BYD – The world’s largest EV manufacturer! How did they get there? And can they stay on top?! In 2011, the current world leader was still
a laughing stock... “Why do you laugh? Hahaha…. BYD is trying to compete? Why do you laugh? Have you seen their car?… Well this aged like milk. At the end of 2023, BYD stormed past Tesla
to become the number one EV manufacturer on the planet! So is BYD having the last laugh? Though, to be fair, Elon Musk has since said
that BYD is very competitive. Like rapper Drake, BYD started at the bottom
before reaching the top! But how did this budget phone battery producer
become the best-selling electric car manufacturer? And how long can they remain number 1? "We will see a big race between BYD and Tesla
in the next three to four years!" In the final quarter of 2023, BYD outsold
Tesla in battery-only cars – 526,000 to 484,000 – for the first time. "I think what it really shows is the kind
of the change that is happening in the car industry at the moment. Most of BYD sales have been within China. It's their biggest market, about 90% of their
sales and a lot of their stuff there is done on selling in big volumes and at quite competitive
prices.." This was not a complete surprise, as it was
the second year in a row they'd beaten Tesla in terms of production. But the first time around, the figures included
BYD’s EVs plus their hybrids. So, at the IAA in Munich in 2023, BYD was
more than happy to flex. ‘In last year, with 1.86M new energy vehicle
car sales, which is 3 times of the previous year. BYD become the world number 1 new energy vehicle
brand.’ Now it’s beating Tesla with EVs ONLY! BYD or Build Your Dreams, once a small startup
with just 20 employees back in 1995, has evolved into an electric car giant. Founded by chemist Wang Chuanfu in China,
it initially manufactured lithium-ion batteries for mobile phones just as the smartphone trend
took off. Business boomed supplying giants like Motorola
and Nokia. Chuanfu had already been interested in battery
technology as a student. In 2003, BYD ventured into cars by acquiring
Xi’an Qinchuan Automobile. This was the start of BYD Auto. The F3 -- its first combustion-engined car,
which looked similar to the Toyota Corolla -- debuted in 2005. But it was much cheaper than a Corolla. By 2008, BYD entered the electric vehicle
space with the F3DM. It was the world's first mass-produced plug-in
hybrid automobile. A flop at the time. Still: A $232 million investment from Warren
Buffett in 2008 fueled BYD's EV ambitions. In 2020, BYD launched the Blade Battery, an
LFP – or Lithium Iron Phosphate – battery, which cost less than other types of Lithium
Ion batteries used in EVs. BYD's Blade was more compact and seen as safer
as well. A clever move. The Han, BYD's sporty sedan, and subsequent
models incorporated the Blade Battery. BYD's EV sales surged from almost 131,000
in 2020 to 1.57 million in the following year. "The battery is the most expensive part of
the car. It's about 40% of the cost of an electric
car is the battery. And if you have competencies in a battery,
also innovation-wise but also cost-wise, then you have a big advantage in building electric
cars." China EV Domination
Like NIO before them, BYD is eyeing global markets -- especially Europe, where they're
launching three of their models. So it's no coincidence that BYD was named
the official EV sponsor of the Euro 2024 football championships. That could be another nail in the coffin for
the German auto industry, as this was long Volkswagen's golden ticket. Now BYD is on everyone's lips. "Come on, begin your wonderful trip with BYD
ATTO 3! What kind of car is this? Does it run on gasoline? No, this car is very environmentally friendly. Yes, it's fully electric. I can't hear any sound at all. BYD can no longer say they're the biggest
car brand you’ve never heard of! Already a giant in Asia, they're expanding
around the globe. "Keep exploring the world together! Move towards and strive for the halo!" ‘Since launching the passenger car brand
in Europe last October, BYD entered 15 European countries within just 11 months’
The rise of Chinese EVs and BYD owes much
to a push by the Chinese government. The EV industry has enjoyed huge tax breaks. That's led to BYD's domination domestically,
with a market share of 35% in China, compared to Tesla’s 7.8%. "The biggest difference, if you look at them,
is where they compete. Tesla still kind of has a kind of fairly style
and design and there's real desire around that Tesla badge and brand now. Whereas BYD much more competes on price, but
it's kind of offering more for the same price as other car firms." BYD has been able to undercut Tesla, pricing
their cars a lot cheaper, thanks to the subsidies. But there's another secret to their success. Unlike Tesla, BYD went for the lower hanging
fruit: fleets & buses, enabling them to produce batteries in mass quantities. That battery development has been key to their
success, giving them a huge advantage over their U.S. and European rivals. Unlike many of their competitors, BYD produces
large parts of their cars themselves -- helping them avoid extra costs, delays and logistical
problems that have hurt companies like Tesla. "That is one of the competitive advantages
of BYD that they have a high added value of about 75% of added value in the car that they
make themselves. And this brings them to this position they
are now." BYD calls this vertical integration. ‘Our vertical integration capability gives
us the flexibility to have a faster response to the market trend, as well as better support
for brand development and customer services’. BYD is actively securing lithium deposits,
to strengthen their vertical integration. Their successful formula looks set to continue. The Battle For Number One
For BYD to stay at number one they need to expand, and this road may not be as smooth
as the domestic one has been. But growing demand in Southeast Asia & Australia
certainly helps, and BYD already has a significant market share in Thailand. But Europe poses tougher problems. The aggressive expansion of the Chinese auto
industry into Europe has ruffled some feathers. The EU Commission is investigating Chinese
EV imports, which could lead to increased tariffs. This move is driven by concerns about unfair
competition, because of those state subsidies we mentioned earlier. But this is a double-edged sword that could
do more harm to European car brands. "We see that German manufacturers are not
really happy that there's a discussion of imposing taxes to Chinese manufacturers. Because they know if the Chinese get problems
in Europe and there were regulatory hurdles for the Chinese players coming to Europe,
the same will happen then in China too." "BYD says it will build a new electric car
factory in Hungary. This coming the first Chinese company to make
cars in Europe!"
The investigation aims to push manufacturers, including BYD, to open plants in the EU. As a response, BYD is looking to build a factory
in Hungary. The EU is also working on establishing its
own battery supply chain, tackling challenges such as obtaining critical raw materials domestically.
And the U.S.? It's an even tougher market to crack. Tensions between China and the U.S have meant
that BYD is taking a less aggressive approach to entering this territory.
"The geopolitical conflict between China and the US is a big hurdle. And I think what could happen is that BYD,
after being successful in Europe, is thinking about building up plants in the US. Without building up plans and have a supplier
base in the US, it will be very hard for the Chinese companies, especially BYD, to be successful." Though they've supplied electric buses to
the U.S. for years, BYD have not entered the car market there. And it looks like it will stay that way for
now as the U.S. currently imposes a 27.5% tariff on automotive imports from China. Tesla’s long-rumored, low-cost EV has yet
to materialize. But it could provide an answer to the cheap
EVs that have flooded the market from China. "It's really important for Tesla to offer
also a car in a lower segment. A segment of the small-sized cars beginning,
for instance, at 25,000 euro. And I'm pretty sure Tesla is working very
hard on such a model. There are rumors that next year this Model
2 maybe that's the name will be produced and offered." A New King In Town? While BYD currently wears the crown taken
from Tesla, this is a marathon and not a sprint. "These two that will be ahead of the pack
so to say. Volkswagen as a car group is also strong but
there's a gap between these two and I would say that the BYD would lead the electric car
ranking for the next few years." "So I think perhaps the most interesting thing
is less about the battle between Tesla and BYD and more about what the big established
manufacturers that have a hundred years of history in making cars are going to do to
catch these upstarts." So while these two EV giants duke it out,
German brands like VW seemingly sit and watch from the sidelines hoping for scraps. What is clear, if German brands want to compete
with BYD and Tesla, the key factors are innovation and price. "German manufacturer especially to be at least
as innovative as Tesla and the Chinese players. And if they are not more innovative than Tesla
and the Chinese it's clear they can't be more expensive!" But could we see another Chinese brand come
out of nowhere and replicate BYD’s success? Like automotive giant Geely? "Geely is for me a very interesting global
player of the future: because they have a quite broad product portfolio and we also
see that they are quite Innovative in the electromobility sphere. So I would also bet on the Geely group as
an important competitor of the future.” We're witnessing the emergence of an EV price
war across global markets as legacy brands respond and these new players look to dominate. This is a win for consumers, one that looks
set to prolong the boom in EV sales. But the geopolitical climate means this road
is not a smooth one, so unless other car manufacturers innovate soon, BYD will be hard to dethrone. What do you think? Leave us a comment and don’t forget to subscribe
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