In recent times, the performance of BYD has elicited diverse reactions, particularly following the announcement of its financial report for 2021. The figures presented in this report reveal a perplexing narrative about the company's growth trajectoryOn March 29, BYD unveiled its annual results, showcasing a staggering revenue of 216.14 billion yuan - an impressive growth of 38.02% year-on-yearHowever, the contrasting figure of a mere 3.045 billion yuan in net profit highlights a significant decline of 28.08% compared to the previous yearThis discrepancy calls for a deeper dive into the underlying factors that shape BYD's performance.

At first glance, the increase in revenue might seem optimistic; yet, a closer examination reveals a disparityIn 2021, BYD managed to sell approximately 740,000 vehicles - a commendable year-on-year growth of 73.34%. This implies that while sales surged by over 70%, the revenue growth fell short of expectationsClearly, the relationship between sales volume and financial gain appears unbalanced, raising concerns over pricing strategies and operational efficiency.

When analyzing net profits, the situation becomes even more troublingAnalysts had projected a net profit exceeding 4 billion yuan, making BYD's actual performance both surprising and disappointingParticularly, the fourth quarter demonstrated significant volatilityWhile revenue increased by more than 30% quarter-on-quarter, net profit suffered a drastic decline, decreasing by nearly half, culminating in a paltry net profit margin of less than 1%. In straightforward terms, for every 100 yuan earned from vehicle sales, BYD's profit margin was so thin that it was nearly negligible, raising alarms about the sustainable profitability of the business.

Delving deeper into the company's financials uncovers the issue of net profit excluding non-recurring gainsMany financial analysts contend that this metric holds greater relevance when assessing a company’s operational health

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For BYD, the annual report indicates a government subsidy income of 2.26 billion yuanThis suggests that without the subsidy, BYD's net profit would nosedive to less than 1 billion yuan, showcasing a troubling dependence on external assistance to maintain its profitability.

Yet this scenario is not the worstThe intricacies of BYD’s financial reporting reveal yet another layerWhile the company's research and development expenditure reached 10.6 billion yuan in 2021, only 8 billion yuan was accounted as a research expense, with approximately 2.6 billion yuan being capitalizedThis strategic financial maneuver raises eyebrows, as it may serve to embellish the overall profitability picture of the companyGovernments worldwide routinely encourage innovation through research, allowing firms to capitalize some R&D costs in order to present a healthier balance sheetHowever, such measures can provoke skepticism, as they indicate a potential obfuscation of the actual financial positionIndeed, economically speaking, any delay in amortizing these intangible assets could lead to substantial future costs.

The implications of these accounting decisions are starkIf BYD were to operate with a slightly more aggressive accounting approach, it might find itself reporting losses rather than profits at the end of the financial yearThis precarious situation creates uncertainty regarding the company's future performance, particularly in light of the evolving landscape of the electric vehicle market.

Despite the underwhelming financial outcomes, an optimistic narrative persists among market analysts and industry observersOne of the silver linings is the undeniable demand for BYD's electric vehicles, which continues to outpace supplyProjections indicate that the company may aim for 1.5 million in vehicle sales in 2022, reflecting a robust growth strategy aligned with the global shift towards renewable energy sources.

Furthermore, BYD’s battery subsidiary, known as Fudi Battery, has also seen an uptick in shipments, with positive expectations for external supply

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