From closed to open, BYD plummeted 173% and transformed itself in the crisis

BYD has been having a hard time recently.

BYD's net profit in 2017 was 4.066 billion yuan, down 19.51% year-on-year. This is the first time that BYD's net profit has declined year-on-year since 2013.

In the first quarter of 2018, BYD still had weak growth, with a net profit of 102 million yuan, a year-on-year decrease of 83.09%. After deducting non-recurring gains and losses, BYD's net profit loss was 329 million yuan, a year-on-year drop of more than 173%.

The decline in the financial report was directly reflected in the stock market. BYD's stock price has dropped from more than 60 yuan before the New Year to more than 40 yuan, and its market value has shrunk by nearly one-third.

In 2017, BYD lost its position as the number one in installed capacity in the domestic power battery industry and was overtaken by CATL.

The recent withdrawal of subsidies for new energy vehicles has also put BYD under great pressure.

Competition in the new energy vehicle market is gradually intensifying, with not only new car manufacturers but also traditional car manufacturers at home and abroad entering the market.

BYD seems a bit lonely in the field of intelligent driving. As early as 2013, there were reports that BYD was planning to develop autonomous driving. But now when it comes to intelligent driving cars, the first brands that come to mind are Tesla, SAIC Roewe and other brands.

Electrification is the first half of the transformation of the automotive industry. In the second half, intelligence and networking will be the protagonists. BYD cannot miss the opportunity of smart cars.

Faced with numerous challenges, BYD is actively transforming and seeking self-help.

BYD's Openness

Previously, BYD has been pursuing a vertical integration strategy with a relatively closed production system. BYD tried to take on as many businesses as possible in the automotive industry chain: self-developed and produced parts, self-assembled vehicles, and even self-developed automotive software systems.

BYD previously adhered to the strategy of vertical integration, not only for the purpose of reducing costs and improving efficiency, but also for the purpose of integration and innovation.

BYD believes that the more the industry is in a period of transformation, the more it needs to vertically integrate the industry. Only by mastering more technologies and production links can it quickly enter new manufacturing fields during the transformation period, rather than wasting time on negotiating cooperation.

Even so, BYD still paid a price for its vertical integration strategy, the biggest loss of which was undoubtedly the failure of its power battery business.

The self-production, self-sales and self-use model has saved BYD a lot of costs in battery procurement, making its own cars more price competitive. However, the side effect is that the closed production system has made BYD no longer sensitive to market changes, and it has fallen behind in the layout of lithium batteries and has been overtaken by CATL.

Currently, BYD's batteries have begun to be sold to the outside world and have received a number of new orders. At the same time, BYD is spinning off its battery business, which is expected to be completed by the end of 2018 or early 2019.

Recently, BYD and Changan have cooperated in the production of batteries, and have used equity relations to bind the partnership, eliminate the concerns of partners, and thus expand their own battery business.

BYD's split this time is not just about the battery division, but a major adjustment to the management structure of the entire enterprise.

BYD divides its business into five divisions: passenger cars, commercial vehicles, rail transit, electronics and batteries. Each division operates independently and has all decision-making power except investment. If each division develops well, it can seek independent listing.

The adjustment of the internal management structure is actually a preparation for further opening up.

BYD has fully opened up its hardware and software. In terms of hardware, BYD has opened up its own e platform. In terms of software, BYD has opened up its intelligent network connection system DiLink.

BYD is trying to create an open automotive ecosystem by opening up its hardware and software systems, as well as the sensors and control rights of its cars. At the same time, BYD's openness allows developers to provide consumers with a more personalized driving experience.

BYD recently announced that it will jointly build the Apollo ecological vehicle authentication platform with Baidu, fully connecting its own 341 automotive sensors and 66 control rights with the Apollo ecosystem.

Meanwhile, BYD is also gradually opening up its supply chain system. For example, BYD has divested its seat business through the establishment of a joint venture, which will help BYD focus on its core business.

Why open up?

The failure of the battery business is undoubtedly an important driving force behind BYD's opening up. However, this is obviously not the only reason.

BYD has always regarded new energy as its most important strategy since entering the automotive field in 2003. Currently, BYD has a great advantage in China's new energy vehicle market.

BYD has a good accumulation in electric vehicles, but is weak in automotive intelligence.

Wang Chuanfu once admitted that traditional car companies like BYD lack innovative ideas about smart cars like the Internet. Therefore, BYD decided to give up making its own autonomous driving system and instead cooperate with Internet companies to do the execution part that it is good at.

BYD's previous vertical closed system gave BYD open capital and could provide a complete set of conditions for Internet car companies to land. However, what Internet car companies lack is precisely the automobile hardware manufacturing capability that BYD excels at.

Not all car companies can easily open up. Due to intellectual property issues and various agreements between car companies, most car companies are unwilling or unable to open up.

The vertical integration strategy previously pursued gave BYD a lot of room for autonomy.

Open results

BYD's motors, electronic controls and even parts are all developed by itself, with complete independent property rights, and it also has its own accumulation in software. This not only enables comprehensive openness, but also enables the maximum degree of integration between software and hardware, providing the greatest convenience for car companies.

This actually verifies the rationality of the vertical integration strategy previously pursued by BYD - only by independently mastering more technologies and production links can it quickly enter new fields during the period of transformation.

BYD’s strategies in different periods are not contradictory, but are simply adaptations to the specific market environment in different periods.

BYD will also gain many business opportunities after providing Internet companies with landing capabilities. A more open attitude will give BYD the opportunity to gain more partners and even become a very important hardware platform for Internet car companies in the future, thereby exporting its own technical standards and building its own brand advantages.

BYD has opened up its control rights and developed standardized expansion slots and interfaces, allowing Internet car manufacturers to easily call on their own hardware platforms.

BYD's openness has effectively made up for its disadvantage of lacking Internet genes, and to a certain extent weakened the advantages of Tesla, new Internet car-making forces and traditional car manufacturers in autonomous driving.

An open platform can build an ecosystem, attract as many partners as possible, and gain a broader space for development. By deeply integrating into the industrial chain, BYD can keep up with and even lead the trend of industrial development, thereby responding to new industry trends and technological innovations in a timely manner and avoiding repeating the mistakes of the battery industry.

Developing an ecosystem means stronger voice and broader prospects for development. The current relative blankness of the market also gives people plenty of room for imagination.

However, the ecosystem needs to be built on a large number of users. If BYD wants to successfully do the automotive ecosystem business, either its own cars have a high market share, or BYD's operating system has a large market share and a good user experience.

This market is very profitable, and sooner or later new players will enter. If BYD fails to build its own moat early, it will be challenged by other players sooner or later.

Openness has actually become a development trend in the automotive industry. Both giants such as Google and Apple have planned to build their own cars, but in the end they turned to cooperating with traditional car companies to develop their own autonomous driving systems.

Tesla is still struggling on both the new energy vehicle and autonomous driving fronts, but the difficulties in mass production and the backwardness in the field of autonomous driving prove the difficulty of the closed route.

Even the mobile phone industry, which is far less complex than the automobile industry, is now becoming more and more open and increasingly emphasizing collaboration in the industrial chain.

The automotive industry chain is complex and no single company can handle everything.

Compared with new energy vehicles, the future development of smart cars is more uncertain. Opening up means attracting more potential partners and pooling more resources, which means more chances of success.

BYD hopes to overcome the current difficulties and win new development opportunities through opening up. Although the specific results still need time to verify, it is ultimately a far-sighted step.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.