“We have not seen such growth in many decades.”

BYD, China's leading electric vehicle manufacturer, is growing rapidly. Over the past two years, the company has sold about one million more cars in its home country than the previous year. And it doesn't stop with China. How did BYD evolve from an industry disruptor to a true Tesla killer?

When Chinese company BYD showed off its latest model in 2007, it was still a battery maker trying to build cars. American executives at the Guangzhou auto show marveled at the car's uneven purple paint and poor fit of the doors. “They were the worst in the industry,” said Michael Dun, a Chinese auto industry analyst.

No one laughs at BYD anymore. At the end of last year, the company surpassed Tesla in global sales of all-electric cars. BYD is building assembly lines in Brazil, Hungary, Thailand, Uzbekistan and soon also in Indonesia and Mexico. It is rapidly expanding its exports to Europe. The company is poised to overtake the Volkswagen Group, of which Audi is part, as the market leader in China.

However, 80 percent of BYD's sales are in China, and over the past two years the company has sold about a million more vehicles in its home country than the previous year. The last car manufacturer to achieve this in one year in the American market was General Motors, and that was in 1946, after General Motors stopped sales of passenger cars for the past four years due to World War II. “The industry hasn't seen the kind of growth BYD has seen in decades,” said Matt Anderson, curator of transportation at the Henry Ford Museum in Dearborn, Michigan.

2.41 billion euros in government support

BYD is located in Shenzhen, the center of China's electronics industry. The company showed how Chinese automakers can benefit from the country's dominance in electric products. No company has benefited more from China's massive shift to electric and hybrid vehicles. Together, these vehicles make up 40 percent of China's auto market, the largest in the world, and are expected to reach more than half next year. Like most Chinese automakers, BYD doesn't sell its cars in America because Trump-era tariffs are still in place, but BYD sells buses in the US. Just like in Belgium.

BYD leads China's electric vehicle exports and is rapidly building the world's largest car ships to transport them. The first ship BYD Explorer No. 1, on its maiden voyage from Shenzhen; It carries 5,000 electric cars and is expected to arrive in the Netherlands on February 21.

With the success of China and BYD, more attention has also been paid to the company. Tesla CEO Elon Musk warned in January of the strength of China's electric vehicle exports. “Frankly, I think if trade barriers are not put in place, they will destroy most other companies in the world.”

The rapid profits made by BYD and other Chinese automakers in Europe have prompted an EU investigation into Chinese government subsidies and could lead to tariffs. BYD's annual reports show a total of €2.41 billion in government aid from 2008 to 2022. This does not include other aid; For example, taxi companies in the company's home city are only allowed to purchase electric vehicles from BYD.

BYD declined to comment on the subsidies. The company said in a statement that BYD Explorer No. Its new ship No. 1 represents “an important milestone for BYD as it expands into international markets and contributes to the development of the global renewable energy vehicle industry.”

China has built enough factories to produce more than twice the number of cars the market can buy. This led to a price war in the country, especially between BYD and Tesla, which led to discounts that caused huge losses. One of BYD's latest models, the Seagull, is already available for less than €10,200.

The real estate crisis and stock market decline in China means that consumers are not inclined to buy cars at all. However, BYD's low production costs put it in a better position than most of its competitors to survive a long sales decline and market consolidation.

Lithium iron phosphate batteries

BYD Chairman Wang Quanfu founded the company in 1995 to manufacture batteries for Motorola and other consumer electronics companies. He had studied at Central South University in Changsha, a top-ranking institute famous for its research in battery chemistry. But he dreamed of making cars.

In 2003, BYD bought a factory in Xi'an to make gasoline cars. But the company ran into problems at first and quickly gained a bad reputation. During a visit to the factory in 2006, a large repair shop at the end of the assembly line was full of newly built cars that were already in need of repairs.

BYD's sales have grown along with the Chinese market. Warren Buffett bought a roughly 10 percent stake (worth €213.60 million) in the company in 2008, giving BYD not only a cash boost, but also global prestige. In the same year, Wang pledged to begin exporting electric vehicles to the United States within two years.

However, at the time, electric cars were still expensive to build and their range was still limited, forcing Wang to postpone his plans to enter the American market. In a 2011 interview, he questioned his focus on electric cars. He announced that automakers should focus on hybrid cars. But he also said: “There is still huge potential for electric vehicles in the Chinese market.”

By 2012, China's automobile production had caught up with demand. Buyers are becoming more selective. BYD's car sales and stock prices have declined as multinational companies introduce sleeker models. Executives and analysts wondered whether BYD still had a future.

But Wang made two risky decisions that paid off. In 2016, he hired Wolfgang Egger, one of Audi's leading designers, who in turn has hired hundreds of automotive engineers with daring tastes. They have completely redesigned BYD models.

In addition, Wang also figured out how to replace the standard chemicals in rechargeable lithium batteries – nickel, cobalt and manganese – with cheaper iron and phosphate. However, initially these batteries ran out quickly and had to be recharged even after short trips. In 2020, BYD introduced its Blade batteries; The range gap between BYD cars and cars with nickel-cobalt batteries was thus closed, and production costs remained much lower.

In the same year, Tesla began manufacturing and selling large numbers of cars in China, and enthusiasm for electric cars swept the country. BYD was ready with cheap battery chemicals and Wang's new designs. Tesla has also begun using lithium iron phosphate batteries in less expensive models. BYD still mainly sells cheaper cars with a smaller range, while Tesla mainly focuses on more expensive cars with a greater range.

Swiss bank UBS found last year that the BYD Seal, an electric hatchback sedan, costs 35 percent less to manufacture than the slightly smaller Volkswagen ID.3, which is produced in Europe and is of similar quality. This is only partly due to cheap lithium iron phosphate batteries. BYD makes three-quarters of the seal components. Like Tesla, BYD uses a few electronic systems in each car. Volkswagen, on the other hand, outsources the production of about two-thirds of its parts. BYD also benefits from lower labor costs in China, although they have risen as factories compete for skilled workers.

Permanent benefit

BYD now has its own walled city in Shenzhen, in the country's southeast, next to Hong Kong. The monorail takes employees from 18-story corporate apartments to BYD's office towers and research laboratories.

Liu Qiangqiang, an engineer at the Shenzhen center, says his auto development team has nearly tripled its workforce since he left GM to work at BYD 15 months ago. “The pace is high,” he says.

After deciding not to pursue autonomous driving a year ago, BYD recently took action when consumer electronics companies Huawei and Xiaomi introduced cars with significant self-driving capabilities. Wang announced in January that BYD had 4,000 engineers working on it Assisted drivingIt is a limited form of autonomous driving that works mainly on highways and main roads, and the company will invest 13 billion euros in this technology.

BYD has a lasting advantage over Tesla thanks to Wang's 2011 decision to develop hybrid cars. These currently account for nearly half of BYD's sales. Li Jingyu, a salesman at a BYD garage in Shenzhen, said many families buy a hybrid car as their first car so they can drive to their hometown to celebrate the Chinese New Year. Most villages in China now have chargers, but they are not enough for the crowds of visiting drivers during Chinese New Year celebrations, Li said. “People are just worried about the wait time.”

_{© The New York Times}