How impressive is the performance of the first quarter report of "Diwang"?

After Tesla released lower-than-expected first-quarter results, the performance of another major player, BYD Company Limited, undoubtedly attracted attention. According to the first quarter report disclosed by BYD Company Limited, it achieved revenue of 124.944 billion yuan, a year-on-year increase of 3.97%; it achieved a net profit of 4.569 billion yuan, a year-on-year increase of 10.62%. In my opinion, there are two most surprising aspects of this financial report. One is that research and development (R&D) investment continues to maintain high-speed growth, with annual R&D investment expected to reach the 60 billion level; the other is that in the face of intense price wars, the gross profit margin has "increased instead of decreased", demonstrating exceptional cost control capability in the industry. R&D investment exceeds 10 billion in a single quarter For technology companies, R&D investment is a key factor in ensuring technological leadership within the company. In this aspect, BYD Company Limited significantly outperforms. In the first quarter, BYD Company Limited invested approximately 10.6 billion yuan in research, a 70% year-on-year increase, setting a new record high not only in history but also higher than Tesla's 11.5 billion US dollars (equivalent to 82 billion yuan) in R&D expenses during the same period. When comparing R&D investment with net profit, BYD Company Limited's R&D investment is 132% higher than its net profit during the same period, which is essentially similar to Tesla. The strength of BYD Company Limited's R&D is clearly higher than Tesla's. It was observed that since 2021, BYD Company Limited's R&D intensity has continuously increased. The R&D investment was 10.6 billion yuan in 2021, a growth of 28%; in 2022, it was 20.2 billion, a growth of 91%; in 2023, it was 39.9 billion, an increase of 98%, surpassing Tesla (28.4 billion yuan) for the first time in history, with a nearly 300% growth in R&D investment in just three years. Moreover, BYD Company Limited has over 102,800 R&D personnel, making it the enterprise with the most R&D personnel in the world. It has accumulated over 48,000 patent applications globally, with over 30,000 patents granted. With this momentum, BYD Company Limited's annual R&D investment is expected to reach the 50-60 billion level, approaching Toyota's annual R&D investment amount for 2023. Why has the gross profit margin risen against the trend? Since the beginning of this year, as the price war in the automotive industry intensifies, major car companies are under immense profit pressure, especially regarding the gross profit margin indicator. Taking Tesla as an example, its gross margin was 17.4% in the first quarter, a decrease of 1.9 percentage points from the same period last year. Surprisingly, the gross profit margin indicator of BYD Company Limited has continued to rise, reaching 21.88%, a year-on-year increase of 4.02 percentage points. Excluding data from BYD ELECTRONIC, the automotive business gross margin of BYD Company Limited reached 28%, which is 10.6 percentage points higher than Tesla's gross margin during the same period. How did BYD Company Limited manage to increase its gross profit margin against the trend? In my opinion, it is mainly due to two major secrets within BYD Company Limited: One is a common practice in the entire automotive industry - economies of scale, by rapidly expanding its scale, achieving marginal cost reductions. The second is BYD Company Limited's unique technique - vertical integration. Previously, after dismantling BYD Company Limited's BaaS model, the research department of UBS Securities pointed out that 75% of its components come from internal suppliers, 17% from suppliers in China, and only 8% from global suppliers. The efficiency advantage brought by the vertical integration supply chain will be further highlighted. In the first four months of this year, BYD Company Limited's cumulative sales volume reached 936,000 vehicles, a year-on-year increase of 23.6%. Especially after launching the Honor version at the end of February, the monthly average sales volume of BYD Company Limited in March and April exceeded 300,000 vehicles, with sales growth continuously increasing. With the further enhancement of the two major advantages of "scale" and "vertical integration", BYD Company Limited will be even more adept in this industry reshuffle.