of 93.4%), followed by 3.521 million in 2021, manifesting a growth of 160%. These figures expose a trend of gradually slowing growth for new energy vehicles as the market matures.

In this context, BYD faces challenges in securing additional market share, pushing it towards frequent price reductions as part of its strategic response.

Following the Spring Festival, BYD introduced significant price cuts on three new vehicle models

The starting price for the Qin PLUS Glory edition was set at 79,800 RMB, while the previously priced 116,800 RMB Dolphin model received a price reduction of 17,000, bringing it down to a starting price of 99,800 RMB.

Subsequently, competitors like SAIC-GM-Wuling, Changan Qiyuan, Beijing Hyundai, and Buick unveiled their own price cuts, igniting the first wave of price reductions in the EV market as the year commenced.

However, even with a production capacity that could reach upwards of 3.9 million units across its nine production bases, BYD recognizes that merely gaining market share through price cuts is insufficientThey are conscious of the need for greater volume.

With an eye on the global landscape, BYD is actively pivoting its attention to international markets.

In 2023, for the first time, the share of China's passenger car exports exceeded 15%, allowing the country to surpass Japan and emerge as the world's largest automobile exporter

This marked a significant milestone as BYD began expansive international operations.

According to the latest data released by the China Association of Automobile Manufacturers, from January to February 2024, China exported 822,000 vehicles, reflecting a year-on-year increase of 30.5%. Projections for this year suggest a notable 12% growth in exports, targeting totals around 5.5 million vehicles, thereby solidifying China’s status as the leading automobile exporter.

In 2023, BYD exported to 58 countries and regions, reporting an incredible growth rate of 334.2% with 242,765 passenger vehicles exported, although this still represents less than 10% of their total sales volume.

Specifically, BYD stands as the market leader in electric vehicle sales in Thailand, Brazil, Israel, and UzbekistanFor instance, in Thailand, BYD sales have exceeded 30,000 units, representing 40% of the Thai new energy vehicle market

Meanwhile, sales in Brazil surpassed 17,000 units, with over 15,000 units sold in Israel and 10,000 units in Uzbekistan.

Additionally, BYD's sales in Australia exceeded 12,000 units, securing second place in the Australian electric vehicle sales rankingsThe company even initiated a cashback campaign earlier this January to stimulate sales.

While BYD has made impressive strides in its export operations, its performance lags behind local competitors, including SAIC, Chery, and Great Wall, which reported export figures of 1.208 million, 937,000, and 316,000 units in 2023, respectively.

This indicates that BYD still has untapped export potential, yet overcoming significant shipping costs remains a major hurdle to accelerate its international expansion.

To tackle this logistical challenge and minimize the costs associated with international shipping, BYD has embarked on a strategy to build eight roll-on/roll-off car carriers

On January 10, 2024, the first vessel, "EXPLORER NO.1," was delivered at Yantai Port in Shandong Province, signifying a new chapter in BYD's shipping capabilities.

On January 15, this carrier set sail from Shenzhen with 5,449 new energy vehicles destined for EuropeNotably, the remaining seven carriers are anticipated to be operational within the next two years, collectively providing an export transport capacity of over 300,000 vehicles per year.

In addition, BYD is in the process of expanding its overseas manufacturing footprint with new factories planned in Uzbekistan, Thailand, and Brazil set to commence operations in 2024, along with ongoing construction in Hungary.

For BYD, overcoming the challenges of international expansion and further penetrating the global new energy vehicle market has become an essential strategic focus moving forward.