Off to the world market. BYD electric cars before shipping in the port of Yantei in China. Picture Alliance
Tesla has so far been one of the top dogs in the Chinese electric car market. But now the BYD brand from southern China has overtaken the Americans.
BYD has long had its sights not only on China, but on the entire global market.
What makes the Chinese industry’s new shooting star so successful? And how does he go about it?
When Wang Chuanfu founded his small battery company in Shenzhen, China’s streets were still humming with dirty CO₂ blasters. Almost 30 years later, more and more electric cars are buzzing through the cities. Many of them have a logo with three letters: BYD. The company initially built cell phone batteries, but the southern Chinese company has only been in the car business since 2003 and has now become the largest electric car manufacturer in the world‘s most important vehicle market, China. With more than 520,000 electric cars sold in the fourth quarter of 2023, Wang Chuanfu’s group pushed the previous leader Tesla off the pedestal worldwide. The Americans were only ahead over the year.
The news stunned the industry. Elon Musk’s electric car pioneer Tesla sold 484,507 cars in the same period. In the domestic US market, where BYD is not yet represented and would face high import duties, Tesla remains number one in electric cars.
Electric cars for 10,000 euros: BYD comes above price
But what is behind BYD’s success? The brand produces many parts itself and sells its models cheaply in different segments, thereby reaching many customers. Tesla and other electric car manufacturers, on the other hand, are trying to get customers through the expensive premium range. These brands did not want to enter the middle and lower segments because the price competition there is high, says industry expert Zhong Shi. However, BYD started there and, according to the analyst, is the only brand that can fully cover these segments. In China, BYD offers new cars starting at the equivalent of 10,000 euros.
An important advantage is the batteries – the most expensive individual component in an electric car. Because BYD makes these themselves, they maintain cost control. Other companies have to rely on suppliers, as Zhong explains. “BYD’s own batteries are better than any competitor’s, the cost is lower and the quality is not bad,” he says.
Tech companies as new competitors for electric cars
Others are also trying to build batteries themselves. But BYD, as a company that comes from battery manufacturing, has a head start. BYD battery customers also include Tesla and Toyota. Beijing’s subsidies to the industry also helped BYD save taxes, buy land cheaply and hire cheap labor.
New competitors are China’s tech companies. Xiaomi and Huawei are building their own electric car models or, in the case of Huawei, their own car brand through collaborations with other companies. According to industry expert Ferdinand Dudenhöffer, today’s car companies could become pure car manufacturers that only assemble vehicles, while the software important for the car comes from the tech companies. “It looks like we are witnessing the biggest transformation in the industry,” explained Dudenhöffer.
German car manufacturers are lagging behind in China
Europe’s largest car manufacturer, Volkswagen, is also feeling the effects of BYD shaking up the Chinese market with low prices. For decades, Wolfsburg was ahead in China. This year, BYD outpaced the Germans with its rapid growth, also because their electric cars like the ID.3 were initially not well received in China. The result: VW had to significantly reduce the prices of the ID.3 in order to boost sales.
CEO Oliver Blume actually wanted to forego large discounts in favor of returns. However, before the price cuts, picky Chinese buyers preferred domestic brands, also because they offered them better internet connectivity in the car. The ID.3 is currently available in China for just under 163,000 renminbi, the equivalent of around 20,800 euros. In Germany, the basic version of the car costs around 40,000 euros.
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BYD stands for Build Your Dreams
However, China alone is not enough for BYD, which incidentally stands for Build Your Dreams. The Chinese have been trying to get their foot in the door abroad for a long time – including in Germany. It’s not easy for them. In North America’s second-largest car market, high tariffs of 25 percent and the regulations of the Inflation Reduction Act are blocking Chinese access.
But they are on their way: last week the huge cargo ship “BYD Explorer No. 1” at sea. The ship chartered by BYD is intended to bring 7,000 cars from China to Europe.
There are hardly any BYD cars in Germany so far. According to the Federal Motor Transport Authority, 3,438 BYD vehicles were newly registered from January to November in 2023 – with a total of almost 470,000 purely electric cars during this period. “I think Germany is not yet a main market for BYD,” says Zeng Zhiling from the Shanghai consulting firm LMC Automotive Market Consulting. The focus is more on Southeast Asia and South America.
Factory in Hungary as a door opener for Europe
In the EU, Brussels’ anti-subsidy investigation also threatens to ruin business for Chinese electric car manufacturers. The magic cure for this is: localization. BYD, like Volkswagen in China, must relocate its production to Europe, says expert Zhong. The Chinese are currently building a factory in Hungary that will open the door to the EU market.
BYD could soon be expected on the German market. But according to Zhong, the Chinese still have homework to do: BYD’s products are good, but the company doesn’t have the necessary knowledge to produce cars for the international market. Their approach to the brand and their ability to connect with a culture abroad have traditionally been lacking, says Zhong.
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