Hong Kong
CNN
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This week, more than 5,000 electric cars were loaded onto a giant Chinese transport ship and sent to ports in Europe.
The cars are made by BYD, the Chinese automaker backed by Warren Buffett that has surpassed Tesla as the world’s biggest seller of electric vehicles (EVs).
China’s official Xinhua news agency said the automaker helped the giant ship, named BYD Explorer 1, make its maiden voyage from the southern Chinese city of Shenzhen to export goods to Germany and the Netherlands.
It’s a striking visual example of how big BYD has conquered its home market but needs to take a new path to maintain its momentum.
To this end, two countries are important: Hungary and Mexico. Neither are huge auto markets, but they could serve as gateways to Europe and North America and strengthen the company’s quest to become truly world-famous.
STR/AFP/Getty Images
In January, an electric car waits to be loaded onto the BYD Explorer 1, a transport ship for the purpose of exporting BYD cars, at Yantai Port in eastern China’s Shandong Province.
BYD is starting to expand into both regions. In December, the company promised to open its first production plant in Hungary. For passenger cars In Europe. Prime Minister Viktor Orbán’s government said it was one of the largest investments in the country’s history and would create thousands of jobs in the south. The city of Szeged.
The company is also considering opening a store in Mexico.Sources said the company has expressed interest in building a factory in the country, but no plans had been officially confirmed as of January. The government of the southeastern state of Yucatan told CNN. BYD Mexico did not respond to a request for comment.
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Experts say expanding operations in Hungary and Mexico will help the Shenzhen-based company. The company could gain a foothold on the other side of the Atlantic while avoiding costly tariffs. The plan could also help BYD navigate the challenging geopolitical environment, especially some European countries. Politicians are increasingly wary of what they see as a “flood” of Chinese-made EVs.
But longtime followers of BYD, a brand that was once little known overseas and even ridiculed by Tesla (TSLA) CEO Elon Musk in 2011, They say the expected move is not simply a reaction to rising protectionism.
“I would see this as a continuation of the company’s global expansion and manufacturing footprint,” said Tu Le, founder of consulting firm Sino Auto Insights. “It’s no secret that they have grand ambitions for world domination.”
Hungary, a small landlocked country with a population of 9.6 million, is becoming an increasingly important production base in Europe, especially for Chinese car suppliers.
Chinese companies such as battery giant CATL and automaker NIO, along with German rivals Mercedes, BMW and Audi, have invested heavily in the country’s manufacturing industry in recent years. BYD already has a presence there, opening an electric bus facility in Komarom city in 2017.
The new plant in Szeged will also give the company free trade access for passenger cars. Matthias Schmidt, a European auto analyst with Schmidt Automotive Research, said the move would include not only Hungary, China’s long-time economic partner, but also 26 other European Union member states.
He also told CNN, citing lower labor and energy costs in Hungary compared to other regional automotive hubs such as France and Germany. You can enjoy it at a low cost.”
The proposed construction site appears to have been planned for years, but experts say BYD will be unable to comply with the 10% European tariffs on cars imported from the world’s second-largest economy and the European Union’s The move is particularly timely, as it avoids additional tariffs imposed as a result of the An EU investigation into state support for Chinese EV makers is underway.
The investigation was announced by the European Commission in September last year, which said it was trying to find out how the prices of EVs imported from China are being “kept artificially low”.
Schmidt said European tariffs are expected to rise after the investigation is completed, but BYD will likely be able to avoid paying additional fees.
Bill Russo, founder and CEO of AutoMobility, a Shanghai-based strategy consulting firm, echoed similar sentiments.
He said BYD’s Hungarian factory should be able to avoid these obligations unless lawmakers create new rules that target a brand’s country of origin, in this case China, rather than its country of production. .
Similar settings are expected in Mexico. Currently, BYD does not sell passenger cars in the United States, and cars made in China are subject to a hefty 27.5% import tariff.
That could change quickly if the automaker sets up production in Mexico, where it sells buses and cars.
According to the United States-Mexico-Canada Agreement (USMCA), the trade agreement that replaced NAFTA in 2020: Each passenger vehicle must be manufactured in North America to avoid tariffs.
Mexico is also included in the agreement, making it more attractive to Chinese automakers.
The country could serve as a “manufacturing and export gateway to North America,” Lee said. “The U.S. government won’t like that Mexico is creating a backdoor.”
Marishu Esral/Bloomberg/Getty Images
A BYD electric vehicle operated by Vemo Taxi in Mexico City in November.
Mexico is seen as a strong base for BYD because Tesla is building a facility there, in addition to perks like lower labor and transportation costs. The US automaker is now one of BYD’s battery customers. wincing face From musk.
“For them, it’s not just a final product strategy,” Lee said. “It’s also saying, ‘We’re going to sell batteries to the Latin American market.’ And guess what? One of our biggest customers is building a gigafactory there. So it makes sense for us to be right next to them.”
In September, Stella Lee, BYD’s executive vice president, told Mexican news outlet El Sol de Mexico that the company was considering building a factory in the country, depending on market reaction. Told.
“If we see that the demand is high, we will consider producing vehicles here,” Lee said.
BYD was founded by Mr. Wang Chuanfu, The company first established its reputation as a battery manufacturer domestically and then expanded overseas.
The company’s first overseas expansion was in 1998, when it established its first overseas subsidiary in the Rotterdam area of the Netherlands, where it established its European headquarters and began importing batteries.
Although only three years old, the company didn’t sell any vehicles in Europe until about 14 years later, in 2012, when it rolled out electric buses, forklifts, and taxis.
Unlike some of its Chinese peers, BYD “didn’t initially prioritize overseas sales,” Russo said.
Instead, it focused on its victories in China, where it has managed to beat longtime industry champion Tesla.
Last year, BYD was China’s best-selling car brand, with vehicle prices starting as low as $11,000.
But “they’re now changing gears because I think they’ve reached a point where they have to prioritize international sales in order to grow,” Russo told CNN.
The numbers reflect this change. BYD’s bases have expanded from over 50 countries in 2020 to over 70 countries now. The company is rapidly adding to existing overseas production in places like California and Brazil where it makes electric buses, with plans to build new factories in Indonesia and Thailand. And Uzbekistan.
In the first half of 2022, around 40% of BYD’s customers were from domestic markets such as mainland China, Macau, Hong Kong, and Taiwan.
A year later, the company has cut that percentage to 33%, according to its latest interim annual report.
BYD has recorded aggressive growth in car exports, with exports soaring by 334% to just under 243,000 cars last year.
This breakthrough is likely to have helped China overtake Japan as the world’s number one car exporter in 2023.
But as it continues to grow overseas, analysts say BYD will need to take a more localized approach.
Building factories near major markets is key to winning not only the wallets of consumers but also the hearts of politicians.
This shows a desire to create local jobs, which could help the company gain goodwill and “perhaps result in more favorable treatment from governments in the region,” Russo said. Told.
“Geopolitics is an important consideration.”