China’s BYD was a battery maker focused on car manufacturing when it unveiled its latest model in 2007. American executives attending the Guangzhou auto show were stunned by the car’s uneven purple paint and poorly-fitted doors.
“They were the laughing stock of the industry,” said Michael Dunn, a Chinese auto industry analyst.
No one laughs at BYD these days.
Late last year, the company overtook Tesla in global sales of all-electric vehicles. BYD has built assembly lines in Brazil, Hungary, Thailand, and Uzbekistan, and is preparing to build one in Indonesia and Mexico. Exports to Europe are also rapidly expanding. And the company is aiming to overtake the Volkswagen Group, which includes Audi, as the leader in the Chinese market.
BYD’s sales account for more than 80% in China, which has increased by about 1 million units in each of the past two years. The last automaker to achieve this in the American market for even one year was General Motors. That was in 1946, after GM had stopped selling passenger cars for the previous four years because of World War II.
“BYD’s growth is unlike anything the industry has seen in decades,” said Matt Anderson, curator of transportation at the Henry Ford Museum in Dearborn, Michigan.
BYD, based in Shenzhen, the heart of China’s electronics industry, has demonstrated how Chinese automakers can leverage the country’s electronics advantages. No company has benefited more from China’s introduction of battery electric vehicles and plug-in gasoline electric vehicles. Together, these vehicles account for 40% of China’s car market, the world’s largest, and are expected to account for more than half that number next year. Like most Chinese automakers, BYD doesn’t sell cars in the US because Trump-era tariffs are still in place, but BYD does sell buses in the US.
BYD is leading China’s electric vehicle exports and is rapidly building the world’s largest car carrier to transport electric vehicles. The first ship, BYD Explorer 1, is on its maiden voyage from Shenzhen with 5,000 electric vehicles on board and is scheduled to arrive in the Netherlands by February 21st.
The success of China and BYD has led to more scrutiny.
Tesla CEO Elon Musk warned about the strength of China’s electric vehicle exports during an earnings conference in January. “Frankly, I think most businesses in the world would be destroyed if trade barriers were not established,” he said.
The rapid growth of BYD and other Chinese automakers in Europe has prompted an investigation by the European Union into Chinese government subsidies, which could lead to tariffs. According to BYD’s annual report, it received a total of $2.6 billion in government support from 2008 to 2022. This does not include other assistance, such as forcing BYD’s local taxi companies to purchase only BYD electric vehicles.
BYD declined to comment on the subsidy. The company said in a statement that the new ship, BYD Explorer No. 1, “marks an important milestone for BYD as it expands into the international market and contributes to the development of the global new energy vehicle industry.” Ta.
China has built enough factories to produce more than twice as many cars as can be purchased on the market. This has led to a price war in China, especially between BYD and Tesla, resulting in large losses due to discounts. One of BYD’s newest models, the subcompact Seagull, costs less than $11,000.
Due to the real estate crisis and stock market decline, Chinese consumers are now cautious about buying cars. But BYD’s lower manufacturing costs put it in a better position than most of its competitors to weather a prolonged sales slump and shakeout in the industry.
BYD Chairman Wang Chuanfu founded the company in 1995 to make batteries for Motorola and other consumer electronics manufacturers. He studied at Central South University in Changsha, an elite university famous for battery chemistry research. But he dreamed of building cars.
In 2003, BYD acquired a factory in Xi’an that manufactured gasoline cars. However, the company had its troubled beginnings, gaining an early reputation for making crappy products. When I visited the factory in 2006, the large repair area at the end of the assembly line was already packed with new cars that needed further work.
BYD’s sales increased due to the rapid growth of the Chinese market. Warren E. Buffett bought his nearly 10% stake in 2008 for his $230 million, giving BYD not only an infusion of cash but worldwide fame. In the same year, Mr. Wang pledged to begin exporting battery electric vehicles to the United States within two years.
However, electric cars at the time were expensive to manufacture and had limited range, so Mr. Wang had to scrap his plans to enter the American market. In a 2011 interview, he reconsidered his focus on battery electric vehicles. He asserted that automakers should focus on gasoline-electric hybrids. “China’s electric vehicle market still has great potential,” he added.
By 2012, China’s car production had caught up with demand. Buyers are now more selective. BYD’s car sales and stock price plummeted as multinational companies offered more stylish models. Industry executives and analysts wondered whether BYD had a future.
But Wang continued to make two risky bets that paid off.
In 2016, he hired famed Audi designer Wolfgang Egger and hundreds of other automotive engineers with bolder tastes. They completely redesigned BYD’s model.
Wang also devised a way to replace the industry standard chemicals in rechargeable lithium batteries (nickel, cobalt and manganese) with cheaper iron and phosphates. However, early batteries made from cheap compounds ran out quickly and needed to be recharged after even short trips.
In 2020, BYD introduced Blade batteries, filling most of the so-called range with nickel-cobalt batteries at a fraction of the price.
That same year, Tesla began manufacturing and selling large numbers of cars in China, and enthusiasm for electric cars swept the country. BYD was preparing an inexpensive battery chemistry and Egger’s new design.
Tesla has also started using lithium iron phosphate batteries in cheaper models. BYD still mainly sells cheap cars with short range, while Tesla mainly sells expensive cars with long range.
Last year, Swiss bank UBS found that a BYD-sealed electric hatchback sedan costs 35 percent less to manufacture than a slightly smaller Volkswagen ID.3 of similar quality made in Europe. Part of the cost reduction was due to cheaper lithium iron phosphate batteries.
BYD manufactures three-quarters of Seal’s parts. Like Tesla, BYD uses only a small number of electronic systems in each vehicle. VW, by contrast, outsources up to two-thirds of its components. BYD has also benefited from lower labor costs in China, which are rising as factories compete for skilled workers.
BYD currently has its own walled city in Shenzhen, a southeastern city adjacent to Hong Kong. An airport monorail transports employees from his 18-story corporate apartment to his BYD office tower and research lab.
Liu Qiangqiang, an engineer at the Shenzhen center, said the car development team’s staff has nearly tripled since he joined from GM 15 months ago.
“The pace is fast,” he said.
BYD denied self-driving a year ago, but took action after consumer electronics makers Huawei and Xiaomi introduced cars with significant self-driving capabilities. Wang announced in January that BYD would have 4,000 engineers and invest $14 billion in driver assistance technology, a limited self-driving technology that primarily works on highways and large roads.
BYD remains in an advantageous position against Tesla. Mr. Wang decided to develop plug-in hybrid vehicles, which would account for almost half of BYD’s sales by 2011.
Li Jingyu, a salesman at a BYD dealership in Shenzhen, said many families bought hybrid cars as their first cars to return to their ancestral villages for the Lunar New Year. Li said most villages in China now have chargers, but there aren’t enough to accommodate the large number of motorists arriving for the Lunar New Year, which began Friday night.
“People are just worried about wait times,” he says.
Li Yu and Joy Don Contributed to the report and research.