As China’s BYD floods Europe with cheap electric cars, can old-fashioned tariffs slam on the brakes?

A giant Chinese cargo ship lumbers along the west coast of Africa before rounding the Cape of Good Hope. The ‘BYD Explorer 1’ returns from a potentially game-changing trade mission: flooding Europe with cheaper electric cars and taking down Tesla.

The 200-meter-long ship has been returning from its maiden voyage for two weeks, having left more than 5,000 vehicles in ports in the Netherlands, Germany and Belgium.

Its final destination is Shenzhen, in southeastern China, from where it set sail more than two months ago.

This bustling city near Hong Kong is home to the ship’s owner, BYD. It is a company so large that it has built its own walled city, with an airport-style monorail for the workers.

The brand, which stands for Build Your Dreams, is backed by legendary American investor Warren Buffet and is the biggest automaker most Westerners have never heard of.

But that’s about to change. BYD recently surpassed Elon Musk’s Tesla to become the world’s best-selling electric car maker in the final three months of last year.

Some are dubbing BYD the ‘Tesla Killer’, after it emerged victorious in a brutal price war in China, a country that makes and buys more electric cars than the rest of the world combined. BYD seems unstoppable.

However, old-fashioned protectionism could come to a screeching halt. Despite ambitious environmental targets to ban sales of new petrol and diesel cars in just over a decade, UK Trade Secretary Mark Harper said last week Britain could use “robust” trade sanctions. to prevent China from flooding the market with cheap electric vehicles.

And the post-Brexit trade watchdog, the Trade Remedies Authority, has also signaled it is ready to launch an investigation into Chinese electric vehicles.

Lawmakers in Europe and the United States have opposed the prospect of their citizens buying cheaper electric cars, subsidized by the People’s Republic of China.

BYD has received a total of £2 billion in subsidies from the communist government in Beijing between 2008 and 2022, it said in its annual reports.

European Commission President Ursula von der Leyen complained in September that this made the price of her cars “artificially low.”

The company, however, is moving forward, and Explorer 1 signals the next logical phase in its quest for global domination.

Of the three million cars that BYD sold last year, only 243,000 were exported.

Slowing global electric car sales, including in China, has given BYD more urgency to expand abroad.

For this reason, it has ordered seven more cargo ships, all capable of transporting up to 7,000 electric cars, to sail on the high seas in the next two years.

It has installed assembly lines in Brazil, Hungary, Thailand and Uzbekistan. More manufacturing plants are in the pipeline in Indonesia and Mexico, which BYD sees as a backdoor to the U.S. market. BYD has a knack for making well-designed vehicles at cheaper prices than its rivals.

The firm recently announced the launch of its cheapest car yet in China: a supermini called the Seagull Honor Edition, which costs the equivalent of less than £8,000.

It launched its first model in the UK last year, the Atto 3 SUV, which starts at around £36,000, around £9,000 less than Tesla’s equivalent, the Model Y, Europe’s best-selling new car of the year. past.

BYD’s Yangwang U9 all-electric supercar, with its distinctive scissor doors, has been launched in three weeks to rival the likes of Ferrari and Lamborghini. However, about half of BYD’s sales are popular plug-in hybrids, which has helped it have an advantage over Tesla as the global appetite for electric cars has waned.

The company was founded in 1995 by Wang Chuanfu, a chemist from a poor farming family, when he was only 29 years old.

Now known as “the president”, he made his initial fortune manufacturing mobile phone batteries and other components for Siemens, Nokia and Motorola, before expanding into automobile manufacturing after purchasing an assembly plant in Xi’an, central from China, in 2003.

BYD’s potential was discovered by Warren Buffett’s right-hand man, the late Charlie Munger, in 2008, several years before the company launched its first electric car.

Buffett’s Berkshire Hathaway investment vehicle bought a 10 per cent stake for £181m.

The stake, which has been reduced to around 8 per cent, is now worth £5.1bn.

Wang pulled off another big coup in 2016 by poaching Wolfgang Egger, a prominent German car designer who had worked for Alfa Romeo, Audi and Lamborghini.

BYD cars, which until then had a reputation for being unattractive, received a stylish makeover.

A few years later, Wang achieved a technological breakthrough with the 2020 launch of the cheaper and more efficient ‘Blade’ batteries, which Tesla and Toyota use in some of their models.

This helped fuel the growth of BYD, which has a stranglehold on the electric vehicle battery supply chain and owns everything from stakes in lithium mines to the battery packs themselves.

It reached a key milestone in the final three months of last year, when it sold 526,409 all-electric vehicles, compared to the 484,507 sold by Tesla (although the US company still sold more throughout the year). BYD’s meteoric rise has spooked more established automakers around the world. They have called for tighter trade barriers to curb China’s huge invasion of electric cars.

Musk, who ridiculed the appearance of BYD cars in 2011 when he dismissed them as no threat, has changed his mind. In an earnings call with investors in January, he warned that Chinese auto exporters would “virtually demolish most other companies in the world” unless new trade tariffs were quickly put in place.

Rejection from Western governments is the biggest threat to BYD’s advancement.

Higher tariffs are expected, and the EU is launching an investigation to determine whether not only BYD, but also other Chinese automakers such as Geely (owner of Volvo) and SAIC, owner of MG, benefit from “hidden” government subsidies, including cheap ones. loans and supplies of steel and electricity.

The 27.5 percent tariffs on imports of Chinese electric cars imposed by the Trump regime have helped exclude BYD from the US market.

Earlier this month, US President Joe Biden took new steps to block imports of Chinese electric vehicles, warning that internet-connected cars and trucks pose national security risks.

But as things stand, BYD is still in pole position to overtake its rivals.