BYD is moving in the right direction

BYD company is at the cusp of the storm. Sales volume decreased for 11 consecutive months. In the first half of 2011, profits dropped by more than 85%. Sales of BYD in the second half of the year are likely to continue to decline, but it does not mean that the company's prospects are generally gloomy.

First of all, BYD abandoned high expectations for electric vehicles and instead focused on investing in gasoline vehicles and trying to upgrade the product. Although it was a bit late, the company finally made the right choice.

Two models with slightly more expensive prices have been on the market. In October last year, BYD introduced the G3 sedan. The starting price is 63,000 yuan (US$9,800). In May of this year, the company launched the S6 SUV with an initial price of 90,000 yuan. yuan.

Last month, BYD sold 4920 G3s and 3204 S6s. In other words, consumers began to accept BYD's more upscale models.

BYD hopes that these models will help the company reduce its dependence on entry-level models, because the F3 compact sedan with a price of 53,000 yuan and the F0 mini-vehicle with a price of 37,000 yuan have experienced a sharp drop in sales.

While adjusting BYD's product line, BYD seems to be rethinking its investment in electric vehicles.

The company has invested hundreds of millions of dollars in the development of plug-in hybrids and electric vehicles, but the sales volume is very poor, partly because Chinese cities lack charging stations. In addition, despite large subsidies, electric vehicles are still relatively expensive.

Then should BYD continue to invest heavily in the production of more and better electric vehicles? Or should we put more resources into gasoline vehicles?

According to BYD's June listing report, the company has returned to the petrol vehicle.

The listing announcement stated that BYD will use the approximately RMB 2.2 billion raised by the IPO to expand the production and upgrade of gasoline models.

Only a small part will be used to produce batteries for power tools, not to plug-in hybrids or electric vehicles.

This is a wise decision. In order to boost sales and profits, BYD must upgrade its product range. As a public company, it cannot use the money of investors to bet on electric vehicles.

BYD is a young company with limited experience. It was not surprising that it started making cars in 2003.

In order to pursue its ambitious sales targets, the company expanded its distribution network too quickly. Due to poor business, 20% of the dealerships were closed.

BYD naively believes that the electric vehicle market is about to start, and the huge investment that it is currently investing in may be difficult to recover. However, BYD learns quickly and has just become the largest independent brand car manufacturer in China since it started to produce cars for four years.

If BYD can come out of operational difficulties in the near future, I wouldn't be surprised.