"A few years ago, the founder of Chinese automaker BYD was worried it might not survive. Now, the company is nipping at the heels of Tesla as the world's No. 1 seller of electric vehicles.
BYD, short for Build Your Dreams, sold 431,603 fully electric cars in the third quarter, just shy of Tesla's 435,059. It's on track to sell around 1.8 million EVs by year-end. That would tie it with Tesla, which has set the same EV sales target for this year, up from 1.31 million it sold in 2022.
BYD, founded in 1995 as a battery maker, has rocketed up the ranks in just the past few years. The company, which also sells hybrid gasoline-electric cars, plans to sell 3.6 million total vehicles this year, likely putting it in the global top 10 automakers by unit sales. It has surpassed Volkswagen as the bestselling car brand in China, and is growing into an export powerhouse.
The leaps are a testament to the ambition of two executives. Founder Wang Chuanfu, 57, born to rice-farmer parents, was orphaned as a child and became an expert battery engineer. His longtime partner, Stella Li, 53, helped sell Warren Buffett's Berkshire Hathaway on the idea that an obscure Chinese company could grow into a global auto giant.
Wang, widely known in China, is a merciless cost-cutter who still flies economy and wheels his own suitcase. Li, who keeps a lower profile, is responsible for overseas business and sales and has negotiated a number of the biggest deals that have helped put BYD on the map. People who know the two describe them as "Mr. Inside" and "Ms. Outside," with Wang focusing on making the products and Li on selling the company to business partners.
Executives at BYD said it is common knowledge within the company that Wang and Li are a couple, and one person who met Wang and Li said they were introduced as husband and wife, an aspect of their relationship that hasn't been reported in international media.
A BYD spokesperson said BYD values teamwork as the company puts emphasis on technological development and building a system, and not on individuals, without commenting on Wang and Li.
BYD's rise echoes the story of many Chinese companies, and Korean and Japanese ones before them. BYD started by copying Toyota products, then grew so proficient at cutting costs that Toyota's then-Chief Executive Akio Toyoda visited to learn its secrets. Chinese officials poured in subsidies and bought BYD vehicles for government fleets, while stimulating the broader EV market with help for buyers.
More recently, BYD has moved aggressively into Europe and Southeast Asia, making inroads by exporting cost-competitive, China-made EVs.
BYD aims to roughly double its export sales to 400,000 vehicles next year. Outside of China, it's already a top EV seller in markets including Australia, Sweden, Thailand and Israel.
At an auto show in Munich last month, executives from rivals flocked to BYD's booth, and attendees booked slots to drive its vehicles days in advance. BYD's main export model, the Atto 3, is marketed in Europe as an "accessible premium" vehicle at around $40,000.
As it shifts its focus onto exports, U.S. and European policy makers, worried about BYD and other low-cost competition from China, are trying to build up their domestic industries.
European automakers are growing more vocal about BYD and its Chinese peers as a potential threat. The EU is investigating whether Chinese automakers benefited unfairly from government help.
In North America, BYD has become one of the largest electric bus and truck makers, seeing that segment as an easier entry point than passenger vehicles amid potential backlash from regulators and U.S. rivals.
U.S.-China relations are so tense that BYD executives said the U.S. consumer car market is effectively off-limits for now.
Expansion beyond China is essential for the company, however. China's economy is slowing -- overall passenger-car sales there have fallen from their peak in 2017 -- and domestic competition is intensifying.
Wang, born in 1966 in Anhui province, was raised by older siblings after both his parents died. He made it to a national public university where he studied physical chemistry, and later researched batteries at a state institute.
He founded BYD in 1995 to make the batteries used in cellphones and other devices -- copying the products of Japanese leaders Sanyo and Sony, said people at BYD.
In Shenzhen, after borrowing some $300,000 from a wealthy cousin, Wang hired more than 1,000 workers and broke down battery manufacturing into hundreds of steps that relatively untrained workers could manage without expensive equipment, said people at the company. A Harvard Business School case study recounted how removing a piece of tape from a battery took two BYD employees -- one to peel up the corner and another to remove the whole strip. The goal was speed, and to avoid the need for expensive machinery.
Stella Li, a statistician from one of China's top universities, arrived in 1996. Though her English was still rudimentary, Wang sent her to Europe and the U.S. to scout for mobile phone companies that might be interested in Chinese batteries that were cheaper than those from the leading Japanese suppliers. Li made clear BYD would work to meet customers' pricing and timeline demands. One customer joked with people at BYD that the first English phrase Li learned must have been, "We can do that," a BYD executive said.
Li brought on Motorola as a customer in 2000 and Nokia in 2002, securing BYD a place among the world's top rechargeable-battery makers.
When BYD listed its shares in Hong Kong in 2002, Wang used some money from the offering to buy the failing car-manufacturing operations of a state-owned weapons maker. He was already making batteries and saw the potential for their use in autos. Toyota had pioneered hybrid gasoline-electric vehicles with its Prius in the late 1990s.
BYD's first car, a gasoline-powered sedan released in 2005 called the F3, looked almost identical to a Toyota Corolla. To an untrained eye, the only difference between the cars was the badge.
Wang was never shy about his strategy of copying. In interviews, he said BYD gained inspiration from others' finished products, and that it specialized in digging through cars to find which parts were patented -- avoiding those and copying others.
"We have to learn from them, then we can stand on their shoulders," he said in an interview in 2021.
BYD values intellectual property, respects its peers as well as rules of the market, and didn't imitate Sony or Sanyo, the spokesperson said.
In the auto business, Wang replicated the way he made batteries to keep costs down. He avoided expensive investments in automation and hired thousands of workers to handle simple processes. He brought in employees on short-term contracts, replacing them to avoid wage increases.
BYD moved production in-house for nearly all components, from chassis to lamps and eventually semiconductors. From its early years, Wang was determined to have BYD make the most important and expensive parts of its cars, including batteries, on its own.
As a result, he was able to sell the F3, the gasoline-engine car, for as little as $8,000, or about half the cost of a Toyota Corolla at the time.
Warren Buffett and his team were among the few Americans who noticed. In 2008, David Sokol, a Buffett lieutenant at the time, traveled to Shenzhen to check out BYD.
Li pitched Sokol on the competitiveness of BYD's batteries and its diverse portfolio of products, which included a prototype of a plug-in hybrid vehicle BYD would launch in China later that year.
In September that year, Berkshire Hathaway bought a 10% stake in BYD for $232 million via its energy unit then run by Sokol, who has since left Berkshire.
Three months later, BYD launched the world's first mass-produced plug-in hybrid, jumping ahead of planned launches of similar vehicles by General Motors and Toyota.
By the end of 2009, BYD's share price had more than quintupled, and Berkshire's position was worth more than $1 billion. Wang had become the richest person in China, according to a Forbes ranking from the time.
BYD's first plug-in hybrid was sold to a limited number of government agencies and corporations in China. The following year, BYD began manufacturing its first all-electric car.
The Chinese government, which was telling domestic automakers to focus more on EVs, rolled out subsidies, tax breaks and relief from car-registration red tape to buyers of battery-powered cars. By the mid-2010s, BYD was introducing hybrid vehicles that were significantly cheaper than comparable models from incumbent hybrid leader Toyota.
By the late 2010s, other Chinese EV startups were piling into the market. And in 2019, Tesla began delivering cars produced at its new plant in Shanghai. These could be sold at much lower prices in China than previous Tesla models because it no longer had to pay import tariffs. By the first half of 2020, about a fifth of EVs sold in China were Teslas, up from around 6% a year earlier.
BYD competes on price with Tesla -- the Chinese maker has in recent years produced a range of autos that have the luxurious touches of higher-end vehicles.
But BYD struggled to compete on range with the lower-cost competitors. It produced a batch of longer-driving cars that used a new, more powerful type of battery, but production was suspended after early reports emerged of the batteries catching fire.
In 2019, BYD sold 21% fewer vehicles than it had in the previous year amid the new competition, a slowing economy and lower state subsidies for electric and hybrid vehicle purchases. Earnings in 2019 dropped by almost half.
A new battery gave it fresh life in 2020. Called the Blade, the battery was one of a number of technologies Wang and his team of engineers had spent years investing in to find a safer battery that could power cars over greater distances.
The long, flat battery maximized power output in a limited space. It made its debut in BYD's Han electric sedan, which the company says can drive 375 miles on a single charge. The car costs around $30,000, or about $40,000 less than a Tesla Model S with a similar range.
By the second half of 2020, BYD couldn't keep up with demand and launched new models using the Blade battery. It outmaneuvered local EV upstarts NIO and XPeng because it had a portfolio of vehicles covering a variety of segments and prices.
BYD global sales more than quadrupled from 2020 to 2022. It is China's top seller in new-energy vehicles -- full EVs and plug-in hybrids -- which now account for nearly one-third of Chinese new vehicle sales. BYD discontinued its gasoline-only vehicles last year.
BYD executives said the company sees commercial vehicles as a way to establish a presence overseas without challenging local manufacturers in the larger, more sensitive passenger-car segment. It plans to introduce new commercial-vehicle models including electric trucks in a number of overseas markets over the next three years, part of a more than $20 billion push, The Wall Street Journal reported earlier this year.
Li has been laying the groundwork for BYD's expansion. Under her guidance, BYD has made deals to supply electric buses to fleet operators in a number of countries including the U.S., U.K. and Japan over the past decade.
BYD continues to draw on low-wage workers to keep its costs low. Some of BYD's lowest-level factory-floor workers said they are paid less than around $750 a month, compared with the roughly $1,000 a month they could earn at Tesla's Shanghai plant.
Factory wages have risen 122% in China over the past decade, and that has led some manufacturers to search elsewhere for cheaper labor. BYD has adjusted by leaning less heavily on people-centered manufacturing methods. Factories BYD has built more recently cost more and have much higher levels of automation, people at the company said.
The investment bank UBS estimates BYD has a cost advantage of around 25% over traditional automakers in North America and Europe, due in large part to its in-house manufacturing of parts. Analysts at UBS recently tore down a 2022 BYD model and found around three-quarters of its parts were manufactured in-house." [1]
1. How China's BYD Became Tesla's Biggest Threat --- Once a maker of cellphone batteries, the company is in the running to become the world's No. 1 seller of electric vehicles. Davis, River; Cheng, Selina. Wall Street Journal, Eastern edition; New York, N.Y.. 05 Oct 2023: A.1.
