As a leading enterprise in China's new energy vehicle industry, BYD's development can be described as extremely rapid. And recently, BYD has made a new move.
According to media reports, BYD's wholly-owned subsidiary, BYD Precision Manufacture, has been granted a Tobacco Monopoly Administration License (Electronic Cigarette Processing Enterprise) from the National Tobacco Monopoly Bureau. This means that BYD has officially entered the electronic cigarette industry.
Many people may be curious about why BYD, which is known for making new energy vehicles, would venture into the electronic cigarette market instead of focusing solely on car manufacturing.
BYD is more than just a car company.
Do you think that BYD is just a car company? That's a big mistake. While it's true that new energy vehicles are BYD's main business, it doesn't mean that the company is limited to just making cars.
Just as Tencent won't solely manage online social networks and Alibaba won't solely focus on electronic commerce, BYD is also moving towards diversifying its development.
Do you remember when BYD started manufacturing face masks? It was an example of their diversification strategy.
According to BYD's financial report, in 2021, the company's total revenue was approximately 112.489 billion yuan from its automotive, automotive-related products, and other product businesses. Meanwhile, its other sources of revenue, such as phone manufacturing and photovoltaics, amounted to approximately 102.925 billion yuan.
From the financial report, it can be seen that, apart from revenue related to the automotive industry, other businesses of BYD have almost taken half of the total revenue.
Therefore, BYD is not simply an automotive enterprise, as it is involved in numerous areas.
According to the information released by BYD, the company has made significant progress in various fields such as smart homes, gaming hardware, the Internet of Things, drones, robots, medical devices, and electronic atomization. Their endeavors have been successful and the company has achieved substantial development in these areas.
The electronic cigarette belongs to the category of electronic vaporization products, and BYD Precision Manufacturing has already obtained many related patents in this field.
Therefore, BYD's entry into the field of e-cigarettes was not a sudden impulse but rather a premeditated strategic move that was planned well in advance.
How profitable are electronic cigarettes?
According to the 2021 financial report, SMOK, a leading player in the electronic cigarette industry, generated a revenue of 13.755 billion yuan (approx. $2.1 billion USD) with a net profit of 5.44 billion yuan (approx. $842 million USD) during the fiscal year.
These are the data after the introduction of the regulations. One can only imagine how profitable the companies in the e-cigarette industry were before the regulations were put in place.
Furthermore, a reporter had previously conducted a secret investigation on physical stores that sell electronic cigarettes. According to the investigation, the profit margin for a single electronic cigarette can reach up to 100%. Agents who are involved in related sales can earn a minimum commission of 40%.
Therefore, it is not surprising that BYD is entering the electronic cigarette industry. With such a profitable industry, which capable company wouldn't try to get a piece of the action? What do you think about this?
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