Chinese carmaker BYD has one of the largest booths at the 2023 IAA Auto Show in Munich, Germany.
Arjun Kapoor | CNBC
Elon Musk fired BYD mocked their product in a 2011 interview with Bloomberg.
“Did you see their car?” Musk quipped. “I don’t think it’s particularly attractive, the technology isn’t very strong. BYD has had pretty serious problems as a company in its home turf of China. I think their focus is, and should be, on making sure they don’t die in China.”
BYD has not been eliminated. Instead, BYD overtook Tesla as the largest electric vehicle maker in the fourth quarter, outselling its U.S. rivals in battery-powered vehicles.
“Their goal is to become China’s largest automaker and make Chinese manufacturing famous,” Taylor Ogan, CEO of Snow Cow Capital, said of BYD’s long-term ambitions.
So how did this Chinese company that started out as a mobile phone battery company become an electric vehicle giant?
BYD’s history
While BYD is now known as an electric vehicle giant, its reach extends into areas from batteries to mining and semiconductors, which is a big reason for its success.
Chemist Wang Chuanfu founded BYD in 1995 in the southern Chinese city of Shenzhen, a large technology hub in China. The company was founded with 20 employees and capital of 2.5 million yuan ($351,994 at today’s exchange rate).
In 1996, BYD began producing lithium-ion batteries, the type used in our modern smartphones. This coincided with the growth of mobile phones. BYD supplied batteries to Motorola and Nokia, the two giants in the mobile phone industry at the time, in 2000 and 2002 respectively.
In 2002, BYD rode the success of lithium-ion batteries and listed on the Hong Kong Stock Exchange.
BYD shifts focus to cars
It wasn’t until 2003 that BYD acquired a small car manufacturer called Xi’an Qinchuan Automobile.
Two years later, it launched its first car called the F3, a combustion model. Then in 2008, it launched the F3DM, its first foray into electric vehicles. The F3DM is a plug-in hybrid electric vehicle.
Warren Buffett’s Berkshire Hathaway At that time, it invested US$230 million in BYD.
This strengthens BYD’s electric vehicle ambitions.
BYD continues its push into electric vehicles, which is where its history as a battery maker comes into play. In 2020, the company launched the Blade Battery, which many believe helped spark BYD’s growth in electric vehicles.
It is LFP or lithium iron phosphate battery. At the time, Ogan said, many battery manufacturers were moving away from lithium iron phosphate batteries because they believed they had poor energy density, meaning they were too heavy for the energy they could provide.
But BYD claims the Blade is a breakthrough, offering good energy density and a high level of safety.It has promised to put the technology into its Han, a sports sedan released in 2020 that is seen as a rival Tesla’s BYD subsequently introduced the Blade S into subsequent models it released.
“The energy density at the cell level and the pack level was actually higher than what BYD originally launched…everyone was blown away,” Ogan said.
BYD sold 130,970 pure electric vehicles in 2020. Last year, the company sold 1.57 million pure electric vehicles.
What’s behind BYD’s success?
The Blade’s breakthrough highlights the reasons for BYD’s success in electric vehicles – strategic investments and the fact that BYD has more businesses than just cars.
“BYD is emerging as a supplier in the high-tech sector, increasing its flexibility by supplying batteries to companies that are difficult to please, such as Apple,” Sino Auto Insights’ Tu Le told CNBC.
“Wang Chuanfu then had enough money to acquire a run-down local Chinese car brand and was able to focus on innovation in battery technology enough to sell it to other automakers. If that wasn’t enough, they dug in and kept doing it. “Improve the design, engineering and quality of your own vehicles. We didn’t know this at the time, but everything it has done over the last 15-20 years has allowed it to overtake Tesla in Q4 ’23. “
Wang Chuanfu, Chairman and President of BYD.
Xie Mei | South China Morning Post | South China Morning Post | Getty Images
At the beginning, BYD did not directly enter the field of pure electric vehicles. The company is still selling hybrids, which Canalys analyst Alvin Liu said is key to BYD’s initial success.
“In the early stages of China’s electric vehicle market, BYD chose to launch pure electric vehicles (BEV) and plug-in hybrid electric vehicles (PHEV) at the same time. This strategy allowed BYD to win the market and users despite imperfect charging infrastructure. The advantages of electric vehicles are not very clear yet,” Liu told CNBC.
“PHEV’s characteristics such as high economic benefits and no range anxiety have played an important role in BYD’s win in the market.”
BYD has positioned itself in the mid-range market with fewer Chinese competitors, which will help drive growth, Liu said. Liu said BYD has done a good job in brand building, creating different sub-brands to address different price points in the market.BYD is such an example Mid- to high-end electric vehicle brands are gaining momentum.
Beijing supports electric vehicles
In addition to BYD’s own strategies, its rise has also benefited from the Chinese government’s strong support for the electric vehicle industry. In past years, Beijing has offered subsidies to incentivize electric vehicle buyers and provided state support to the industry. These measures began around 2009, when BYD was seeking to increase its promotion of electric vehicles.
Rhodium Group estimates BYD received about $4.3 billion in state support between 2015 and 2020.
“BYD is a highly innovative and adaptable company, but its rise is inseparable from Beijing’s protection and support,” Rhodium Group senior analyst Gregor Sebastian told CNBC. “If Without Beijing’s support, BYD would not be the global giant it is today.”
“Over time, the company has enjoyed below-market equity and debt financing, allowing it to expand production and research and development activities.”
global ambitions
After dominating the Chinese electric vehicle market, BYD is now making a major push overseas.It sells cars in several countries including the United Arab Emirates, Thailand and the United Kingdom
In Southeast Asia, BYD owns 43% of the electric vehicle market. But BYD’s international expansion isn’t just about selling cars, it’s also about manufacturing and materials.
BYD said in December it would open its first European manufacturing plant in Hungary.And the company also watching Purchase of lithium mining assets in Brazil. Lithium is a key component of BYD’s batteries.
However, as it expands globally, the government has become concerned about the subsidies that Chinese automakers receive.
In September, the European Commission, the EU’s executive arm, launched an investigation into subsidies to Chinese electric vehicle manufacturers.
At the same time, the United States is trying to promote the development of the domestic electric vehicle industry through the “Inflation Reduction Act” in order to keep Chinese competitors out.
“Measures such as the IRA and EU countervailing investigations are designed to hinder China’s progress in these markets,” said Rhodium Group’s Sebastian.
“To ensure continued growth, BYD is actively addressing these political obstacles, as demonstrated by its recent investment in a Hungarian electric vehicle factory, underscoring its commitment to global expansion.”
What’s next?
The battle between Tesla and BYD, the world’s two largest electric car makers, will also continue. Sino Auto Insights’ Le said he believes BYD has yet to “reach its full potential.”
“Most car companies didn’t take them seriously for a long time. That’s part of their journey mirrors what happened with Tesla, because people didn’t take Tesla seriously in the early days either,” Le said.
As for Tesla, the company will face tougher competition in 2024, as Chinese rivals launch more models and traditional automakers try to catch up in the electric car race.
Daniel Roeska, senior research analyst at Bernstein Research, told CNBC that there won’t be a big boost to sales across Tesla’s vehicle portfolio in the coming months. BYD, on the other hand, may experience faster growth.
“On the contrary, BYD is really accelerating its growth in Europe and other overseas markets… So the BYD story will definitely have more growth in the next 12 to 24 months,” Roeska said.
Tesla’s Musk has realized that he should not underestimate BYD. In a comment posted on X, Musk responded to a video of his 2011 interview with Bloomberg, saying: “That was many years ago. Today, their cars are very competitive.”
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