China’s BYD to overtake Tesla as world’s most popular electric carmaker

Hong Kong – China’s BYD bills itself as the biggest car brand you have never heard of. It might need a different tagline soon.

The automaker

is poised to surpass Tesla 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 such as Toyota Motor, Volkswagen and General Motors, Chinese manufacturers including BYD and SAIC Motor 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 China in 2023 as at October were electric.

“The competitive landscape of the auto industry has changed,” said Ms 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 Mr Elon Musk, the world’s richest executive, and BYD’s billionaire founder Wang Chuanfu.

Whereas Mr Musk has been warning that not enough consumers can afford his EVs with such high interest rates, Mr 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 Mr Musk snickering at BYD’s cars during a 2011 appearance on Bloomberg Television, Mr 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 Mr 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 US in slapping Chinese car imports with higher tariffs to shield thousands of manufacturing jobs.

Other countries’ EV markets are still in their infancy and are not nearly as lucrative.

Management views the US as virtually off-limits due to the escalating trade tensions between Washington and Beijing.

Mr Wang is no Mr 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, Mr 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, billionaire investor Warren Buffett surely is not.

In 2008, Berkshire Hathaway invested about US$230 million (S$304 million) for an almost 10 per cent stake in the Chinese automaker.

When Berkshire started paring its holding in 2022 – BYD shares were trading near their all-time high – the value of its stake had soared roughly 35-fold to around US$8 billion.

In 2016, the company hired Mr Wolfgang Egger as design chief, a role he previously played for Audi and Alfa Romeo.

It also lured away other international executives, including Ferrari’s head of exterior design and a top interior designer for Mercedes-Benz.

By the time China invited Tesla to build the country’s first car plant fully owned by a foreign entity, BYD was no longer resigned to making no-frills econoboxes.

Now, its most expensive model – the Yangwang U8 sport utility vehicle – costs 1.09 million yuan (S$203,400).

While the level of government subsidies has played a role in China’s tremendous EV growth, Mr Paul Gong, UBS Group’s head of China autos research, believes the bigger factor is the level of competition that this support spawned.

“They have to work on the innovation, they have to try and find what consumers really want, and they have to optimise their costs to make sure their EVs are competitive in this highly competitive market,” Mr Gong said.

After tearing down a BYD Seal sedan and finding a 25 per cent cost advantage over legacy competitors, his team concluded that Chinese manufacturers are likely to own a third of the global car market by the end of the decade.

For now, Tesla still has BYD beat on key metrics including revenue, income and market capitalisation.

Analysts at Bernstein expect some of those gaps to close considerably in 2024 – they are projecting Tesla will generate US$114 billion in sales to BYD’s US$112 billion

Analysts expect BYD to launch its third-generation EVs in 2024 offering more technology, such as automated-driving capabilities.

That is one area where BYD falls short with its more affordable products versus upstarts such as Nio and Xpeng.

Even as the number of auto rivals in China has shrunk from over 500 to around 100, new entrants continue to emerge, including well-funded tech giant Huawei Technologies.

When Bloomberg News asked Mr Wang in March whether BYD had aspirations to be as big as Toyota, which in 2023 will be the world’s top-selling overall carmaker for a fourth straight year, he said the development of the EV industry will lead to an industry reshuffle.

“How a car company performs will depend on its tech and response,” he said. “BYD in China’s electrification is the winner for now, but how it will go tomorrow, we can’t say for sure. But we will lean into our advantages and keep making good products.” BLOOMBERG