Chinese automaker BYD was a battery maker dabbling in car building when it introduced its new model in 2007. U.S. executives at the Guangzhou auto show gawked at the vehicle’s uneven purple paint. the car and the poor fit of its doors.
“They were the laughingstock of the industry,” said Michael Dunne, a Chinese auto industry analyst.
Nobody makes fun of BYD now.
The company overtook Tesla in global sales of fully electric cars late last year. BYD is building assembly lines in Brazil, Hungary, Thailand and Uzbekistan and is preparing to do so in Indonesia and Mexico. Its exports to Europe are increasing rapidly. And the company is poised to overtake the Volkswagen Group, which includes Audi, as China’s market leader.
BYD’s sales, more than 80% of which are in China, have increased by about a million cars in each of the past two years. The last automaker to achieve this in a single year in the U.S. market was General Motors – and that was in 1946, after GM had suspended passenger car sales for the previous four years due to World War II.
“BYD’s growth is unlike anything the industry has seen in many decades,” said Matt Anderson, curator of transportation at the Henry Ford Museum in Dearborn, Michigan.
Based in Shenzhen, the hub of China’s electronics industry, BYD has shown how Chinese automakers can exploit the country’s dominance in electrical products. No company has benefited more from China’s adoption of battery electric cars and plug-in gasoline electric cars. These vehicles together account for 40% of China’s auto market, the world’s largest, and are expected to account for more than half next year. Like most Chinese automakers, BYD does not sell its cars in the United States because Trump-era tariffs remain in effect, but BYD sells buses in the United States.
BYD is leading China’s exports of electric cars and is rapidly building the world’s largest car carrier ships to transport them. The first of the ships, the BYD Explorer No. 1, is making its maiden voyage from Shenzhen with 5,000 electric cars on board and is expected to arrive in the Netherlands by February 21.
The success of China and BYD has come with increased scrutiny.
Elon Musk, Tesla’s chief executive, warned about China’s strong electric car exports during a company earnings call in January. “Frankly, I think that if trade barriers are not established, they will destroy most other businesses in the world,” he said.
Rapid gains by BYD and other Chinese automakers in Europe have prompted the European Union to open an investigation into Chinese government subsidies and could lead to the imposition of tariffs. BYD’s annual reports show a total of $2.6 billion in government aid between 2008 and 2022. And that doesn’t include other aid, like making sure the city’s taxi companies home of BYD only buy BYD electric cars.
BYD declined to comment on the subsidies. In a statement, the company said the BYD Explorer No. 1, its new ship, “represents an important milestone for BYD as it expands into international markets and contributes to the development of the global energy vehicle industry.” news”.
China has built enough factories to make more than twice as many cars as its market can buy. This led to a price war in China, notably between BYD and Tesla, with discounts inflicting heavy losses. One of BYD’s newest models, the Seagull subcompact, starts at less than $11,000.
The real estate crisis and the fall in the stock market are now making Chinese consumers wary of buying a car. But BYD’s low manufacturing costs have put it in a better position than most of its rivals to survive a long sales downturn and industry upheaval.
BYD Chairman Wang Chuanfu founded the company in 1995 to make batteries for Motorola and other consumer electronics companies. He had studied at Central South University in Changsha, an elite institution famous for its research into battery chemistry. But I dreamed of making cars.
In 2003, BYD purchased a factory in Xi’an that manufactured gasoline-powered cars. But the company struggled at first, developing a reputation early on as a maker of brickbreakers. During a visit to the factory in 2006, a large repair area at the end of the assembly line was cluttered with newly built cars that already needed more work.
BYD’s sales have increased as the Chinese market has soared. Warren E. Buffett bought a nearly 10% stake for $230 million in 2008, giving BYD not only an infusion of cash but also global cachet. The same year, Mr. Wang promised to start exporting battery-electric cars to the United States within two years.
But at the time, electric cars were expensive to build and had limited range, and Mr. Wang had to thwart his plan to enter the American market. In a 2011 interview, he questioned his insistence on battery-electric cars. Automakers should focus on gasoline-electric hybrids, he said. He added: “There is still huge potential in the Chinese electric car market. »
By 2012, automobile production in China had caught up with demand. Buyers have become more demanding. BYD’s car sales and stock prices plunged as multinationals offered sleeker models. Industry executives and analysts have questioned whether BYD has a future.
But Mr. Wang made two risky bets that paid off.
In 2016, he hired Wolfgang Egger, a prominent Audi designer, who in turn hired hundreds more automotive engineers with bold tastes. They have completely redesigned BYD models.
Wang also figured out how to replace industry-standard chemicals in rechargeable lithium batteries – nickel, cobalt and manganese – with cheaper iron and phosphate. But early batteries made from cheap chemical compounds quickly ran out of power and had to be recharged even after short trips.
In 2020, BYD introduced its Blade batteries, which closed most of the range gap with nickel-cobalt batteries for a fraction of their cost.
Tesla began manufacturing and selling large numbers of cars in China that same year, and enthusiasm for electric cars swept the country. BYD was ready with cheap batteries and Mr. Egger’s new designs.
Tesla has also started using lithium iron phosphate batteries in cheaper models. BYD still primarily sells cheaper cars with lower range, while Tesla primarily sells more expensive cars with greater range.
Swiss bank UBS found last year that a BYD Seal electric hatchback cost 35% less to make than a slightly smaller, similarly quality Volkswagen ID.3 made in Europe. The savings only partly come from cheaper lithium iron phosphate batteries.
BYD makes three-quarters of the Seal’s parts. Like Tesla, BYD uses only a few electronic systems in each car. In contrast, VW outsources up to two-thirds of its components. BYD has also benefited from lower labor costs in China, although these have risen as factories compete to hire skilled workers.
BYD now has its own walled city in Shenzhen, a southeastern city neighboring Hong Kong. An airport-style monorail transports workers from the company’s 18-story apartments to BYD’s office towers and research labs.
Liu Qiangqiang, an engineer at the Shenzhen center, said the staff of his auto development team has almost tripled since he joined the company from General Motors 15 months ago.
“The pace is fast,” he said.
After rejecting autonomous driving a year ago, BYD swung into action when consumer electronics companies Huawei and Xiaomi showed off cars with considerable autonomous driving capabilities. Mr. Wang announced in January that BYD had 4,000 engineers working on assisted driving, a limited form of autonomous technology that works mainly on highways and major roads, and that it would invest $14 billion in the technology.
BYD has a lingering advantage over Tesla: Mr. Wang’s decision in 2011 to develop plug-in hybrid cars, which account for nearly half of BYD’s sales.
Li Jingyu, a salesman at a BYD dealership in Shenzhen, said many families bought a hybrid car as their first car so they could return to their ancestral villages in the Lunar New Year. Most villages in China now have chargers, Li said, but not enough for the drivers’ first visit during the Lunar New Year, which began Friday evening.
“People are just worried about the wait time,” he said.
Read you And Joy Dong contributed to reports and research.
