---
endpoint: analytics
pattern: Autos
status: done
latency_ms: 246441
conversation_id: fd84ba60-07fc-432f-a35d-a0ae3171ac16
citations: 2
created: 2026-05-31 20:08:28Z
---

# What is BYD’s core business franchise and the key components of its operating model?

# BYD (1211 HK / 002594 CH) — Core Business Franchise and Operating Model

BYD is a Shenzhen-headquartered industrial conglomerate whose franchise sits at the intersection of new-energy vehicles (NEVs), traction-grade batteries, power electronics/semis, and consumer-electronics (handset) components. The auto business is now overwhelmingly dominant, but the legacy battery and electronics platforms remain integral to the operating model because they supply the auto business and amortise R&D / process capability across multiple end markets.

---

## 1. Group Structure & Reporting Segments

Per BYD's own filings, the principal activities of the Group are "**research, development, manufacture and sale of rechargeable batteries and photovoltaic business, automobiles and related products, handset components and other electronic products, rail transit equipment**" [15]. Externally, BYD reports revenue in two product categories:

| Reporting segment | FY2023 share of revenue | FY2022 share of revenue |
|---|---:|---:|
| Automobiles and related products, and other products | **80.27%** | 76.57% |
| Mobile handset components, assembly service and other products (BYDE) | **19.68%** | 23.30% |
| PRC (incl. HK/Macau/Taiwan) | 73.40% | 78.43% |
| Overseas | **26.60%** | 21.57% |

Source: BYD 2023 Annual Results [14].

The 2023 mix illustrates the franchise's centre of gravity: NEV-led autos now generate ~80% of group revenue, growing 42% YoY and lifting group gross margin from ~17.0% (2022) to ~20.2% (2023) [14]. Overseas revenue share has risen ~5pp YoY, foreshadowing the export-led leg of the model described below.

### 1.1 Sub-business map (legal / operating entities)

The auto franchise is built on top of a stack of fully- or majority-owned subsidiaries:
- **BYD Auto Co., Ltd.** — autos design/manufacture (99% owned)
- **BYD Auto Industry Co., Ltd.** — auto + light-rail equipment R&D and manufacturing
- **BYD Lithium Batteries (BYD Li-ion) / Shanghai BYD** — Li-ion (incl. LFP "Blade") and solar batteries
- **BYD Microelectronics** — IC design, production, sale (IGBT / power semis)
- **BYD Precision Manufacture / BYD (Huizhou) / BYD Electronic (International)** — mobile-handset components and assembly, EMS
- **Huizhou BYD Battery** — consumer Li-ion and accessories [15]

This is the structural basis for what CLSA calls BYD's "vertical integration" — the same group makes the cells, packs, motors, power electronics, controllers, and increasingly the smart-driving hardware that go into its cars, and runs an internal EMS arm (BYDE) that doubles as a captive supplier (e.g. domain controllers).

---

## 2. The Auto Franchise — Brand Portfolio

The auto business is run as a multi-brand house, deliberately segmented by price band so that vertical integration cost advantage compounds across the curve:

| Brand tier | Brand(s) | Indicative price band | Role in the franchise |
|---|---|---|---|
| Mass market | **BYD brand** — Dynasty (Han, Tang, Qin, Song) and Ocean families | ~Rmb80–250k | Volume engine, contribution to scale economies |
| Premium MPV / SUV | **Denza** (D9 MPV, Z9, N9) | Rmb300k+ | Key profit driver of premium mix |
| Off-road / lifestyle | **Fang Cheng Bao (FCB)** — Bao 3, Bao 8 | ~Rmb250–400k | New product cycle; not yet profitable at current run-rate (off-road non-load-bearing structure dilutes scale) |
| Ultra-luxury | **Yangwang** — U7 (sedan), U8 / U9 | Rmb1m+ | Tech showcase, brand halo |

CLSA's domestic volume framework for 2024 had BYD brand at ~3.56m units, Denza ~154k (D9 ~125k), FCB ~71k, Yangwang ~11k, and exports c.500k — total ~3.8m [5]. By 2025, the bull case migrates to 5.1m total units with c.4.2m domestic BYD, Denza ~200k (Z9/N9 driving the uplift), and exports of 400–600k depending on overseas factory ramp pace [11]. Management's longer-term target is 10m units, with **roughly half outside China** [8].

### 2.1 Powertrain & platform layer

The auto-side moat sits on three platforms:
- **DM5.0 PHEV platform** — fuel efficiency to 2.9L/100km, anchoring BYD's dominance in lower-priced PHEVs where its market share **exceeds 70%** [10]. PHEV mix is also the wedge into geographies where BEV charging infrastructure is still thin (Europe, Brazil, ASEAN).
- **e-platform BEV architecture** — Dynasty/Ocean BEVs and Denza premium BEVs.
- **Blade Battery (LFP)** — captive cell supply; underwrites cost and safety positioning and is increasingly sold to third-party OEMs.

CLSA's view of BYD's domestic positioning: the mass-segment advantage has widened to roughly **36% share in sedans and 27% in SUVs**, with Denza driving premiumisation via the D9 (best-selling MPV in 8M24) and the Z9/N9 launch wave [11].

---

## 3. The Operating Model — Five Key Components

### 3.1 Vertical integration as the core thesis

The single most-cited element of BYD's operating model in internal research is vertical integration. CLSA's standing investment thesis across every BYD note in 2024–2025 reads: "*We expect BYD's vertical integration model to offer greater leeway in an intensifying price war environment. We like its visible overseas and high-end growth stories.*" [1]

In practical terms, vertical integration means BYD internally produces:
- Battery cells and packs (LFP Blade)
- Power electronics (IGBT, SiC via BYD Microelectronics)
- Motors, e-axles, thermal management
- Body-in-white and key stampings
- Smart-driving domain controllers (via BYDE)

The result is that cost reductions in lithium/cathode, in IGBT yield, or in BYDE process improvement flow directly through to BYD Auto's unit economics — rather than being captured by external suppliers.

### 3.2 Hybrid (not pure) supply chain for intelligent driving

For ADAS / autonomous driving, BYD has deliberately departed from pure vertical integration and runs a hybrid model: "**Unlike traditional vertical supply chain integration, BYD utilises both internal R&D and external partners. Specifically, its chip suppliers are NVidia for high-end solutions and Horizon Robotics for economy packages; the JV with Momenta provides algorithm support; Huawei supplies all-in products for the FCB 8, and BYDE will be the main contractor for domain controllers and other hardware**" [3]. Per-car ADAS hardware cost is estimated at Rmb1–5k for mass-market and Rmb5–10k for high-end [3][4].

Management's stated objective is to **drive intelligent-driving hardware cost to below c.4% of total BOM through deeper supply-chain integration**, with the option of putting LiDAR and the "God's Eye B" system into sub-Rmb150k cars [9].

### 3.3 Three-tier "God's Eye" / DiPilot strategy

CLSA characterises BYD's intelligent-driving go-to-market as three tiers, segmented by brand and price band: "*1) high-end city navigation on autopilot (NOA) which will be equipped in Yangwang, Denza and FCB cars targeting premium competitors, 2) mid-level option packages for flagship cars such as the Han and Tang, aimed at taking market share from the top JV ICE cars at the Rmb150–250k level, and 3) mass market packages, which BYD mostly uses as a defence against domestic peers.*" [2]

The tiered roll-out is the principal mechanism by which BYD intends to defend mass-segment share while pulling demand up the price curve in the Rmb150–250k band currently held by JV ICE brands.

### 3.4 Multi-country manufacturing footprint (the export leg)

The export franchise sits on a small but expanding overseas manufacturing footprint: "*The construction of Hungary factory is accelerating and is targeting 2H25 for production, a relief from looming tariff pressures. Combined with Thailand, Brazil and Uzbekistan factories, we expect BYD to have half million units of overseas capacities by 2025. Additionally, BYD has introduced its PHEV models in global markets, which we believe fits well into the current BEV infrastructure bottlenecks.*" [7]

Strategic logic:
- **Hungary** — neutralises EU CBAM/tariff risk and provides European-built capacity.
- **Thailand / Brazil / Uzbekistan** — local content for ASEAN, LATAM, and CIS markets where PHEVs fit infrastructure realities better than BEVs.

By May 2025, management was guiding to **800k+ overseas units in 2025**, with strength in Europe and Brazil and PHEV (introduced in Europe Nov 2024) becoming a full-year contributor [12][8].

### 3.5 Mix-led unit economics

Because BYD's brand portfolio spans Rmb80k mass-market cars to Rmb1m+ Yangwang flagships, the franchise is driven by **mix uplift, not just volume**. CLSA's unit-economics framework:
- Overall profitability for **exports and high-end models is 2–5x higher than mainstream BYD-brand cars**, and high-margin sales accounted for over two-thirds of total profits in 2024 [13].
- Estimated **net profit per car** by brand (2023–2024 data): Denza > Rmb40k; Yangwang ASP ~Rmb1m with very high contribution; FCB roughly in line with mainstream BYD/Ocean; and exports ~**Rmb20k profit/car** (higher ASP and dealer incentives, net of ~Rmb10k shipping and 10–15% tariff) [13].
- New-model pipeline (Xia MPV, Seal 06 GT, Song L EV 2025, Tang L, Han L, Denza N9, Bao 8, Yangwang U7) is designed to keep the premium and export mix expanding [6].
- By mid-2025, CLSA was modelling **Denza ~190k units at Rmb30k profit/car**, FCB ~100k at Rmb3k profit/car, and **export profit/car normalising to Rmb24–26k from ~Rmb30k** as overseas volume scales [6].

---

## 4. Summary — Why the Franchise is Differentiated

Three properties define BYD's franchise relative to peers:

1. **Captive cost stack.** It is the only large-scale auto OEM that owns its battery, power electronics, semis (IGBT), and EMS arms (BYDE) and runs them at vehicle-OEM scale. This is the source of pricing leeway in repeated domestic price wars [1].
2. **Full-price-band coverage.** From Qin/Dolphin at Rmb80k to Yangwang U8/U9 at Rmb1m, BYD's brands are deliberately layered to convert one cost base into multiple price-band P&Ls — with 2–5x profit per car at the top of the brand stack [13].
3. **Two-axis growth.** Both axes — premium (Denza, FCB, Yangwang) and export (Hungary/Thailand/Brazil/Uzbekistan; 800k+ overseas units in 2025; longer-term 5m out of 10m abroad) — are higher-margin than mainstream domestic BYD [6][7][8].

The strategic risk to the model — and the one CLSA flags repeatedly — is the structural intensification of domestic price competition layered on top of intelligent-driving capex; the vertical-integration thesis is, in effect, the buffer that allows BYD to absorb that price war while continuing to fund the premium and overseas legs of the franchise.

---

**Sources**
[1] BYD (From volume to value) — CLSA (9 Apr 2024) — investment thesis on vertical integration (607926293LinqAlpha.PDF)
[2] BYD — HC O-PF (A new battlefield) — CLSA (6 Feb 2025) — three-tier intelligent-driving strategy across Yangwang/Denza/FCB, Han/Tang, mass-market (607949913LinqAlpha.PDF)
[3] BYD — HC O-PF (A new battlefield) — CLSA (6 Feb 2025) — hybrid supply chain with Nvidia, Horizon, Momenta, Huawei, BYDE (607949913LinqAlpha.PDF)
[4] BYD — HC O-PF (A new battlefield) — CLSA (6 Feb 2025) — per-car ADAS cost Rmb1–5k mass / Rmb5–10k high-end (607949913LinqAlpha.PDF)
[5] BYD (From volume to value) — CLSA (9 Apr 2024) — Denza/FCB/Yangwang/BYD brand and export volume forecasts (607926293LinqAlpha.PDF)
[6] BYD — O-PF (Double turbo) — CLSA (7 Oct 2024) — model pipeline, brand-level profit per car, export profit normalisation (607940718LinqAlpha.PDF)
[7] BYD (From volume to value) — CLSA (9 Apr 2024) — Hungary / Thailand / Brazil / Uzbekistan factories; 0.5m overseas capacity by 2025 (607926293LinqAlpha.PDF)
[8] BYD (More contributions from overseas) — CLSA (12 May 2025) — 10m long-term target, half outside China; 60% of May orders with intelligent driving (607959021LinqAlpha.PDF)
[9] BYD (More contributions from overseas) — CLSA (12 May 2025) — intelligent-driving cost target <4% of BOM; LiDAR/God's Eye B in sub-Rmb150k cars (607959021LinqAlpha.PDF)
[10] BYD — O-PF (Double turbo) — CLSA (7 Oct 2024) — >70% share in lower-priced PHEV; DM5.0 platform leadership (607940718LinqAlpha.PDF)
[11] BYD — O-PF (Double turbo) — CLSA (7 Oct 2024) — 36% sedan / 27% SUV mass-segment share; 5.1m 2025 framework (607940718LinqAlpha.PDF)
[12] BYD (More contributions from overseas) — CLSA (12 May 2025) — Europe/Brazil strength; 800k+ export target for 2025; PHEV full-year in Europe (607959021LinqAlpha.PDF)
[13] BYD (From volume to value) — CLSA (9 Apr 2024) — unit-economics: exports/high-end 2–5x BYD-brand profit; Denza > Rmb40k/car; export ~Rmb20k/car (607926293LinqAlpha.PDF)
[14] BYD Company Limited — 2023 Annual Results Announcement — segment revenue split: Autos 80.27% / Handset 19.68%; PRC 73.40% / Overseas 26.60%
[15] BYD Company Limited — 2017 Annual Report — principal activities: rechargeable batteries & photovoltaic, automobiles & related products, handset components & other electronics, rail transit equipment; group subsidiary structure

## Citations

- [14] **BYD Company Limited Class H: 2023 ANNUAL RESULTS ANNOUNCEMENT** · external
- [15] **BYD Company Limited, Q4 2017 Report** · external

