The passing of the EV sales crown reflects the shift in competitive dynamics between Tesla’s Elon Musk and BYD’s billionaire founder Wang Chuanfu. —Bloomberg
CHINA’S BYD Co bills itself as the biggest car brand you’ve never heard of. It might need a different tagline soon.
The automaker is poised to surpass Tesla Inc as the new worldwide leader in fully electric vehicle (EV) sales. When it does – likely in the current quarter – it will be both a symbolic turning point for the EV market and further confirmation of China’s growing clout in the global automotive industry.
In a sector still dominated by more familiar names like Toyota Motor Corp, Volkswagen AG and General Motors Co, Chinese manufacturers including BYD and SAIC Motor Corp are making serious inroads.
After leapfrogging the United States, South Korea and Germany over the past few years, China now rivals Japan for the global lead in passenger car exports.
Some 1.3 million of the 3.6 million vehicles shipped from the mainland as of October this year were electric.
“The competitive landscape of the auto industry has changed,” said Bridget McCarthy, head of China operations for Shenzhen-based hedge fund Snow Bull Capital, which has invested in both BYD and Tesla.
“It’s no longer about the size and legacy of auto companies; it’s about the speed at which they can innovate and iterate.
“BYD began preparing long ago to be able to do this faster than anyone thought possible, and now the rest of the industry has to race to catch up.”
The passing of the EV sales crown also reflects the shift in competitive dynamics between Tesla’s Elon Musk, the world’s richest executive, and BYD’s billionaire founder Wang Chuanfu.
Whereas Musk has been warning that not enough consumers can afford his EVs with such high interest rates, Wang is firmly on the offensive. His company offers half a dozen higher-volume models that cost much less than what Tesla charges for its cheapest Model 3 sedan in China.
When a Tesla owners’ club shared a clip in May of Musk snickering at BYD’s cars during a 2011 appearance on Bloomberg Television, Musk wrote back that BYD’s vehicles are “highly competitive these days.”
The likely change in the global EV pecking order marks the realisation of a goal that Wang, 57, set back when China was just starting to foster its now world-beating electric car industry. While BYD continues to pull away from Tesla and all other auto brands at home, replicating its runaway success abroad is proving tricky.
Europe looks poised to join the United States in slapping Chinese car imports with higher tariffs to shield thousands of manufacturing jobs. Other countries’ EV markets are still in their infancy and aren’t nearly as lucrative.
Management views the United States as virtually off-limits due to the escalating trade tensions between Washington and Beijing.Brash address
Wang is no Musk – he eschews social media and largely steers clear of the limelight. But in an uncharacteristically brash address delivered weeks before the European Union opened an investigation into how China has subsidised its EV industry, Wang declared the time had come for Chinese brands to “demolish the old legends” of the auto world.
While many car buyers outside of China are still only dimly aware of BYD, Warren Buffett surely isn’t. In 2008, Berkshire Hathaway Inc invested about US$230mil for an almost 10% stake in the Chinese automaker. When Berkshire started paring its holding last year – BYD shares were trading near their all-time high – the value of its stake had soared roughly 35-fold to around US$8bil.The late Berkshire vice-chairman Charlie Munger saw BYD primarily as a battery play.
On Bloomberg TV in May 2009, he said the company was working on “one of the most important subjects affecting the technological future of man.”
Munger’s family had invested in the company years ahead of Berkshire, and he told an interviewer weeks before his death in November that he had tried to dissuade Wang from getting into the car business.
BYD acquired a failing state-owned automaker in 2003 and introduced its first plug-in hybrid – called the F3DM – in 2008. A New York Times reviewer panned its exterior design, calling the compact “about as trendy as a Y2K-era Toyota Corolla.” The company sold all of 48 units in the first year.
Around that time, China started subsidising plug-in car purchases. Support from the government extended from cities and provinces to the national level, spanning tax breaks for consumers, production incentives for manufacturers, help with research and development, and cheap land and loans.
Rare automaker
As a rare automaker that also made its own batteries, BYD was uniquely positioned to benefit. Before entering the car business, it was the first Chinese lithium-ion supplier to Motorola and Nokia in the early 2000s. To scale up output before consumers were embracing EVs, the company targeted automotive segments that would need lots of cells. Its first electric bus launched soon after the F3DM.“BYD was a miracle,” Munger told the podcast Acquired in an episode that aired in October. He called Wang a genius, saying he kept the company from going broke by working 70-hour weeks, and described him as a fanatical engineer. — Bloomberg
Danny Lee writes for Bloomberg. The views expressed here are the writer’s own.
