China’s BYD was a battery maker that tried to make cars when it introduced its newest model in 2007. American executives at the Guangzhou auto show noticed the car’s patchy purple paint and poorly fitting doors.
“It was the laughing stock of the industry,” said Michael Dunne, an analyst of the Chinese auto industry.
Nobody’s laughing at BYD now.
The company overtook Tesla in global sales of all-electric cars late last year. BYD builds assembly lines in Brazil, Hungary, Thailand and Uzbekistan and is preparing to do so in Indonesia and Mexico. It is rapidly expanding its exports to Europe. And the company is on the verge of overtaking the Volkswagen Group, which includes Audi, as the market leader in China.
BYD’s sales, more than 80% of them in China, have grown by about one million cars in each of the past two years. The last automaker to do so in even one year in the US market was General Motors — and that was in 1946, after GM had suspended passenger car sales for the previous four years due to World War II.
“BYD’s growth is unlike anything the industry has seen in many decades,” said Matt Anderson, curator of transportation at the Henry Ford Museum in Dearborn, Mich.
Based in Shenzhen, the hub of China’s electronics industry, BYD has shown how Chinese automakers can capitalize on the country’s dominance in electric products. No company has benefited as much from China’s embrace of battery electric cars and gasoline-powered electric cars. These vehicles together make up 40 percent of China’s auto market, the world’s largest, and are expected to account for more than half next year. Like most Chinese automakers, BYD does not sell its cars in America because Trump-era tariffs remain in place, but BYD does sell buses in the United States.
BYD is leading China’s export push into electric cars 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 by February 21.
With the success of China and BYD came more scrutiny.
Elon Musk, Tesla’s chief executive, warned about the strength of Chinese electric car exports on the company’s earnings call in January. “Honestly, I think if trade barriers aren’t put in place, they’re going to pretty much demolish most other companies in the world,” he said.
BYD and other Chinese automakers’ rapid gains in Europe have led to a European Union investigation into Chinese state subsidies and could lead to tariffs. BYD’s annual reports show a total of $2.6 billion in government aid from 2008 to 2022. And that doesn’t include other help, like making sure taxi companies in BYD’s hometown buy only BYD electric cars.
BYD declined to comment on the subsidies. In a statement, the company said the BYD Explorer No.
China has built enough factories to make more than twice as many cars as its market can buy. This has led to a price war in China, particularly between BYD and Tesla, with discounts that have caused heavy losses. One of BYD’s newest models, the subcompact Seagull, starts at less than $11,000.
A real estate crisis and falling stock market are now making Chinese consumers more cautious about buying a car. However, BYD’s low manufacturing costs have left it in a better position than most competitors to survive any lengthy sales and industry slowdown.
BYD chairman Wang Chuanfu founded the company in 1995 to make batteries for Motorola and other consumer electronics companies. He had studied at Central South University in Changsha, an elite institution renowned for battery chemistry research. But he dreamed of building cars.
In 2003, BYD bought a factory in Xi’an that made gasoline cars. But the company had trouble at first, gaining an early reputation for building clunkers. On a visit to the factory in 2006, a large repair bay at the end of the assembly line was clogged with newly built cars that already needed more work.
BYD’s sales rose as the Chinese market soared. Warren E. Buffett bought nearly 10 percent of the stock for $230 million in 2008, giving BYD not only an influx of cash, but also a global collection. That same year, Mr. Wang promised to start exporting battery electric cars to the United States within two years.
But electric cars at the time were expensive to build and had limited range, and Mr Wang had to kill his plans to enter the US market. In a 2011 interview, he second-guessed his emphasis on battery electric cars. Automakers should focus on gasoline-electric hybrids, he said. He added, “There is still huge potential in the Chinese market for electric cars.”
By 2012, car production in China had met demand. Buyers became more selective. BYD’s car sales and share price fell as the multinationals offered more stylish models. Industry executives and analysts questioned whether BYD had a future.
But Mr. Wang made two risky bets that paid off.
In 2016, he hired Wolfgang Egger, a prominent Audi designer, who in turn hired hundreds of other automotive engineers with bold tastes. They completely redesigned the BYD models.
Mr. Wang also discovered how to replace standard industry chemicals in rechargeable lithium batteries—nickel, cobalt and manganese—with cheaper iron and phosphates. But early batteries made from the cheap chemical compounds ran out quickly and needed to be recharged after short trips.
In 2020, BYD introduced its Blade batteries, which closed most of the so-called range gap with nickel-cobalt batteries at a fraction of their cost.
Tesla began building and selling large numbers of cars in China that same year, and enthusiasm for electric cars swept the country. BYD was ready with cheap chemical batteries and Mr. Egger’s new designs.
Tesla also started using lithium iron phosphate batteries in less expensive models. BYD still mainly sells cheaper cars with lower range, while Tesla mainly sells more expensive cars with longer range.
Swiss bank UBS found last year that a BYD Seal electric hatchback sedan cost 35 percent less than a slightly smaller Volkswagen ID.3 of similar quality made in Europe. The savings came only in part from cheaper lithium iron phosphate batteries.
BYD makes three-quarters of the Seal’s components. Like Tesla, BYD only uses a few electronic systems in each car. Instead, VW outsources up to two-thirds of its components. BYD has also benefited from lower labor costs in China, although this has increased as factories compete to hire skilled workers.
BYD now has its own walled city in Shenzhen, a southeastern city next to Hong Kong. An airport-style monorail transports workers from 18-story corporate apartments to BYD’s office towers and research labs.
Liu Qiangqiang, an engineer in downtown Shenzhen, said the staff of his car development team had nearly tripled since he joined the company from General Motors 15 months ago.
“The pace is fast,” he said.
After rejecting self-driving a year ago, BYD got in on the action when consumer electronics companies Huawei and Xiaomi unveiled cars with significant self-driving capabilities. Mr. Wang announced in January that BYD had 4,000 engineers working on assisted driving, a limited form of autonomous technology that works mainly on highways and major roads, and would invest $14 billion in the technology.
BYD has a lasting advantage over Tesla: Mr. Wang’s decision by 2011 to develop plug-in hybrid cars, which account for nearly half of BYD’s sales.
Li Jingyu, a salesman at a BYD dealership in Shenzhen, said many families bought a hybrid as their first car so they could drive the Lunar New Year back to their ancestral villages. Most villages in China now have chargers, Mr Li said, but not enough for the crowds of visiting drivers on the Lunar New Year, which began on Friday night.
“People are just worried,” he said, “about the wait time.”
Li You and Joy Dong contributed reporting and research.
