How China built its Tesla killer BYD

New YorkChina’s BYD was a battery maker trying to make a car when it unveiled its latest model in 2007. American officials at the Guangzhou Auto Show were shocked by the cars’ uneven purple color and the poor fitting of their doors.

“They were the laughingstock of the industry,” said China auto industry analyst Michael Dunn. No one laughs at BYD anymore.

The company overtook Tesla in global sales of all-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.

It is rapidly increasing its exports to Europe. And the company is set to overtake Volkswagen Group, which also includes Audi, as the market leader in China. BYD’s sales, more than 80 percent of which are in China, have increased by about a million cars in each of the past two years.

The last automaker to accomplish this feat in just one year in the U.S. market was General Motors, and that was in 1946, when GM suspended passenger car sales for the last four years due to World War II. “BYD’s growth is unlike any the industry has seen in several decades,” said Matt Anderson, curator of transportation at the Henry Ford Museum in Dearborn, Michigan.

Based in Shenzhen, the center of China’s electronics industry, BYD has shown how Chinese automakers can take advantage of the country’s dominance in electrical products.

No company has benefited as much from China’s adoption of battery electric cars and plug-in gasoline electric cars. The share of these vehicles in China’s auto market, the world’s largest, is 40 percent and is expected to increase to more than half next year.

Like most Chinese automakers, BYD does not sell its cars in the United States because of Trump-era tariffs in place, but BYD does sell buses in the United States.

BYD is leading China’s electric car exports and is rapidly building the world’s largest car carriers to transport them. The first of the ships, BYD Explorer No. 1, is on its maiden voyage from Shenzhen with 5,000 electric cars and is expected to arrive in the Netherlands on February 21.

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Tesla CEO Elon Musk warned about the strength of Chinese electric car exports in the company’s earnings conference call in January. “Frankly, I think if trade barriers weren’t put in place, they would pretty much collapse most other companies in the world,” he said.

The rapid growth of BYD and other Chinese automakers in Europe has prompted an EU investigation into Chinese government subsidies and could result in tariffs.

BYD’s annual report shows government support totaling $2.6 billion from 2008 to 2022. And that doesn’t include other assistance, like ensuring that taxi companies in BYD’s hometown only buy BYD electric cars.

BYD declined to comment on the subsidies. In a statement, the company said 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 new energy vehicle industry.”

China has built enough factories to assemble more than twice the number of cars that can be bought in its market. This has sparked a price war in China, especially between BYD and Tesla, with discounts causing huge losses. One of BYD’s latest models, the Seagull subcompact, starts at less than $11,000.

BYD Chairman Wang Chuanfu founded the company in 1995 to make batteries for Motorola and other consumer electronics companies. He studied at Central South University in Changsha, an elite institution renowned for battery chemistry research. But his dream was to make cars.

global reputation

In 2003, BYD purchased a factory in Xi’an that produced gasoline-powered cars. But the company struggled initially and gained a reputation for making scrap metal. On a factory tour in 2006, a large repair area at the end of the assembly line was filled with newly built cars that already needed more work.

BYD’s sales increased as the Chinese market grew. Warren E. Buffett bought about a 10 percent stake in 2008 for $230 million, giving BYD not only a cash windfall but also global prestige. That same year, Wang promised to begin exporting battery-electric cars to the United States within two years.

But electric cars cost too much to manufacture at the time and had limited range, and Wang had to scrap his plans to enter the US market.

In a 2011 interview, he questioned their emphasis on battery electric cars. Automakers should focus on gasoline-electric hybrids, he said. He said: “The Chinese electric car market still has great potential.”

By 2012, automobile production in China had caught up with demand. Buyers became more selective. BYD’s car sales and share price declined as multinational companies introduced luxurious models. Industry executives and analysts questioned whether BYD had a future.

But Wang proceeded to make two risky bets that paid off.

In 2016, it hired Wolfgang Egger, a leading Audi designer, who in turn hired hundreds of automotive engineers with a penchant for adventure. They completely redesigned BYD models.

Wang also figured out how to replace the industry-standard chemicals in rechargeable lithium batteries (nickel, cobalt and manganese) with cheaper iron and phosphate. But early batteries made from cheap chemicals drained quickly and had to be recharged even after short trips.

In 2020, BYD introduced its Blade batteries, which closed most of the so-called range gap with nickel-cobalt batteries for a fraction of their cost.

walled city

BYD now has its own walled city in Shenzhen, a southeastern city next to Hong Kong. An airport-style monorail transports workers from the company’s 18-story apartments to BYD’s office towers and research laboratories.

Liu Qiangqiang, an engineer at the Shenzhen center, said the staff of his auto development team has nearly tripled since he joined the company from General Motors 15 months ago.

After dismissing autonomous driving a year ago, BYD sprang into action when consumer electronics companies Huawei and Xiaomi introduced cars with considerable autonomous driving capabilities.

Wang announced in January that BYD had 4,000 engineers working on assisted driving, a limited form of autonomous technology that works primarily on highways and major roads, and that it was investing $14 billion in the technology. Will do.

BYD has had a persistent advantage over Tesla: Wang’s decision in 2011 to develop plug-in hybrid cars, which account for about half of BYD’s sales.


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