In the world of electric vehicles Tesla has reigned supreme but its days as top dog may be numbered.
In China the world’s largest EV market it’s been losing ground to domestic automakers as a ruthless price war has inflamed an already competitive market
If Tesla had not had price cuts of 20 to 30% they probably would have had sales drop last year. Warren Buffet’s backing has made BYD a tough competitor for Tesla.
The Chinese automaker logged 2.4 million new car insurance registrations in 2023 making it the top brand in China with a market share of 11%.
I don’t think anywhere in the history of the automobile has the company enjoyed such explosive growth in such a short period.
BYD is now a giant, you look at the monthly rankings they’re always at the top
In 2023 BYD produced more than 3 million new energy Vehicles which include plug-in hybrids and Battery electrics surpassing Tesla’s production of 1.84 million cars
BYD is so much ahead of Tesla in China it’s like it’s just it’s almost ridiculous.
Early on, Elon Musk was dismissive of BYD Chinese car makers weren’t taken seriously by their rivals.
It used to be that foreign brands had the majority of the market share in China now it’s Chinese Brands and when you look at the vehicles that these Chinese OEMs and Chinese brands are putting on the market they are some very good vehicles.
BYD’s Global Plans
Now they’re a serious threat as they not only dominate the Chinese market but have grand Ambitions of expanding globally.
In 2023 BYD’s exports grew 334 to 242,655 vehicles across 70 countries. About 40% of the EV Market in China is owned by BYD and they’re just starting to export globally to places like Australia Japan Europe and potentially very soon the United States.
The CLSA has some predictions that by 2026 BYD will enter the top five automakers in the world and this year they reached the top 10.
Birth of Build Your Dreams (BYD)
BYD short for Build Your Dreams was originally started as a battery company in 1995 by Wong ChuanFu in Shenzen China.
It started out in the ’90s as a manufacturer of batteries for cell phones and for the first 10 years low cost was their magic formula we’re going to undercut all the competition.
After building a successful business supplying customers such as Motorola and Nokia it decided to enter the auto business it bought Xi’an TsinChuan automobile and launched its first internal combustion car in 2005 the F3 in 2008 it launched the F3 DM a plug-in hybrid EV
Driving in and riding the earliest BYD they’re called the F3 and the F1 you know inspired by Formula 1 racing which is almost comical because their cars were these sort of mediocre commuter cars that were powered by Mitsubishi engines.
In 2010 it unveiled its first fully electric vehicle the E6. It progressed but it wasn’t perfect still you know taxis would buy the electric vehicle because they got incentives to do so but very few private individuals had any appetite for BYD cars.
The company’s Auto Division didn’t see much growth through the 2010s sales increased but only gradually profits on sales were mediocre.
In fact, in 2018 and 2019 BYD’s sales year on year were declining up until very recently it was on the fence whether or not it was going to make it as a car company.
However it managed to turn things around in 2019, I saw some of its new products called the Tang and the Han designed by German designers and world-class designers the first time you see oo these are actually good-looking cars there’s potential here.
In 2022 the company stopped production of its ice Vehicles focusing on building battery electric and plug-in hybrids.
The majority of their cars are in the mainstream market so that helps with volume and they’ve also not completely moved into pure electric vehicles at once.
BYD Backed by Warren Buffet
BYD is backed by Warren Buffett’s Berkshire Hathaway and considered entering the US market in 2008 when Buffett acquired 10% of the company.
Buffett himself said “I’m betting on the man I don’t understand the technology I’m not sure about the China Market will EVS take off or not but this guy is one in a 10 million so he recognized something special in Wang Chang Fu” and it’s with that that he gave his blessing to investment about quarter billion dollars.
A lot of the reason why he invested was because of the battery business more so than the vehicle business and that has grown dramatically along with their vehicle sales.
BYD’s stock is up over 1, 1400% since Buffett first invested Berkshire Hathaway did pair down its stake in the company selling more than 60% of its shares since last summer.
Why would he draw down? So one is geopolitics as he’s mentioned with Taiwan he said I don’t like TSMC because of the location
The second thing going is Tesla ignited a price war about one year ago at the end of 2022 and that price War has been ferocious so much so that most EV makers in China are losing money today there’s only Tesla BYD and a couple of others that are actually able to make a profit.
At the core of BYD ‘s winning strategy price, many of its Vehicles undercut the competition.
In Munich just a few months ago they launched the seagull price it gets this $11,500 very competitive in the segment of $35,000 and its expertise in batteries typically the most expensive part of an EV has helped here as well.
BYD Batteries
BYD designs develop Engineers its own batteries at scale so not only they have the capability and the capacity for their own products but they’re also supplying batteries globally with plans to build battery plants all over the world
They are one of the the top companies in the world uh building lithium iron phosphate batteries in particular they cost about 30 to 40% less per kilowatt hour to manufacture and LFP batteries are also extremely sturdy they stay working for a really long time.
As a leader in battery technology, it actually supplied batteries to other car makers like Tesla, Toyota, and Kia in 2020.
The company launched a lithium iron phosphate battery called Blade. The company praised it as a good advancement because it holds high energy density with high levels of safety.
By many accounts BYD ‘s blade battery is best-in-class globally right now what they’ve done essentially is to maximize the energy density and this is attractive to everyone in the industry.
BYD is not just in the passenger car market it makes trucks buses and other vehicles as well. The company actually builds and sells electric buses in the US at a factory in Lancaster California.
They have had a big business in the commercial fleet vehicles including buses in the US and Latin America but its Passenger cars are what account for the majority of its sales the company sells different models at different price points
The dynasty series includes the kin with a price starting around $14,000 two vehicles priced all the way up to the tong on the high end starting around $334,000.
BYD Sedan Models
The vehicle that really put BYD on the map for the new energy segment is the hand it’s a sedan that they launched in July 2020 and this car just took off.
The Ocean series appeals to younger consumers and features the seagull BYD ‘s smallest car with a starting price of around $10,000 up to the Seal a sedan that starts at around $22,000
When they released the Dolphin and Seal models one of the things that I was told was well we have many different colors it’s opposed to appeal more to young families and especially women.
BYD Luxury Cars
BYD has also introduced vehicles under luxury sub-brands Denza YangWang and Fang Cheng Bao.
Denza a joint venturer with Mercedes-Benz created in 2010 introduced a few EVS for the Chinese market before undergoing a restructuring in 2021
Mercedes has since reduced its share to 10% but BYD has continued to develop new vehicles starting with the D9 a luxury minivan the N7 a direct competitor to the Tesla Model Y and the N8 a larger SUV
In 2023 YangWang made two high-end segment cars: a supercar called the U9 and the luxurious SUV called U8.
Details of its next car the U7 recently revealed it will have quad electric motors with a range of around 500 Miles.
Fang Chang Bao also created in 2023 launched its first vehicle the bow five in November last year.
YangWang is definitely BYD ‘s effort to enter that really luxury segment of the market. The cars are either extremely gigantic or they’re in the sports car category which is very different from BYD ‘s other cars.
Most automakers at some point in their history try to create Halo vehicles that will reflect well on the rest of the brand and create an image for the brand and BYD is no different.
It’s a sign of their growing confidence and say look we can do what Ferrari or Lamborghini or Porsche can do uh just as well if not better.
BYD entering markets in 2018-19
Being China’s leading electric car maker, BYD has set its sights on bringing its cars to other markets starting around 2018 and 2019.
The market slowed and the margin started to drop. All Chinese automakers said uh-oh if we we stay still in our domestic Market we’re going to drown in overcapacity and hyper-competition. We’re already seeing that play out.
It’s already a major player in Southeast Asia where it has a 43% market share in EVs and is currently the top-selling EV maker in Thailand Brazil Colombia and Israel
In Thailand, they were basically non-existent in the market a year ago and just in the last few months they’ve become the top-selling car brand and I believe they also have plans to double their sales in the Philippines and Singapore this year 2024.
Last year the company started selling in Mexico and is looking to enter Japan they are launching the dolphin in Mexico now uh increasingly growing into other markets in South America where Tesla doesn’t have as much of a presence right now.
BYD Global Setup
BYD is building up its existence in Europe. Last year it sold 13,000 Vehicles there and now has its own giant cargo ship capable of carrying 7,000 vehicles.
It recently delivered 3,000 cars to Germany in its first voyage.
It’s pretty in line with BYD ‘s strategy overall to make sure they have as much as possible inhouse with the ship that just gives BYD extreme control over costs
It’s safe to say that their number one priority right now overseas is Europe because in Europe there’s legislation that goes electric. There are people with money to buy electric cars, there’s decent charging infrastructure
The company has said it will open its first European facility in Hungary, but the Chinese automaker is facing hurdles abroad.
The EU in the last couple of months has announced they’re going to be investigating subsidies that went into the production of Chinese-made electric vehicles
The EU Commission is saying hey we don’t believe your costs. We think that you’re probably dumping or over-subsidizing your products and that’s why you’re so competitive here
In China, new energy vehicles have received significant backing from the government.
Rodium group estimates that BYD received approximately $4.3 billion in state support between 2015 and 2020 but the biggest question of all is that BYD tries to sell its cars in the US. they’re definitely preparing for the US market waiting for the right timing us and Europe promise a profitable Market.
They have to enter and compete and win here to thrive globally currently tariffs make it expensive with made-in-China EVS hit with a 25% tax on top of the 2.5% tariff imposed on imported cars
A lot of these companies and the investors in these companies which in some cases include various levels of government in China seem to be more of an acceptance for at least for the time being taking losses in order to develop market share.
BYD’s new Mexico Facility Centre
It recently announced it will build a factory in Mexico possibly to gain a foothold in the North American Market few people know it but China’s the number one supplier of cars to Mexico already and the next natural step will be for them to build manufacturing plants in Mexico they’re already looking at sites are well advanced in their research and we’ll ship our vehicles up through the border into the US starting probably their expectations after 2025
What is the possibility of the Chinese getting closer and closer to our Market?
Within the next five or six years you will see several automakers likely begin final assembly in Mexico why is that important because of NAFTA.
It basically eliminates that tariff people will say Americans won’t buy Chinese you know what you ask somebody do you want to pay $9,000 for a v an SUV or do you want to pay 19 or 20,000 for an SUV no contest and that’s what we found with everybody we’ve talked to down here
As per reports, US lawmakers have warned Chinese automakers could flood the market and be a threat to domestic automakers
People in DC definitely paying attention on that and you can bet that they’re talking to the Mexican authorities.
The risk is real for the US at a time when UAW has just negotiated all-time record high wages and perks.
BYD’s Growth in Australia
In Australia Chinese automakers aren’t restricted by tariffs and BYD has grown considerably there after entering the country in 2022 it now has 14% of the EV Market
Tesla leads with a 53% share but has been selling there since 2014
Conclusion:
The Chinese car companies are the most rival car companies in the world. They will have massive success outside of China depending on what kind of tariffs or trade barriers are recognized.
I think if there are no trade barriers established they will pretty much demolish most other car companies in the world they’re extremely good.
But with China becoming such an automotive Powerhouse it may be hard to keep its Ambitions at Bay.
Chinese automakers have learned very quickly how to produce really appealing vehicles they’re more affordable and they’re arguably in many respects better Vehicles the rest of the industry has reason to be scared
Today, China has the strength to deliver half of the world’s car demand. China is good at it as they have advanced designs and improved qualities at low cost.
You start to wonder what is going to stop this.
Source: CNBC