HONG KONG – China’s BYD bills itself as the biggest car brand you’ve 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 the mainland as at October this year were electric.
“The competitive landscape of the auto industry has changed,” said 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 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, 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 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, 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 last year – 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 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$203,700).