Overall, $BYD(002594.SZ) delivered another impressive performance in the third quarter, with the automotive business gross margin (including battery business) increasing by 3.2 percentage points quarter-on-quarter to 25.6%, exceeding market expectations.

The quarter-on-quarter increase in automotive business gross margin was mainly due to:

① The DMI 5.0 model began to ramp up production in the third quarter, driving a rebound in the average selling price (ASP) per vehicle: The main plug-in hybrid models in the third quarter switched from the Glory version of the Qin Plus/Destroyer 05 to the Qin L/Seal 06 under DMI 5.0, with the Qin L/Seal 06 priced 14,000 to 20,000 yuan higher than the Qin Plus/Destroyer 05.

② The explosive sales in the third quarter released scale effects, leading to a continued decline in per vehicle amortized costs, which aligns with previous assessments by Dolphin.

Regarding the net profit per vehicle that investors are concerned about, the net profit per vehicle in the third quarter was 9,300 yuan, slightly lower than the market expectation of 9,600 yuan, mainly due to a significant quarter-on-quarter increase in BYD's three expenses this quarter.

Among them, R&D expenses increased by nearly 4.7 billion yuan quarter-on-quarter, reaching a historical high. Dolphin believes that the high increase in R&D investment is mainly used for ① the launch of high-end models in the third and fourth quarters, focusing on technology investments for high-end models: such as the Tengshi debuting on the Easy Trip platform; ② BYD accelerating its investment in intelligence: BYD expects to mass-produce its self-developed advanced driving system in November, which can be understood by the market.

However, Dolphin noted that although capital expenditures remained low in the third quarter, $BYD COMPANY(01211.HK) accelerated the conversion of construction projects into fixed assets (construction projects decreased from 43.3 billion in the second quarter to 17.6 billion in the third quarter), leading to an increase in net fixed asset value (fixed assets rose from 230 billion in the second quarter to 263 billion, an increase of 33 billion). The market may be concerned that this will lead to an increase in depreciation and amortization expenses in the fourth quarter, thereby affecting the profit release in the fourth quarter. Dolphin will roughly estimate the impact on fourth-quarter profits in a later commentary.