neo_englishneo_english ・ Sep. 13, 2023
BYD CEO Wang Chuanfu Gets His Hands on VC
BYD CEO Wang Chuanfu is striving to become a good corporate venture capital investor, with an aim to make BYD a global leader in the auto industry.

Credit: Visual China

Credit: Visual China

BEIJING, September 13 (TiPost) – BYD, a Chinese automobile manufacturing company, is making forays into the corporate venture capital (CVC) market for greater returns, at the time of its electric vehicle sales having overtaken Tesla.

At the end of August this year, Chengdu Xinjin Electronics Co., Ltd. (Xinjin Electronics) had two new shareholders, namely BYD Co., Ltd. and Shenzhen Innovation Investment Group Co., Ltd. The registered capital also increased from approximately 15.74 million yuan to about 16.90 million yuan. Xinjin Electronics is a Chinese analog and mixed-signal chip design company.

This marks the fourth investment and financing event announced by BYD in August alone. In August, BYD participated or exclusively invested in four companies: Xinjin Electronics, humanoid robot company Agibot, graphics engine company GritWorld, and intelligent electrical protection equipment company Zhongbei Energy. Among these, BYD stated that its investment in Agibot is related to its business, rather than being purely financial.

According to statistics from the TiPost App, in the year to date, BYD has invested 17 times in 14 startup companies. From 2021 to August 2023, BYD expanded its portfolio to approximately 60 companies, covering various fields such as semiconductor chips, robotics, new energy materials, and intelligent manufacturing.

Over the past 12 years, 74 companies have benefited from BYD's financial support.

According to the annual report of BYD Electronics (00285.HK, 002594.SZ), based on fair value calculation, in the critical years of 2021 and 2022, BYD invested a total of 491 million yuan in non-listed companies (liquid financial assets), with expenditures of 336 million yuan in the previous year alone.

With its market value of 760 billion yuan, the company is not only actively developing its own electric vehicle technology, but it has also changed its previous strategy of "closed-door manufacturing." It is now introducing more innovative technology and resources through investments, ensuring the security of its supply chain, addressing technological weaknesses, and enhancing its critical capabilities in global technological competition.

BYD invested in 74 companies, with nearly one-third of the companies in the chip industry 

BYD, founded in 1995 by Wang and headquartered in Shenzhen, started with battery manufacturing, then entered the mobile phone component market, and in 2003, ventured into the automotive manufacturing sector. Today, it is primarily focused on the new energy electric vehicle industry, with its main businesses including batteries, new energy vehicles, and rail transit. BYD was listed on the Hong Kong Stock Exchange in 2002, and its founder, executive director, and CEO, Wang, owns 27.83% of the company's shares.

Over the past 30 years, the rise of China's middle class has created the world's largest automotive market, driving the vigorous development of the Chinese new energy electric vehicle industry and ending the decades-long dominance of European, American, Japanese, and South Korean car manufacturers in China.

Financial reports show that in 2022, BYD's total vehicle sales reached 1.80 million units, a year-on-year increase of 149.88%, surpassing Tesla's 1.31 million units in the same year. In the first half of this year, BYD's net profit increased by over 200%. One of the best-known investors in world, Warren Buffett, has been investing in BYD stocks for 14 years, ultimately achieving a remarkable return of 38 times his initial investment.

Information released in March this year shows that 77-year-old Wang, with a net worth of 135 billion yuan, ranked 77th on the 2022 Hurun Rich List, following prominent figures like Pony Ma, Zhang Yiming, Jack Ma, and Huang Zheng.

BYD started to invest in 2009, primarily through its internal CVC strategic investment department. Initially, the companies it invested in were mostly subsidiaries, affiliated companies, and joint ventures of BYD, including GAC New Energy, BYD Semiconductor, and Denza, among others, all closely related to BYD's battery, automotive, rail transit, and new energy technology businesses.

Financial reports show that BYD's investment in joint venture companies increased from 1.63 billion yuan in 2020 to 3.5 billion yuan in 2021, while the investment in associated companies also increased to 570 million yuan during the same period.

However, since 2021, BYD has become an industrial venture capital (VC) player, beginning with Horizon Robotics and subsequently investing in numerous companies, including Chengdu Analog Circuit Technology Inc., Haawking, etc.

Statistics from the TiPost App show that over the past three years, BYD has invested in and expanded its portfolio to approximately 60 companies, a significant increase compared to the total number of BYD's previous investments over the past 12 years.

As of now, statistics from the TiPost App show that BYD has invested in 21 semiconductor and chip industry chain companies, accounting for approximately 28% of the total number of companies invested in (74 companies), nearly one-third of the total, covering areas such as AI chips, intelligent driving chips, silicon carbide epitaxial chips, and semiconductor devices, among other specialized fields.

Wang’s investment style: being controlling shareholder and  eyeing industry chain

Wang once used the "fish farming theory" as an analogy, stating that "BYD has a 'fish pond' of technology, with chips, electric vehicles, rail transit among others being the big fishes in the pond.'" Today, Wang has transcended that theory and is introducing more catfish into the technology pond.

At the end of 2021, BYD hosted its first CEO annual meeting for investment enterprises, where Wang personally presented. Participants came from more than 20 companies. This delivered one signal: BYD needs partners to expand the market pie.

Wang believes that the trend of new energy development is irreversible. According to BYD's estimation, by 2025, the penetration rate of new energy vehicles in the Chinese market will exceed 60%, with an addition of over 4 million new energy vehicles.

Therefore, based on observations, BYD's investment projects today are mostly early-stage startups, focusing on industrial strategic investments in areas such as semiconductor chips, robotics, new energy materials, and intelligent manufacturing. The core objective remains to support the development of BYD's industrial chain. According to public reports, BYD has strengthened "special rights" in some of its investment targets, retaining positions as major shareholders.

Here are five representative non-listed top companies that BYD has invested in:

Horizon Robotics: Horizon Robotics is a well-known provider of AI computing chips and intelligent driving solutions in China. Through 13 rounds of financing in seven years since its inception, its valuation has exceeded 31 billion yuan. In February 2021, the company secured over 2.2 billion yuan in Series C3 financing with BYD's participation, followed by a collaboration between the two companies. Horizon Robotics has already signed more than 70 pre-installed production projects with over 20 automakers. In October last year, Volkswagen Group's software company CARIAD also established a joint venture with Horizon with a total investment of approximately EUR 2.4 billion (about CNY 16.7 billion).

RoboSense: RoboSense is a leading company in the field of LiDAR technology, providing hardware, perception software, and chips for automakers. At the end of 2021, BYD led a strategic financing round for RoboSense with over 2.4 billion yuan, making it the largest single-round financing in the field of automotive LiDAR. In July 2023, RoboSense submitted its IPO prospectus to the Hong Kong Stock Exchange. From 2020 to 2022, the company's revenue totaled over CNY 1.03 billion, and as of March 31 this year, it had delivered over 100,000 LiDAR units.

Semi-tech: Semi-tech is a Chinese semiconductor intelligent manufacturing software provider. Its core product is a fully automatic intelligent CIM (Computer Integrated Manufacturing) solution, covering areas such as production management, quality management, logistics management, and business management. Founded three years ago, the company has completed nearly 10 mergers and integrations after five rounds of financing, with an estimated valuation of over CNY 6 billion. Its investors include SCGC and BYD.

Tongbo Technology: Jiangxi Tongbo Technology is a manufacturer of electrolytic copper foil and materials related to lithium batteries, and it is a core supplier for the battery industry. Public information indicates that the company's revenue in 2021 was nearly CNY 1.8 billion, with expected revenue of CNY 6 billion in 2022. In February 2022, BYD acquired a 6.44% stake in Tongbo Technology, becoming its seventh-largest shareholder. BYD's investment in the company was aimed at securing the supply chain for lithium battery copper foil and further strengthening its industrial chain.

Agibot: Agibot was founded in February 2023 by former Huawei "genius youth" Zhihuijun (Peng Zhihui). The company focuses on the fusion of AI and robotics, aiming to create innovative products and application ecosystems for intelligent humanoid robots. It has already unveiled its first intelligent humanoid robot. In August of this year, BYD invested in the company, with the core goal to use its software and hardware technology to assist BYD's intelligent manufacturing in its factories. Agibot had previously received investments from institutions such as Hillhouse Capital and Baidu.

BYD has been aggressive as a CVC investor. Compared to the current downturn in the investment environment, BYD's frequent investments and acquisitions are notable. Looking at specific projects, the company’s external investments mainly focus on high-precision manufacturing companies related to new energy vehicles, semiconductor chips, and batteries. The purpose of these industrial strategic investments is diverse, with around five companies having been acquired by BYD.

According to BYD Electronics' 2022 annual report, BYD Holding Group is a leading platform-based high-end manufacturing company globally, providing one-stop services to customers, including new material development, product design and research and development, zero components and whole-machine manufacturing, supply chain management, logistics, and after-sales services. It covers diversified fields such as smartphones, smart wearables, computers, the Internet of Things, smart homes, gaming hardware, robotics, drones, communication equipment, medical devices, and more. BYD Electronics is an investment holding company.

Automotive analyst Zhang Xiang believes that BYD's investment in external supply chains is progressive. In the future, BYD is expected to increase its stake in these targets and consolidate them financially.

Becoming a Global Leader

"We all have the opportunity to become truly world-class brands. Together, we are the future of Chinese automobiles," said Wang. This statement has recently sparked controversy, mainly because at the mid-year performance conference in 2023, Wang stated that BYD would wage a price war in the next 3-5 years.

This implies that BYD's future actions may lead to more small and medium-sized electric vehicle companies facing losses and shutdowns. Therefore, many peers believe that BYD's approach is too aggressive.

In fact, Wang's "aggressive" style is mainly derived from his experiences. Wang was born in a small town in Anhui province, where poverty and hardship shaped his resilient character. He overcame numerous difficulties to enter Central South University of Technology, eventually joining the General Research Institute For Nonferrous Metals (China), where he held positions as deputy director, director and associate professor. He is a scholar-turned entrepreneur.

As early as 1996, BYD started researching and developing power batteries, more than a decade ahead of CATL. In 2003, Wang made the bold decision to enter the electric vehicle sector, and produced three new energy vehicles the following year. However, at that time, traditional gasoline cars dominated the market, and the term "new energy vehicles" didn't even exist, let alone Tesla.

"We faced various doubts and ridicule. On the first day of entering the automotive industry, BYD's stock price dropped by 20%, and the capital market poured cold water on us," Wang once said. While it sounds easy to overcome challenges, very few people can persevere. It took BYD ten years of effort to break through a penetration rate of 1% in China's new energy vehicle market.

Over the past 20-plus years, BYD has encountered countless challenges and trials. During that period, "survival" became their strategy. Moving forward against the headwinds, every step taken by BYD hid deep bitterness and pain. Perhaps only Wang and his team can truly understand the flavor of those experiences.

In Wang's view, while BYD has already become a leader in China's new energy vehicle sector, further development requires more investment in intelligence and industrialization. Continuously collaborating with companies like NVIDIA, Huawei, and Baidu is a testament to this. Such a cooperative strategy not only helps mutual development and resource sharing but also ensures that BYD maintains a leading position in the industry, capable of addressing various market changes and challenges.

BYD is currently pursuing a comprehensive strategy, combining independent research and development with partnerships with technology providers. At this year's Nvidia GTC 2023 conference, Jensen Huang, the founder and CEO of Nvidia, with a market value of $1 trillion, expressed his intention to expand cooperation with BYD. BYD will use Nvidia's DRIVE Orin high-performance computing platform in multiple models of its following car series.

Wang, in his current capacity, is striving to become an excellent CVC investor, with the aim of getting BYD closer to being a leader in the global industry.

(This article was first published on the TiPost App, Author | Lin Zhijia)

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