China’s BYD was delisted by Elon Musk. Now it beats Tesla

Beijing, China – The Chinese company that dethroned Tesla this month as the world’s top seller of electric cars is not known.

BYD, founded in 1995 by entrepreneur Wang Chuanfu, has little brand recognition outside China despite selling some 641,000 pure electric and hybrid vehicles in the first half of 2022, nearly 80,000 more than its rival. based in Texas.

But for Tony Fu, owner of a BYD Tang PHEV hybrid since 2015, the resounding success of the Shenzhen-based company comes as no surprise.

“Its prices are much better than Tesla’s,” Fu, who lives in Shanghai, told Al Jazeera.

“And he has more role models. Now domestic [Chinese] brands offer more choice – so it’s no wonder BYD’s sales are better than Tesla’s.

Tony Fu has been driving a BYD hybrid car since 2015 [Courtesy of Tony Fu]

BYD’s dramatic rise comes despite years of denials about the quality and safety of Chinese electric vehicles, underscored by incredibly high recall rates in the industry that have at times topped 10%.

Among the most prominent critics was Tesla CEO and co-founder Elon Musk.

“Have you seen their car? Musk said in a 2011 Bloomberg interview, “I don’t think they make a good product.”

Just over a decade later, BYD, backed by Warren Buffett, is not only overtaking Tesla, but also on a more promising trajectory – although both companies defy “apples-to-apples” comparisons, as many BYD models are hybrid electric vehicles, while Tesla models are all fully electric.

The Chinese company reported sales growth of 315% in the first six months of the year, compared to 46% growth for the former number one.

BYD and Tesla did not respond to Al Jazeera’s requests for comment.

Despite selling more than 90% of its vehicles at home, BYD’s ability to tap into China’s pool of nearly 480 million licensed drivers has allowed it to harness explosive growth.

Value for money has been central to the automaker’s appeal, with models offered at lower prices than overseas rivals, thanks in part to the use of less powerful but cheaper lithium iron phosphate batteries.

In congested cities like Beijing and Shanghai, where drivers rarely get a chance to test the speed limit, this accessibility has proven to be a bigger draw for many customers than the time it takes to go from 0 to 60mph.

BYD’s Han sedan retails in China for around $32,000, nearly $18,000 less than Tesla’s entry-level Model Y.

BYD Headquarters
BYD has found success by offering models at prices well below those of its foreign rivals [File: Bobby Yip/Reuters]

Bill Russo, founder and CEO of Shanghai-based strategy and investment advisory firm Automobility, described BYD’s recent sales milestone as “kind of manifest destiny.”

“China’s electric vehicle market is by far the largest in the world,” Russo told Al Jazeera.

“BYD is the dominant player, with five of the top 10 selling models, so it makes sense for China to lead the world in electric propulsion. And certainly be the main force in the market.

China’s ambitions to be a powerhouse for electric vehicles have also contributed to BYD’s rise.

Beijing has poured billions of dollars into battery and electric vehicle companies to research alternatives to the combustion engine, as well as subsidies and tax breaks to encourage the adoption of low-emission vehicles.

BYD, which has a proven track record as a maker of cellphone batteries for companies such as Motorola, has been a major beneficiary of this influx of cash.

Government support helped BYD shift to electric vehicles in the late 2000s, by which time it had become a major player in gasoline vehicles with the acquisition of state-owned automaker Tsinchuan.

“BYD has appreciated and taken full advantage of government incentives and incentive policies,” Thomas Callarman, former director of the Automotive Research Center at China Europe International Business School, who has studied China’s automotive industry, told Al Jazeera. electric vehicles.

“Furthermore, in our talks with some government officials, as well as talks with BYD management, it was emphasized to us that China wants to be the global supplier of electric vehicles, and BYD wants to lead the charge – no backlash. of words,” Callarman added.

BYD has also enjoyed an advantage during the pandemic due to its location in Shenzhen, which has seen less severe lockdowns than Shanghai, where Tesla has its largest overseas factory.

“Additionally, BYD produces most of its own parts, and major suppliers of parts it hasn’t produced are available from Chinese suppliers,” Callarman said.

Wang Chuanfu,
Chinese billionaire Wang Chuanfu founded BYD in 1995 [File: Reuters]

But Russo, the founder of Automobility, said it would be a mistake to reduce BYD’s success to government support or luck.

“The market for electric vehicles would not exist today if the Chinese government did not invest heavily in subsidies. But I could say the same about Tesla: If the California government hadn’t heavily subsidized zero-emission vehicles, Tesla wouldn’t have made any profit for the first 10 years of its existence,” he said. .

“The most expensive component in the vehicle is the battery. So if you started as a battery company and then grew into an electric vehicle company, you dominate the supply chain. Tesla and BYD both have this chain vertically integrated battery supply that gives them a competitive advantage, anyone else relies on someone like LG, Samsung or even BYD to make the battery for them.

BYD’s next challenge will be to break into overseas. After years of selling electric buses in major markets including the United States, India and Japan, the automaker is aiming to move its cars overseas.

Earlier this month, the company announced plans to enter the Japanese market next year with the Atto 3, Dolphin and Seal models, following recent forays into Australia, Singapore, Norway and the Netherlands. Down.

“I think the key to that success would be his success in the United States,” Callarman said.

It’s not a sure bet, especially given the ban on federal funding for Chinese manufacturers such as BYD that was introduced last year amid allegations of unfair competition and potential cybersecurity risks. Industry watchers also point out that many American consumers rightly or wrongly feel that Chinese brands are inferior to their American, European and Japanese counterparts.

Other looming challenges apply to the electric vehicle industry as a whole, including potential shortages of key battery materials like lithium.

Still, Russo said BYD had significant advantages, including attractive pricing, that weighed in favor of its overseas takeoff.

“BYD has the ability to do that. Affordable electric vehicles are a valuable prospect outside of China,” he said.

“If you’re looking for affordable electric vehicles, the only place you can find them right now is China, until global industry steps up its efforts to develop these products at a price the market will accept.”

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