Elon Musk burst out laughing in 2011 when asked about Chinese competitors in the electric car market. Now he probably regrets it.
Shares in BYD, short for Build Your Dreams, rose sharply this week after the company said it expects profit to double in the third quarter of 2023 compared to the same period last year.
BYD overtook Tesla in quarterly production and is second only to the US manufacturer in global sales.
BYD’s success is also a sign of the pace at which the Chinese auto industry is growing, having overtaken Japan in 2023 to become the world’s largest exporter.
On the other hand, Beijing’s economic tensions with other states, not just the US and European countries, which are export markets for Chinese electric vehicles, are also growing. The world is increasingly turning to new, clean technologies, and this is yet another example illustrating how difficult it will be for Western countries to move away from dependence on Chinese products, he notes. BBC.
Cum s-a clădit visul Build Your Dreams
BYD had an advantage from the very beginning: unlike manufacturers that started building electric models, this company first produced batteries and then moved on to cars.
Chief executive Wang Chuanfu, whose fortune stands at $18.7 billion, was born in 1966 into a peasant family in one of China’s poorest provinces. Wang was orphaned as a teenager and was raised by his older brother and sister.
After receiving his bachelor’s degree in engineering and metallurgical chemistry, he founded BYD with his cousin in Shenzhen in 1995. The two built a reputation in the field of rechargeable batteries used in mobile phones, laptops and other devices electronics, which competed with more expensive Japanese imports.
BYD went public in 2002 and soon diversified by buying a struggling state-owned automaker, Qinchuan Automobile Company.
Electric cars were still in their infancy when officials in Beijing were looking for a niche market for China to fill. In the early 2000s, they introduced a scheme of subsidies and tax breaksand the Government gave priority to the production of renewable energy.
It was the perfect time for BYD. The batteries it produced actually became the engines of electric cars.
The potential of the Chinese was so seductive that in 2008 the American billionaire Warren Buffett bought 10% of BYD Auto sharessaying that one day it will become “the biggest player in the world car market that will inevitably become electric”.
And he was right. Today, China dominates global electric car production, thanks in large part to BYD. Beijing is now looking to maintain its lead – in June it offered BYD a $72.3 billion tax break over four years, its biggest subsidy at a time when sales had slowed.
Analysts say BYD owes its growth to its start-up business – batteries. They are the most expensive parts of an electric car, and producing them in-house helps BYD save a lot of money. Instead, competitors, including Tesla, are forced to rely on battery suppliers.
That largely explains why the BYD Seal has a 15 percent market lead over the Chinese-made Tesla Model 3, according to a UBS report. BYD’s entry-level model, the Seagull, costs $11,000. Tesla recently unveiled the Model 3 sedan, which starts at $36,000 in China.
And the Chinese company is also on the rise in the global electric market – at the beginning of the year it surpassed the best-selling Volkswagen model in China.
BYD contra Tesla
In 2011, Elon Musk laughed when asked in a television interview about BYD and Chinese competition. Tesla was then a young public company and had unveiled the prototype of its first electric car – the Model S.
Today, Musk probably regrets looking down on the Chinese. Tesla sold 74,073 electric vehicles in September, nearly 11 percent less than last year, according to the latest data released by the China Passenger Car Association.
It’s a development in the opposite direction from BYD, which sold 286,903 cars in the same period – a 43% increase in the electric and hybrid car market.
We achieved total monthly sales throughout September of 287,454 NEVs.
In 2022, we sold more than 1.86 million NEVs—that momentum continues throughout 2023 with total sales for the year surpassing 2 million NEVs. pic.twitter.com/OdCatBdWEN
— BYD (@BYDCompany) October 3, 2023
The irony is that Tesla is at the origin of the rise in popularity of electric vehicles in China, the world’s largest car market.
When Beijing aimed to attract more electric vehicles, it relaxed rules to allow foreign firms to open factories in the country. Until then, companies like General Motors and Toyota needed a local partner to build a factory in China.
When conditions changed, Tesla immediately took advantage. Even today, Tesla is the largest exporter of electric cars made in China and the second best-selling Chinese manufacturer.
Musk has ambitious plans to expand operations in China and build huge battery warehouses that would act as a network of electric vehicles, powering charging stations.
But as tensions between Washington and Beijing have grown, he has turned his attention to India, which presents itself as an alternative to the Chinese market.
Musk said Tesla would arrive in India “as soon as humanly possible” after a June meeting with Indian Prime Minister Narendra Modi.
The Chinese “Dragon” attacks the realm of the giants
The lane is narrowing fast for traditional automakers, whose business is still fueled by gasoline engines, the BBC writes.
Analysts predict a seismic shift by 2030 as green incentives to combat climate change expand, driving down prices.
Car manufacturers from Europe and Great Britain “gasp” in this competition. They may be helped by prompt regulation of the European market, which could become less accessible to competitive Chinese builders.
The European Commission has opened an investigation and is looking into whether tariffs should be imposed to protect EU manufacturers from the “invasion” of cheap imported Chinese electric vehicles, as they benefit from Beijing’s subsidies.
Commission chief Ursula von der Leyen said the EU had not forgotten how its solar energy sector had been hit by China’s “unfair trade practices”.
For now, the eco-friendly cars that BYD sells at affordable prices are a big hit in Germany, which is struggling with high inflation and high energy costs. The Chinese are entering with aplomb the realm of giants Mercedes-Benz, BMW and Volkswagen trying to compete in the electric car market. The showdown continued at the Munich Motor Show in September, when Chinese electrics made waves.
Bill Russo, founder and CEO of consulting firm Automobility, summed it up simply: “There’s demand everywhere in the world for affordability. And the place that can give that to the world right now is China.”
T.D.
Photo: Facebook / BYD Global
2023-10-21 04:36:00
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