Why Everyone Except Tesla Should Be Terrified Of BYD
BYD, Tesla, Ford, GM, Stellantis, Mercedes, Toyota, Hesai, Xiaomi SU7, India, VinFast
Why Everyone Except Tesla Should Be Terrified Of BYD
There is a new sheriff in town. The name is BYD.
By now, you have heard that there is a new global No. 1 in electric vehicle sales. BYD edged past Tesla in 2023, delivering an estimated 3 million vehicles – about 2 million them pure electrics.
Tesla need not worry too much about BYD (more about that later). But everyone else who builds cars should be gripped by panic.
Here is why:
Price. No one can match BYD on price. Period. Boardrooms in America, Europe, Korea and Japan are in a state of shock. The BYD Seagull compact sedan launched in Munich in September starts at $11,500. The BYD Dolphin is priced at $33,000 in the UK, 30% lower than the VW ID.3 hatchback.
BYD is comfortable making thin margins to win market share.
Even Toyota is worried. “For the first time, I came face to face with the competitiveness of Chinese components,” Toyota EV Chief, Takero Kato said. After seeing manufacturing processes not used in Japan, Kato thought, “We’re in trouble!”
Blade Battery. BYD now produces arguably the world’s most advanced battery, called the Blade. The battery delivers maximum energy density, safety and efficiency. Most of gains are from the super-efficient blade battery pack design and inventive manufacturing processes.
Think of the Blade as the equivalent of a high quality Toyota gasoline engine: reliable, affordable and efficient. Mercedes, Ford and Kia have already decided to source some their batteries from BYD.
Design. BYD’s early cars used to look clunky and ride even clunkier. No more. Since hiring former Audi designer Wolfgang Egger in 2016, BYD has dramatically improved the looks and interior of its vehicles. Egger works with a design team of 600 people from 10 countries including Italy, Spain and Germany.
Export Ramp. BYD achieved global sales leadership in EVs while selling 92% of its production inside China. Now the company is moving aggressively into global markets. BYD is already winning a record number of customers in Australia, Brazil, Israel, Mexico, Sweden and Thailand (where it already controls 33% of the Kingdom’s EV market).
What is scary is that prices on exported vehicle today are 10-20% higher than the same BYD products sold in China. That means BYD has room to offer even lower prices on products going overseas in 2024.
Quality. Perhaps the most remarkable BYD improvement is quality. “I could sell a ton of these in America. The looks, the ride, these are right there with Hyundai’s best.” That is what the president of a major US dealer group told me after we completed a recent private test drive of BYD’s newest offerings.
Why is Tesla different?
Elon & Co. clearly respect BYD. The Tesla Gigafactory in Berlin sources the Blade battery for its base models. But Elon & Co do not fear BYD - at least not yet:
Brand & Customers. Tesla enjoys extraordinary global brand power. The BYD image is rather bland, evoking little emotion. As a battery company that moved up into cars, BYD is still searching for an identity that clicks with customers.
Sources close to the company say that BYD is “spending only 10% of what it needs to” on marketing. The hesitation to invest more is one of the reasons why BYD got off to a slower-than-anticipated start in Europe.
Price points and customers are different, too. Tesla (premium) and BYD (mostly mass market) serve different customers. Things could change. But today few people looking at a Tesla opt for a BYD.
Superior Software. BYD has improved its software, but still has far to go to catch Tesla. The BYD models I drove offered many features but the user interface was at times not intuitive and at other times sluggish. Or as reviewers at Top Gear put it, the BYD experience “grates as much as it soothes.”
BYD’s core competence is battery-making. It is not easy to move from batteries into advanced technologies like software, AI and autonomous driving. Tesla, on the other hand, is the original software-define vehicle. “Tesla is a AI/Robotics company,” Elon Musk declared last week.
Charging Network. Tesla owns its own network. BYD relies on third-party charging services. When BYD steps into European or North American markets, it will be seen as another second-rate charging citizen, along with other non-Tesla brands. Tesla is miles ahead because the experience is totally integrated – no payment hitches or hook-up surprises. Even if BYD joins Tesla’s network, it will still need to overcome irritating delays and complexities like software handshakes.
So What - BYD Going Global
What does this mean for global automakers not named Tesla? BYD will continue to win large chunks of market share from legacy automakers worldwide.
China's market, the world's largest, no longer needs or wants foreign makers. Jeep, Suzuki and Mitsubishi are already gone. VW, Ford, Hyundai, Nissan, and others will depart within five years. GM, once the poster-child for successful US business in China, will likely be gone, too. (GM sales in China are already down by more than 50% from their 2017 peak).
BYD announced plans to invest in a greenfield plant in Hungary last month. Suppliers tell me that they expect BYD to build another plant in Mexico by 2025. A decision on the timing of entry into the US market will likely come after US presidential election.
Now What - Find A Way to Compete
Leadership teams at the global automakers can no longer afford to stick their heads in the sand, hoping that BYD will go away. They must move urgently to build specific plans for competing with BYD and other rising Chinese automakers.
My company is now actively advising several automakers and advanced tech companies as they begin that crucial - call it existential - work.
The key differentiator - no surprise - will be superior software that delivers an exceptional customer experience.
Future Cars & Markets
Xiaomi SU7. One of the five largest smart phone makers on the planet, Xiaomi, is now officially in the car business. Founder and CEO Lei Jun launched the the Xiaomi SU7 this week. The design reminds one of a cross between a Porsche Taycan Turbo and a Tesla Model 3. Pricing and full specs will be revealed in early 2024. Link
VinFast - First US Dealership. Leith Automotive Group in North Carolina is the first VinFast dealer in America. VinFast is moving towards a hybrid model that includes both direct sales through its stores and franchised dealers. VinFast said it has received 70 dealer applications across the United States. Link
Aito M9. Huawei-backed Aito launched a full-size SUV this week with prices starting at $66,000. The company, which features advanced technologies from Huawei, says it received 15,000 pre-orders for the M9. Link
Batteries / Supply Chains
Gotion in Fremont. Gotion, a tier-two Chinese battery maker, has started production of battery packs in Fremont, California. The company plans to operate from three base camps in the United States - Michigan, Illinois and California. It is all part of a “made-in-America” initiative. Link
Hesai Sensors. Here is a fascinating account about how US customers are advising China’s Hesai to hire lobbyists in Washington to sustain market access in America. Hesai customers include robotaxi companies Cruise — which is backed by General Motors — and Zoox, along with automated trucking company Kodiak Robotics. Hesai brings deep expertise in lidar sensors. Link
New Numbers / Milestones
China still builds and buys more EVs than the rest of the world combined. Chinese EV makers are sitting on enough capacity to supply 75% of global EV demand. That should keep western automakers awake at night.
Global EVs Sales 2023 (e)
Sources: BNEF, Company Reports, S&P.
Better Batteries. How Western Companies Will Get To Affordable EVs:
Vincent Pluvinage, Karl-Thomas Neumann and James Frith of OneD Battery Sciences.
The Dunne Insights Newsletter: Future. Electrics. Global.