BYD Acquires an Internet Insurance Company for $530M

According to Chinese commercial information query platform Tianyancha, BYD’s proposed acquisition worth 3.6 billion yuan ($530 million) for Yi’an Property Insurance Co., Ltd. was put in place on January 31. BYD will acquire 100% equity of the Internet insurance company.

Yi’an Property Insurance, established in February 2016, is one of the four professional Internet insurance companies approved by the China Banking and Insurance Regulatory Commission (CBIRC). In July 2020, Yi’an was taken over by CBIRC due to substandard solvency and other reasons. By the end of March 2022, Yi’an had assets totaling 335 million yuan, liabilities totaling 462 million yuan, and shareholders’ equity totaling -127 million yuan.

In July 2022, CBIRC agreed that Yi’an had entered a bankruptcy reorganization procedure. As a result, accelerating the search for strategic investors has become an inevitable choice for Yi’an. Although it is insolvent, it has the advantages of a flat management structure and asset-light strategy. Moreover, its own assets and liabilities are small, and it is expected to improve its solvency through limited investment.

Prior to this, BYD had begun to prepare to enter the insurance industry. In March 2022, BYD Insurance Brokerage Co., Ltd. was approved to be established.

In fact, it is common for automobile manufacturers to set up insurance companies. XPeng, Tesla China, and NIO established their own insurance divisions in 2018, 2020, and 2022 respectively. GAC Group, FAW Group, and Geely have all taken stakes in insurance certificate holders.

According to industry insiders, auto insurance is the first service that consumers come into contact with when buying a car. In the past, auto sales terminals were mainly controlled by dealers, so they have the most important sales channels for auto insurance. The just-needed attribute of auto insurance enables dealers to control the service entrance of car owners, thus expanding the automotive aftermarkets business such as auto maintenance, claims repair and auto finance.

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For automobile manufacturers, without obtaining an insurance license or an insurance intermediary license, it is necessary to cooperate with third-party insurance companies. If they are directly involved, they can strive for greater profit margins and extend their own industrial chain. It is also possible for them to make use of vehicle operation data and maintenance data to be more accurate in auto insurance policies and payouts, differentiated pricing, and exclusive insurance.

In addition to entering the insurance industry, BYD also turned its attention to auto finance, financial leasing, and private equity. Taking auto finance as an example, BYD and the Bank of Xi’an jointly funded the establishment of BYD Auto Finance Co., Ltd. in 2014, with BYD holding 80% of shares, which is one of the 25 licensed auto finance companies approved by CBIRC.