A deep dive into an astounding story, from Bloomberg Businessweek, October 16:
The Chinese company is flooding markets with its cars—while the US is doing everything it can to keep the booming brand out.
Malta, a tiny archipelago in the Mediterranean Sea, might not seem worth the attention of a disruptive new car brand. The nation of just under 564,000 is known as a sunny tourist destination with limestone sea cliffs, ancient temples and lax regulation. About 7,200 new cars were registered in the country last year, approximately one-seventeenth the volume sold in a single day in the US. Yet the Maltese market isn’t too small for BYD Co., the Chinese electric-vehicle giant.
Last fall in Malta, BYD began selling the Atto 3, an all-electric compact crossover. Strip away the company’s futuristic logo, and it looks almost indistinguishable from other small, sporty SUVs. But inside it’s full of treats, including heated seats in vegan leather and a 360-degree rotating touchscreen. The 60-kilowatt-hour battery gives it a range of 260 miles, enough to circle Malta’s main island twice. And by European standards, it’s inexpensive, at about $28,000. It’s a novelty in Malta. But the real reason BYD is entering the European Union’s tiniest member state? The company’s happy place is emerging markets and countries with no domestic auto industry to defend: “You can basically describe them as a ‘chicken rib market,’ ” says Yu Zhang, the managing director of consulting firm AutoForesight in Shanghai. “All the chicken ribs added up together, it’s more than 10 million cars.”
After increasing its annual sales in China 15 times over, to 3 million cars in only three years, BYD is now exporting to roughly 95 markets, including 20 new ones this year. The company is building, has recently opened or has announced plans for assembly plants outside China in 10 countries on three continents. The speed and scope of this expansion have caught the global auto industry off guard and triggered protectionist tariffs in the US and EU, where policymakers fear Chinese players such as BYD will, in the words of Elon Musk, “demolish” their domestic automakers.
BYD, which stands for “Build Your Dreams,” is the brainchild of Wang Chuanfu, a 58-year-old battery scientist who in the 1990s saw an opportunity to start a rechargeable battery company to challenge Japan’s hold on the industry. It began by focusing on batteries for mobile phones and power tools, but in 2003 it decided to pursue cars. Wang’s battery and manufacturing innovations, cushioned by China’s EV-friendly government policies and the scale of its domestic auto market, have helped BYD do what Tesla Inc., Ford Motor Co. and the rest of the auto industry haven’t: build an affordable electric car for the masses and make money doing it. Since introducing a new battery technology in 2020, BYD has gone from being an also-ran in China’s crowded car market to cracking the top 10 automakers in the world. It’s unseated Volkswagen AG from its decade-plus perch at the top in China and briefly—in late 2023—surpassed Tesla to become the biggest seller of pure electric vehicles globally.
It’s a playbook reminiscent of those of Toyota Motor Corp. and Hyundai Motor Co., which grew out of Japan and Korea’s postwar industrialization; they exported for years before eventually setting up factories overseas. Like them, BYD started out with cheap cars but moved up the scale, leveraging muscular industrial policy, lower costs and more efficient manufacturing. As BYD makes its global push, it’s facing bipartisan anti-China sentiment in Washington that has echoes of the Japan Inc. hysteria of the 1980s, when the US feared being eclipsed as an economic superpower. The concern is that, as with solar panels and steel, electric cars are part of China’s larger economic strategy to amass political power through industrial and technological supremacy.
BYD executives say the company is just trying to sell cars and fight climate change. But it also wants to do what no Chinese carmaker has ever done: become a globally recognized consumer brand. It’s hoping to transcend geopolitics through the appeal of a plug-in hybrid sedan that can go 1,200 miles without stopping at a pump or a charger. Stella Li, BYD’s executive vice president and the face of its global expansion, says she wants consumers to see BYD as “a technological pioneer in changing the world.” She adds, “Just like when you are using an iPhone, you may not think it’s from a particular country. It’s just part of your life.”
This past summer, President Joe Biden imposed a 100% tariff on EVs exported from China; in September his administration proposed a ban on the sale or import of connected cars with Chinese hardware or software, underscoring a fear in US national security circles that internet-connected cars could become tools of Chinese surveillance or cyber warfare. In October, the EU slapped a 17% tariff on BYD’s EV imports, part of a probe into government subsidies in the Chinese auto industry. According to a recent study by Germany’s Kiel Institute for the World Economy, BYD receives “particularly high subsidies,” and China as a whole spends anywhere from three to nine times more than other democratic, market-based economies on subsidies.
Like many Chinese executives, Li bristles at the notion that BYD owes its success to government largesse and calls subsidy accusations “completely groundless.” BYD is so formidable because it’s emerged victorious from China’s brand of state-led capitalism, which weeds out weak or inefficient players by forcing them to compete in a protected, carefully calibrated sandbox. For Li, that victory was hard won, the result of grit and determination. “They cannot beat us and can only attribute our success to other factors,” she says. “We’d rather just show our muscles than make explanations to them.”
Still, BYD has benefited from government incentives, even if the full extent of it is opaque. “There is not a single major ‘private’ company that succeeds in China without the backing of the Party,” says Michael Dunne, a consultant and former General Motors Co. executive who spent more than two decades working in Asia. BYD is part of a wave of Chinese automakers fulfilling a government directive to combat a domestic economic slump by cranking up exports. But its bigger goal is localizing manufacturing around the world, so it can sidestep tariffs and become a household name in each market. “No company in recent memory has expanded globally at such a rapid clip as BYD,” Dunne says. “It sees a need to strike while the iron is hot, to move as fast as possible before others catch up.”....
....MUCH MORE
If interested see also: "Tariffs Backfire as China Outmaneuvers Rivals with Global EV Investments" and the outro from that post, a couple prior stories:
March 18
Bloodbath (partially) Averted: "A win for automakers as US softens EV mileage rule"
This Will Be A Bloodbath: "Biden Set to Crack Down on Auto Emissions to Accelerate EV Sales"
The net effect of this order will be to give the Chinese the auto industry.*
It's only partial because those BYD and other Chinese EV-maker plants to be built in Mexico that Trump was talking about with the "bloodbath" line are still going to destroy Detroit. It will just take a little longer.
Here's December 8 2023's "Western Legacy Automakers Probably Won't Be Long-Term Survivors":
Because their current business is being mandated and legislated out of existence the Western marques, barring some serious breakthroughs in small-scale hydrogen or methanol, will have to pivot to EV's.
And they won't be able to compete.
It almost appears that the gifting of the electric vehicle and solar industries to the Chinese was deliberate.....MUCH MORE
Also:
December 6, 2023
Elon Musk suggests Tesla and 9 Chinese companies will be the top 10 carmakers
January 3, 2024
"China could be on track to dominate the world’s EV market, even if not in the U.S."
February 23 , 2024
Rystad: "China’s EV Growth Set To Explode in 2024"
