China’s BYD Beats Tesla in Global EV Sales and Stuns Carmakers with Low Prices
China's BYD recently surpassed Tesla in global electric vehicle sales, but it's their remarkably low prices that are leaving other carmakers in shock.
BYD's Competitive Advantage: Low Prices
When BYD overtook Tesla as the global leader in electric vehicle sales, it surprised many industry observers. However, what has truly shocked carmakers around the world is BYD's ability to offer EVs at extremely low prices. According to Michael Dunne, CEO of Dunne Insights, "No one can match BYD on price. Period." Boardrooms in America, Europe, Korea, and Japan are in a state of shock over BYD's pricing strategy.
BYD's ability to keep costs low can be attributed in part to its ownership of the entire supply chain for its EV batteries. From raw materials to finished battery packs, BYD controls every step of the process. Since the battery accounts for about 40% of a new electric vehicle’s price, this vertical integration gives BYD a significant advantage in cost reduction.
Expansion Plans and Exporting Cheap Models
While BYD vehicles are not yet commonly seen on American roads, experts believe it is only a matter of time. Despite the high tariffs currently in place to restrict imports, BYD or other Chinese carmakers could still find a strong market position by offering a $20,000 car in the US. This is because the average price of a new car in the US is approximately $48,000.
BYD has already launched an EV called the Seagull in China with a price tag of around $11,000, making it one of the best-selling EVs in the country. However, the real disruption potential lies overseas. Autovista Group, a UK-based market intelligence firm, notes that BYD's EVs could be a truly disruptive force in foreign markets.
In fact, BYD is planning to export much cheaper models to various markets worldwide, including Europe, South America, and Southeast Asia. Over the past three years, China's EV exports have seen a staggering 851% increase, as reported by the New York Times in October. This indicates a growing global demand for Chinese EVs.
Entering the US Market
To enter the US market, BYD may leverage its operations in Mexico. The company is currently exploring potential locations for a new manufacturing plant in Mexico, which has a free trade agreement with the US and Canada. However, House lawmakers have expressed concerns about Chinese automakers like BYD gaining access to the US market through Mexico, describing it as a potential 'back door.'
Bill Ford Jr., executive chairman of Ford Motor, has acknowledged that American automakers are not yet ready to compete with Chinese rivals on EVs. He stated that Chinese carmakers have quickly developed large-scale EV production capabilities and are now exporting their vehicles. Ford believes it's only a matter of time before they enter the US market.
BYD also benefits from its founder and CEO Wang Chuanfu, who has a reputation for being a relentless cost-cutter. Charlie Munger, Warren Buffett's long-time partner, described Wang as a natural engineer and production executive. Munger even stated that Wang is better at actually making things compared to Elon Musk.
