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BYD: China’s electric vehicle power reaches Europe

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BYD: China's electric vehicle power reaches Europe

GRAMGermany’s men kicked off Euro 2024 on Friday in Munich. The city has history in football terms, but it also occupies an important place in Germany’s self-image for a different reason: Munich is the home of BMW, one of the country’s car export powerhouses.

However, it won’t be the logos of BMW or its German rivals, including Volkswagen or Mercedes-Benz, plastered across stadiums or television coverage. Instead, China’s BYD is the only automaker to sponsor Europe’s premier international tournament.

Auto Trader said the advertising campaign was responsible for a 69% weekly increase in views of BYD models on its website, during the first weekend of the tournament, from Friday to Sunday.

BYD competes with Elon Musk’s Tesla as the world’s largest electric car maker, and Europe is its main export target. But BYD faces its own European drama, as the EU threatens to impose tariffs on its products.

Electric cars for export wait to be loaded onto the BYD Explorer No 1 ship at Yantai Port in east China’s Shandong Province. Photograph: –/AFP/Getty Images

The EU highlighted alleged unfair subsidies for the trio of BYD, Geely and state-owned SAIC Motor. If confirmed after negotiations with China, BYD will face tariffs of 17.4%, in an effort to protect the European car industry and its 3 million workers.

However, many experts believe that tariffs alone will not be enough to slow BYD’s advance in the European car market.

For the BYD founder, the US and EU tariffs are a sign of the new strength of China’s car industry. Wang Chuanfu, often described as China’s Elon Musk, reportedly told an audience of auto executives at an industry conference in Chongqing last week: “If you are not strong enough, they will not be afraid of you.”

Wang studied metallurgy in Hunan province, before founding BYD as a battery company in 1995. He won clients including Motorola and Nokia, before taking over a bankrupt car factory in 2003 to produce hybrids (vehicles that combine a battery with a gasoline engine). Wang has since built BYD into the world’s second-largest battery maker, behind only Chinese rival CATL, and the world’s second-largest electric car maker, after briefly overtaking Tesla in late 2023.

Subsidies and tariffs

BYD faces a lower tariff rate than other Chinese automakers, such as Geely’s 20% or SAIC’s 38.1%. This is believed to have been partly due to its cooperation with the EU, but also because analysis suggested it benefited less from subsidies than its rivals.

That would be a surprise, as previous estimates of Chinese subsidies by the Kiel Institute for the World Economy suggested BYD “receives particularly high subsidies”, including €2bn (£1.7bn) in 2022 alone, according to public documents. BYD has also benefited greatly from China’s generous electric car subsidies.

Chinese subsidies chart

Whatever the exact level of support, the company’s headquarters in Pingshan, outside Shenzhen, rivals Volkswagen’s in Wolfsburg in size. Gregor Sebastian, an analyst covering Chinese industry at consulting firm Rhodium Group, said help from the city government also played an important role in BYD’s development.

The cars that BYD produces in Pingshan are not particularly notable. But that’s a big change from Chinese gasoline or diesel cars, which often had a reputation for looking cheap. By contrast, at an industry test day last month, cars from BYD and its Chinese rivals Omoda, Ora and MG (owned by SAIC) were not out of place alongside German and Korean brands.

BYD’s entry-level Dolphin and its more premium Seal offer standard features that could cost rivals more. Even a rotating center screen seemed sturdy when this journalist unwisely pulled on it instead of pressing the button to rotate. In particular, increasingly crucial digital features, such as voice assistants, appear to be better executed than the much more expensive European competition.

BYD’s Dolphin costs £32,000 in the UK, but offers standard features that could cost its rivals more. Photograph: John Keeble/Getty Images

Matthias Schmidt, a Berlin-based electric vehicle (EV) analyst, said BYD sold fewer than 10,000 cars in Western Europe in the first four months of 2024. However, he added that BYD may have started with “ambitious prices, presumably designed to absorb and prevent any increase in European tariffs.”

The cheapest version of a Dolphin will start at £25,490, less than a VW ID.3. However, a version of the Dolphin sells for 99,800 yuan (£10,700) in China. Even taking into account the additional costs due to stricter regulations in the UK and Europe, that means a lot of leeway to absorb the tariffs. A planned car factory in Hungary could export to the EU tariff-free, and an executive said last week that BYD was committed to building a second.

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“The whole tariff thing is not going to sink Chinese automotive below the waterline,” said Rupert Mitchell, who worked for years in the Chinese auto industry for the now-bankrupt startup WM Motor. Mitchell, who now heads the Blind squirrel macro blog, said: “We definitely felt like we had a cost advantage over the rest of the world.”

BYD has already gained a strong position in the electric bus market. Photograph: Visual China Group/Getty Images

BYD’s electric ambitions are not limited to cars. It has already built a strong position in the electric bus market, including in the United Kingdom, where Canadian-owned bus manufacturer Alexander Dennis makes bus bodies that run on BYD chassis.

Despite courting local bus-buying authorities, the company still appears to want to keep a close eye on its public image. Last month, BYD invited UK journalists to see its newest electric bus, only to rescind the same invitation at short notice, apparently bewildered by the prospect of newspapers asking questions.

The company blamed an unspecified “misunderstanding” between the company and the outside public relations agencies that handled the invitations. The event continued with specialized media.

Battery Mastery

BYD’s roots as a battery maker appear to have given it a significant manufacturing advantage. Rhodium’s Sebastian said vertical integration – owning the supply chain rather than buying parts from elsewhere – had given it “a lot of control over costs”.

Tu Le, CEO of consulting firm Sino Auto Insights, highlighted his ownership of computer chip factories as well as their batteries. And “they have scale,” he added, predicting that 4 million cars will be sold this year, about half pure electric and half hybrid. “There is no one who comes close to building as many clean energy vehicles as BYD.”

And while other automakers have focused on long-range batteries containing expensive nickel-manganese-cobalt (NMC), BYD has pioneered the use of the cheaper lithium iron phosphate (LFP) chemistry.

BYD’s low-cost electric vehicles have helped drive the green transition, some analysts say. Photograph: Toya Sarno Jordan/Reuters

Al Bedwell, director of global powertrain at LMC Automotive, said BYD had “invested heavily in (LFP) and optimized it to the point where it can compete,” including through designs that minimize packaging around the power cells. Battery.

The company has so far proven vital to the global transition from gasoline and diesel cars, including in poorer but fast-growing countries like Brazil and Indonesia, where BYD is opening plants.

“You wouldn’t be as successful (in the global transition) without BYD,” Sebastian said. “The only other company that is like this is Tesla. “They alone are driving the transition to electric vehicles at scale.”

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