In 2011 Elon Musk scoffed at the offerings of Chinese giant BYD and wrote them off as non-threatening. However, BYD has since become an undisputed leader in electric vehicles (EVs), surpassing Tesla in EVs sold in the fourth quarter. In only a few years, BYD has managed to grow from a maker of mobile-phone batteries to one of the largest EV companies on the planet, rapidly expanding into overseas markets.
In 2011 during a Bloomberg interview, Elon Musk laughed off BYD, saying "Have you seen their car? I don't think it's particularly attractive, and the technology is not very strong.” He noted that BYD was having “severe problems” in its home market of China, and put forward the suggestion that their focus should be on staying afloat there. But BYD would not be wiped out - in fact, it unseated Tesla as the top EV seller in the fourth quarter. Taylor Ogan, CEO of Snow Bull Capital, noted that BYD had long held the ambition of being "China's largest auto manufacturer and put China manufacturing on the map." While BYD began as a phone battery manufacturer, they have now risen to become an electric car giant.
BYD, which is nowadays renowned as a major electric car corporation, in fact has many different business areas, ranging from batteries to mining and semiconductors. This is a major source of its success. The founder of BYD, chemist Wang Chuanfu, founded the company in 1995 in the tech city of Shenzhen in Southern China. This was done with 20 workers and a starting capital worth 2.5 million Chinese yuan which, taking into account the exchange rate of today, amounts to $351,994.
In 1996, BYD initiated the production of lithium-ion batteries, the kind now known to be in the current-day smartphones. This was concomitant with the expansion of the mobile phone market. BYD went on to provide its batteries to Motorola and Nokia in 2000 and 2002 respectively, with the latter two being the leading companies of the mobile phone world at the time. In 2002, BYD got listed on the Hong Kong Stock Exchange, taking advantage of its prevalence in lithium-ion batteries.
In 2003, BYD acquired the Xi'an Qinchuan Automobile, a small automaker, from which the combustion model F3 was released two years later. Then in 2008, BYD's first electric vehicle, the F3DM (a plug-in hybrid), was launched. With this, Warren Buffett's Berkshire Hathaway invested an impressive $230 million, encouraging BYD to further its plans in the EV space. This was aided by the creation of the Blade battery in 2020, an LFP (lithium iron phosphate) battery which was touted for its good energy density and safety capabilities, and featured in the Han, a sedan rival to Tesla's Model S. The success of the Blade was seen in BYD's sales figures for 2020 and 2021; 130,970 pure battery EVs and 1.57 million battery EVs respectively.
The success of BYD's Blade is a testament to the company's strategic investments and its diversified portfolio beyond cars. Tu Le of Sino Auto Insights told CNBC: "BYD's roots lie in its high tech components, such as batteries, which have given it a strong foundation of resilience, as seen from its partnership with the likes of Apple. Wang Chuanfu then acquired a defunct Chinese car brand, built on this solid base to focus on innovate battery technology, and further develop BYD's vehicle designs, engineering and quality. What we didn't know at the time was that the past 15-20 years of product development would position BYD to outsell Tesla in Q4 2023."
At the start, BYD did not immediately gravitate to pure EVs. Rather, they still sold hybrid cars, which Alvin Liu, analyst at Canalys, commented was the secret to their beginning success. "In the early phases of the Chinese EV sector, BYD opted to introduce both Battery Electric Vehicles (BEV) and Plug-in Hybrid Electric Vehicles (PHEV). This method enabled BYD to dominate the market when charging infrastructure was yet to be developed, and buyers still had not properly grasped the perks of EVs," Liu conveyed to CNBC. "The traits of PHEVs such as great financial proficiency and absence of range anxiety made a huge contribution to helping BYD gain the market." Liu said that BYD took advantage of the fact that there were fewer rivals in China's mid-range category, which helped advance its progress. Additionally, Liu highlighted that BYD did well on branding, crafting different sub-brands to address different price points in the market. A good example of this is BYD's mid-to-high-end EV brand Denza.
In addition to its own strategies, the rise of BYD has been positively impacted by the state encouragement of China's electric vehicle sector. In the recent years, Beijing has extended incentives for EV buyers and delivered state assistance in the EV industry. These approaches initiated in 2009, which happened to be the same time BYD was striving to strengthen its electric vehicle initiatives.
Rhodium Group's senior analyst, Gregor Sebastian, commented to CNBC that BYD's success is, in large part, due to Beijing's strong backing; pointing to an estimated $4.3 billion received in state support from 2015-2020. Moreover, Sebastian notedBYD has been able to benefit from below-market equity and debt financing, which enabled it to expand its operations and research and development endeavors.
Having secured a leading position in China's EV market, BYD is now aggressively targeting overseas markets. The carmaker has a 43% share in electric vehicles in Southeast Asia, with sales in countries such as the United Arab Emirates, Thailand and the UK. In December, BYD announced its first European manufacturing plant in Hungary, and seeks to acquire lithium mining assets in Brazil, which is a crucial input for its batteries. While this international expansion is a crucial step to increase its presence, it is beign met with opposition from global regulators, who are concerned about the financial support given to Chinese producers. The EU Commission launched an investigation into subsidies for electric vehicles in China and the U.S. is attempting to block Chinese rivals by enacting the Inflation Reduction Act. To ensure sustainable growth, BYD is tackling these political barriers head-on, as shown through their investment in the Hungarian plant, signifying their commitment to international expansion.
The fight between Tesla and BYD - the world's two leading EV companies - looks set to continue. Le from Sino Auto Insights is of the opinion that BYD has yet to reach its maximum capacity. He noted that "most car companies didn't take them seriously for a long time. This is where part of their journey is similar to Tesla's because people didn't pay attention to Tesla early on either."
In 2024, Tesla will encounter increased competition from Chinese car makers producing multiple models and traditional vehicle manufacturers striving to be part of the EV landscape. Daniel Roeska, a senior research analyst from Bernstein Research, informed CNBC that Tesla has minimal sales outlook within the upcoming months. In contrast, BYD could experience quicker growth. Roeska declared, "BYD is keenly accelerating their growth in Europe and in other global areas, so the next 12 to 24 months should bring notable progress in BYD's story." Musk, boss of Tesla, is cognizant that he shouldn't ignore BYD's achievements; in a comment posted in X related to a 2011 Bloomberg interview, he commented "That was many years ago. Their cars are extremely competitive nowadays."
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