BYD: China’s electric vehicle powerhouse charges into Europe
Threat of EU tariffs may not be enough to slow carmaker in its attempt to challenge Tesla on global stage
Germany’s men kicked off Euro 2024 on Friday in Munich. The city is storied in football terms, but it also occupies an important place in Germany’s self-image for a different reason: Munich is home to BMW, one of the country’s car exporting powerhouses.
Yet it will not be the logos of BMW or German rivals including Volkswagen or Mercedes-Benz plastered on stadiums or television coverage. Instead, China’s BYD is the only carmaker to sponsor Europe’s premier international tournament.
Auto Trader said the advertising campaign was responsible for a 69% week-on-week increase in views of BYD models on its website, during the first weekend of the tournament from Friday to Sunday.
BYD is vying with Elon Musk’s Tesla as the world’s largest electric carmaker, and Europe is its key export target. But BYD is facing its own Euro drama, as the EU threatens to impose tariffs on its products.
The EU highlighted alleged unfair subsidies for the trio of BYD, Geely and the state-owned SAIC Motor. If confirmed after negotiations with China, BYD will face tariffs of 17.4%, in an effort to protect the European car industry and its 3 million workers.
Yet many experts believe tariffs alone will not be enough to slow the march of BYD on Europe’s car market.
For BYD’s founder, tariffs by the US and the EU are a sign of the newfound strength of China’s car industry. Wang Chuanfu– often described as China’s Elon Musk – last week reportedly told an audience of car executives at an industry conference in Chongqing: “If you are not strong enough, they will not be afraid of you.”
Wang studied metallurgy in Hunan province, before founding BYD as a battery company in 1995. He gained Motorola and Nokia as customers, before snapping up a bankrupt car factory in 2003 to produce hybrids (vehicles that combine a battery with a petrol engine). Since then Wang has built BYD into the world’s second-largest battery maker, behind only Chinese rival CATL, and the world’s second-largest maker of electric cars, after briefly overtaking Tesla at the end of 2023.
Subsidies and tariffs
BYD faces a lower tariff rate than other Chinese carmakers, such as Geely’s 20% or SAIC’s 38.1%. It is thought this was partly because of its cooperation with the EU, but also because the analysis suggested it benefited less from subsidies than rivals.
That would be a surprise, as previous estimates of Chinese subsidies by the Kiel Institute for the World Economy suggested BYD “receives particularly high subsidies”, including €2bn (£1.7bn) in 2022 alone, according to public filings. BYD has also benefited heavily from China’s generous electric car grants.
Whatever the exact level of support, the company’s headquarters at Pingshan, on the outskirts of Shenzhen, rivals Volkswagen’s Wolfsburg in size. Gregor Sebastian, an analyst covering Chinese industry at the consultancy Rhodium Group, said aid from the city government had also played an important role in BYD’s development.
The cars BYD produces in Pingshan are not particularly remarkable. But that is a big change from Chinese petrol or diesel cars, which often had a reputation for feeling cheap. By contrast, at an industry test day last month, cars from BYD and its Chinese rivals Omoda, Ora and MG (owned by SAIC) were not out of place alongside German and Korean marques.
BYD’s entry-level Dolphin and its more premium Seal offer features as standard that might cost extra from rivals. Even a rotating central screen felt sturdy when this reporter ill-advisedly tugged at it rather than pressing the button to rotate. Notably, increasingly crucial digital features such as voice assistants appear better executed than much more expensive European competition.
Matthias Schmidt, a Berlin-based electric vehicle (EV) analyst, said BYD sold fewer than 10,000 cars in western Europe in the first four months of 2024. However, he added that BYD may have started with “ambitious pricing, presumably designed to soak up any rise in European tariff increases”.
The cheapest version of a Dolphin will start at £25,490, less than a VW ID.3.. Yet a version of the Dolphin sells for 99,800 yuan (£10,700) in China. Even accounting for extra costs because of stricter UK and European regulation, that implies a lot of leeway to absorb tariffs. A planned car factory in Hungary could export to the EU tariff-free, and an executive last week said BYD was committed to building a second.
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“The whole business of tariffs isn’t going to hole China automotive below the waterline,” said Rupert Mitchell, who worked for years in the Chinese car industry for the now bankrupt startup WM Motor. Mitchell, who now runs the Blind Squirrel Macro blog, said: “We definitely felt that we had a cost advantage versus the rest of the world.”
BYD’s electric ambitions are not limited to cars. It has already built up a strong position in the electric bus market, including in the UK where the Canadian-owned bus maker Alexander Dennis builds the bodies for buses running on BYD chassis.
Despite its courting of bus-buying local authorities, the company still appears to want to control its public image closely. BYD last month invited UK journalists to view its newest electric bus, only to rescind the same invitation at short notice – apparently discomfited by the prospect of newspapers asking questions.
The company blamed an unspecified “misunderstanding” between the company and the external public relations agencies that handled the invitations. The event went ahead with specialist media.
Battery dominance
BYD’s roots as a battery maker appear to have given it an important manufacturing advantage. Rhodium’s Sebastian said vertical integration – owning the supply chain rather than buying parts from elsewhere – had given it “a lot of control over costs”.
Tu Le, the managing director of Sino Auto Insights, a consultancy, highlighted its ownership of computer chip factories as well as its batteries. And “they have scale”, he added, predicting 4m car sales this year – about half pure electric and half hybrid. “There is no one close to building as many clean energy vehicles as BYD.”
And where other carmakers have focused on long-range batteries containing expensive nickel, manganese and cobalt (NMC), BYD has pioneered the use of the cheaper lithium iron phosphate (LFP) chemistry.
Al Bedwell, the director of global powertrain at LMC Automotive, said BYD had “invested in [LFP] heavily and optimised it to the point that it can compete”, including through designs that minimise the packaging around battery cells.
So far the company has proven itself vital to the global transition away from petrol and diesel cars – including in poorer but fast-growing countries such as Brazil and Indonesia, where BYD is opening plants.
“You wouldn’t have so much success [in the global transition] without BYD,” said Sebastian. “The only other company that is like that is Tesla. Only they are driving the EV transition at scale.”