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Started as a battery company in the 1990s in Shenzhen, BYD is now one of the best-selling EV brands in the world. Once mocked by Elon Musk, the company’s startling growth made it a global player and has sparked tariffs in the US and EU.
On today's Big Take Asia Podcast, host K. Oanh Ha talks to Bloomberg's Gabrielle Coppola and Danny Lee about the company’s aggressive expansion and what it means for the global auto market.
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Terminal clients: Click here to subscribe Below is a lighted edited transcript of the conversation:
K. Oanh Ha: In the middle of the Mediterranean Sea, between North Africa and Italy, lies Malta – a sunny, tiny island nation that’s known for its beaches and ancient temples. But it might not seem worth the attention of a disruptive, global car brand.
So when Gabrielle Coppola, a Bloomberg Auto reporter based in Detroit, heard that BYD – the Chinese EV company – was selling their all-electric model, the Atto 3 in Malta, she was intrigued.
Gabrielle Coppola: They sold new cars on the island of Malta last year… was around 7,200. How many cars were sold in the U. S.? Over 15 million. So that is like a piece of a fingernail the size of the U. S. car market, I mean it is tiny.
Ha: But Malta isn’t too tiny for BYD. Gabrielle says, Malta and small markets like it are part of a key strategy in BYD’s global expansion. BYD is facing heavy tariffs in some of the biggest auto markets – the US and the EU. So it’s looking to boost sales in emerging countries that don’t have their own auto industries.
One automotive analyst compared its strategy to chicken ribs – because chicken ribs don’t have much meat on them but you also don’t want to throw them away and let them go to waste.
Coppola: It's like a chicken rib market. You know, you add up all those chicken ribs. That's a lot of meat. And all these countries and all those little bits of meat, all those chicken ribs add up to like 10 million cars and you've got a real business outside of China.
Ha: BYD is now exporting to roughly 95 markets - including 20 new ones this year. Meanwhile, its annual sales in China are booming.
And Bloomberg’s China EV reporter Danny Lee says the car maker has its eyes on surpassing one of the biggest global players in this space.
Danny Lee: It has been hunting down Tesla over the last several quarters to be in the lead as the best selling electric vehicle brand globally.
Ha: Welcome to the Big Take Asia from Bloomberg News. I’m Oanh Ha.
Every week, we take you inside some of the world's biggest and most powerful economies, and the markets, tycoons and businesses that drive this ever-shifting region.
Today on the show: The story of BYD – how it became one of the world’s largest EV manufacturers, and whether it can succeed in its quest to become the best-selling EV brand in the world.
Ha: BYD began as a battery company in the 90s started by an engineer, Wang Chuanfu. He was born in rural Anhui province in eastern China.
Coppola: His parents died when he was still pretty young and he was raised by his elder siblings. He is an engineer through and through. He focused on batteries. And that was the early part of his career, he was doing very in-depth research, experimenting with different battery chemistries and seeing what batteries could do.
Ha: Wang was convinced he could make cell phone batteries more cheaply than the Japanese companies who were dominating the industry.
Coppola: The story goes he got a 350, 000 loan from his cousin. That was the money he used to start BYD and so he went South to Shenzhen and he started the company.
Ha: BYD had a humble beginning – its workers were assembling batteries by hand while Japanese companies were using highly automated equipment.
Eventually, Wang developed his own manufacturing production line, but the company didn’t get its big break until the late 1990s, thanks to a young saleswoman named Stella Li.
Coppola: She had joined the company as a export sales manager and, you know, she basically said, put me in coach, I want to go out there, I wanna make this happen. I'm going to land these big contracts. I'm going to sell.
Ha: So Li was sent to the US to court Motorola which was then one of the world’s biggest mobile phone makers . She showed up in Georgia with a box of battery samples and spoke very little English. And she spent months trying to win over the team at Motorola.
Lee: To ask them to give BYD a chance in order to say, look, we have a product which is lower cost and capable of delivering you, the performance, the margins you need as a business.
Coppola: Stella was just very persistent, always following up, you know, what do we have to do next? The people I interviewed told me that at first they thought she was annoying and she was a pest because she just never leave them alone. But eventually they were like, Holy crap. Like, can we hire this person? Like, she's amazing.
Lee: Stella is a fascinating person.
Ha: Danny Lee is Bloomberg’s China EV supply chain reporter based in Hong Kong and he co-reported this story. He’s met Li in person several times.
Lee: When you go to talk to her, she's such a warm and welcoming individual. But, you know, when it comes down to business, she knows the details. She knows what she wants to achieve. And she's very firm with that.
Ha: Eventually, Stella’s persistence paid off – the executives at Motorola did give BYD a chance – It took two years for them to evaluate the products and in 2000, BYD officially became Motorola’s first lithium-iron battery supplier from China. And that gave BYD’s products a big stamp of approval.
Ha: So how would you characterize Stella Li’s role at BYD versus Wang Chuanfu’s, the engineer and company’s founder?
Lee: Wang is very much the head of the company, he is the thinker, he is the, the, the creator. He wants to figure out the next steps. However, but for Stella, Stella is very much the executor. She'll be executing on all of Wang's plans and also being the driving force in making sure that that business that they have effectively built, hand in hand, continues to grow at pace.
Ha: Besides being business partners, Wang and Li are also a couple with two kids together. BYD declined to comment on it and said the company doesn’t discuss personal matters. What’s clear is that their business partnership has reaped profits.
After the Motorola deal, other big contracts followed, and BYD rode the momentum. In 2002, the company went public on the Hong Kong exchange.
Ha: But just a year after the IPO, Wang decided that BYD should pivot its future into something beyond batteries – in 2003, BYD bought a majority stake in a failing state-run car company Xi’an Chin-chuan Auto. That decision didn’t go over well with the company’s investors and shareholders.
Coppola: Wang Chuangfu didn't even know how to drive a car at the time. The car business is a tough business. To this day it's notoriously, you know, being a metal basher, it's low margin. It's very capital intensive. This is not what BYD's investors were hoping he would do. They did not want this. The phone lines in Shenzhen were ringing off the hook with people who were like, what are you doing? Don't go into the car business.
Ha: Though it was a big bet, Wang saw cars as a natural extension of BYD’s battery business. In 2004, at the Beijing auto show, Wang outlined his vision to use batteries to change the future of the automotive industry.
Very few investors took him seriously, but a very important one did. In 2008, Warren Buffett’s Berkshire Hathaway invested $232 million dollars in BYD.
BTV Anchor: Call it the Buffett effect, but shares of BYD have jumped 500% since Buffett first announced his buy in September…
Ha: And the same year that BYD received Berkshire’s backing, it launched its first plug-in hybrid EV model –
Ha: Now Danny the BYD F3DM, it doesn’t roll off your tongue, does it?
Lee: Yeah, I couldn't even say it myself.
Ha: And how was it received?
Lee: Badly, badly. The car that BYD produced in 2008 was so poorly received because it looked like a cheap knock off Toyota Corolla, the color, the design, it all looked pretty bad. Consumers want something that looks good, feels good. This was far from it.
Ha: The early models of BYD were so unimpressive that Elon Musk, CEO of Tesla, publicly laughed at BYD’s design in a Bloomberg interview in 2011.
BTV Anchor: Warren Buffett owns 10 percent stake in that. Uh, why do you laugh? BYD is trying to compete. Why do you laugh?
Elon Musk: Have you seen their car?
BTV Anchor: I have seen their car, yes. In fact, at the Berkshire Hathaway meeting, I saw their cars. Yeah. (Musk laughs) Tell me why you’re laughing.
Musk: Um.
BTV Anchor: You don’t see them at all as a competitor?
Musk: No.
Ha: But a little more than a decade later, Musk would hit reverse on his diss of BYD – Last year, Musk commented on this old interview on X, saying “That was many years ago. Their cars are highly competitive these days.”
So how did BYD go from being a joke of the industry to one of the best-selling car brands on the road? And where are they headed next? That’s after the break.
Ha: In 2008, BYD’s first hybrid EV was a flop. And Bloomberg reporter Danny Lee said in the following decade, sales for their other cars, also fell short.
Lee: BYD over the past decade prior to around 2020, they were selling cars but they were just not appealing and it got to the point where sales were sliding so, by 2015, the company not only saw poor sales, it had to think about raising money.
Ha: To figure out how to build better EVs in order to sell more, BYD poured money into research and development. They brought in expensive designers from Alfa Romeo and Audi to make better-looking cars. They also developed what’s called a “vertically-integrated supply chain” - here’s Danny again.
Lee: BYD largely creates its own products. It doesn't have to rely on external forces for the most important components to make its automobiles. From the mining of the materials to make the electric vehicle batteries all the way through to the components that power the cars chips, semiconductor chips to even. the seats, for example, that it is able to control so much of a supply chain.
Ha: In a teardown of the BYD Seal sedan – UBS found that about 75% of the parts were made in-house – giving BYD a 25% cost advantage over American and European carmakers. And after about a decade of hard work, BYD finally hit a golden breakthrough in 2020.
Coppola: BYD came out with the Blade battery. And it was a total game changer because it changed the way the world looked at this technology.
Ha: Now, there are two prominent battery technologies in the world - nickel-based batteries and Lithium iron phosphate – or LFP.
While most researchers outside China were experimenting with the nickel-based ones, Wang and his team went against the tide and chose to make batteries with LFP – which is in general cheaper, and safer. But it comes with a huge flaw: It lacks energy density, meaning it couldn’t go very far on a single charge.
Coppola: People thought LFP could never be used, for an individual who wants to go on a road trip, things like that. But through his engineering innovations, the work they had done to improve the energy density of LFP chemistry and the work they did to design a pack and the software system that can kind of get the maximum amount of energy out of that battery. It just showed the world that, Hey, I can make an electric car with decent range using LFP.
Ha: By any measure, the Blade battery was a real turning point for BYD. And it allowed the company to drastically reduce overall costs for its vehicles, so much so that other automakers couldn’t help but follow suit.
Today, Ford, Tesla and Toyota all use LFP batteries in their cars in China, as do many Chinese automakers. And in just three years after BYD released the Blade battery it went from selling under 180,000 electric and hybrid cars to selling ten times that much.
Coppola: Everyone I talk to says, they have mastered the affordable EV, something that Tesla, Ford, all these other car makers are still trying to do. To do that and make money at it? No one else has done that the way that BYD and, and Wang Chuanfu and Stella and their team have.
Ha: All this gave BYD the cash to fund a new overseas push –
Coppola: They're building a new assembly plant in Northeast Brazil that's going to make 150,000 cars. They just opened a new assembly plant in Thailand. they're building in Turkey, in Hungary. They've stated their intentions to build a plant in Mexico. You know, BYD is leaving no stone unturned.
Ha: But BYD cars are not available in the US – tariffs have kept them and other Chinese-made EVs out of the country. And that’s a big market to be missing out on.
Coppola: How many cars were sold in the US? Over 15 million. I mean, you look at Toyota, Hyundai, without the US market, they'd be a lot smaller of a company.
Ha: And it’s not just automakers in the US that feel threatened by BYD.
Earlier this month, the EU – the third biggest car market – voted to slap tariffs as high as 45% on electric cars from China. That was in response to an investigation that found that China unfairly subsidized its industry.
Next week, BYD is expected to post strong quarterly earnings, and it says it’s on track to sell four million vehicles by the end of this year. Meanwhile, Wall Street expects Tesla to sell just 2.2 million cars this year.
But Gabrielle said BYD’s success can’t just be chalked up to Chinese government support.
Coppola: This is not a story about the power of the Chinese government. This is a story about the power of China's brand of capitalism, where there was an entrepreneur who is very much a capitalist, who clawed his way to the top after 20 years of hard work and vision and innovation. But now he's got the power of the Chinese state behind him.
It's important to understand that if a company wants to figure out how they're going to keep their auto industries and keep them competitive, they need to truly understand what's going on. And if they tell themselves, this is all about subsidies and nothing else, then they're definitely going to fail.
(Corrects spelling of Warren Buffett's surname. A previous update addedthe transcript)
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