Byd Electronic Obtains Production License for E-Cigarettes in China

In the past two years, with the successive release of new policies on electronic cigarette regulation, enterprises engaged in the production and operation of electronic cigarette products, vaporizers, and nicotine used in electronic cigarettes are required to obtain a production license, leading to some domestic electronic cigarette companies turning into the mainstream, and the electronic cigarette industry is moving towards a healthy and orderly development. Recently, BYD announced that it has obtained a production license, which means that BYD Electronics has officially participated in competition in the field of electronic cigarette OEMs with a legal identity.

BYD Electronics receives production license.

On August 4th, BYD Electronic announced on their official public account that their wholly-owned subsidiary, BYD Precision Manufacturing Co., Ltd., has been awarded a production license (for electronic cigarette processing enterprises) by the National Tobacco Monopoly Bureau. This means that BYD Electronic can now legally compete in the field of electronic cigarette processing.

BYD Electronic has announced that the company has completed the patent layout and automated production line for its full range of electronic atomization products. The company has integrated its own capabilities in new materials research and development, precision molds, product design and development, as well as intelligent manufacturing, with the goal of becoming a leader and practitioner in the field of health and harm reduction.

For A-share investors, BYD is best known for its new energy vehicles, to the extent that many people consider it to be just an auto company.

It is understood that BYD Electronic spun off from BYD and mainly engages in contract manufacturing of intelligent phones, masks, and e-cigarettes. As early as 2018, BYD Electronic has been laying out the e-cigarette business, and officially launched its ceramic atomization core (ceramic core) technology brand "BEEMCORE" in 2021.

It is worth mentioning that, on the morning of August 4th, BYD Electronic announced that it had been awarded a license to produce tobacco monopolies, and its stock price rose more than 12% at one point during the day, indicating the capital market's expectation for its electronic cigarette business.

Simaole's dominant market position may be challenged.

Aside from BYD Electronics, on the same day, SMIC announced on its official WeChat account, "SMIC Technology," that three fully-owned subsidiaries under the SMIC Group, Shenzhen McWalters Technology Co., Ltd., Shenzhen McBrother Technology Co., Ltd., and Shenzhen Weiplus Technology Co., Ltd., have been awarded the Tobacco Monopoly Bureau's production permits for tobacco monopoly enterprises. The issuance of these permits further strengthens SMIC's confidence in its future development, and the overall production and operation of the group will proceed according to the planned schedule.

It is undeniable that Smoore is currently the leading electronic cigarette company in China and even globally, and many institutions have high expectations for its development.

It is reported that in 2021, Smoore's global market share continued to expand to 22.8%, surpassing the total of the second to fifth places, and maintaining its position as the world's largest electronic atomization device manufacturer. However, Smoore's stock price has recently dropped significantly as investors believe that BYD and Luxshare Precision's entry into the industry will divide Smoore's market share and reduce their profitability.

However, industry insiders estimate that BYD's outsourcing capacity will not be too high, mainly because they are new to the industry and approved production capacity is mainly based on past business data. Some insiders have disclosed that the approved quantity for the pod is very low.

According to the "Regulations on the Management of Electronic Cigarettes" and related Q&A issued by the China National Tobacco Authority on March 11, 2022, anyone engaged in the production, wholesale, or retail of electronic cigarettes in China must obtain the relevant tobacco monopoly license. The regulations also specify that there will be a transition period from May 1, 2022 to September 30, 2022.

Starting from June, the government began conducting qualification and production capacity audits, which will continue until early October. This means that the production licenses and production capacity status of e-cigarette companies will be intensively disclosed in August and September. It is understood that both brand owners and factories are required to disclose their approved production capacity status.

Currently, it is a critical moment for license issuance. It is understood that regulatory agencies have established numerous teams to visit companies and conduct different types of inspections based on the industry. For example, for aerosol companies, the focus is on the completeness of licenses, compliance with site regulations, scientific manufacturing processes, quality control requirements, employee training and vocational education, as well as annual production capacity and sales history.

BYD Electronic stated that it will firmly support the national policies related to electronic cigarettes, operate its production in compliance with laws and regulations, and make positive contributions to the healthy and orderly development of the industry.

Simoer stated that in the future, they will continue to adhere to regulatory requirements and promote standardized, orderly development. They will also firmly support related national policies and operate in compliance with the law. Simultaneously, they will use scientific and technological innovation as the driving force for enterprise development, actively promote the long-term, healthy development of the industry, serve global customers and users, and fulfill their corporate responsibilities to contribute positively to society.

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