BEIJING, Jan 18 (Reuters) – Chinese electric vehicle (EV) maker BYD ( 002594.SZ ) is embarking on a rapid global expansion to challenge Tesla ( TSLA.O ), but for now it is stuck in a sluggish field in its rival. .
While BYD has not fully articulated its global ambitions publicly, a coordinated push around the world has become an important strategic goal for China’s largest EV maker, said four sources familiar with BYD’s management thinking.
In addition to a tour of some European markets already underway, BYD has spent much of the past year exploring setting up a U.S. distribution network for its new electric models, two sources said.
They described the research as advanced and rigorous, and provided specific recommendations from Detroit-based consultancy Urban Science on how many BYD stores in each state and city, as well as brick-and-mortar store formats, are needed.
A BYD official said the momentum was fueled by an announcement at this year’s CES technology show in Las Vegas, where BYD planned to showcase a new generation of battery electric vehicles (BEVs) and plug-in hybrids for the US market.
The announcement never came.
Strained relations between Washington and Beijing, anti-China sentiment in the United States and President Joe Biden’s move to prioritize domestic production of EVs and batteries all prompted BYD to hit the pause button, one of the sources said.
BYD’s management has yet to give the green light to the project, and aggressive US expansion is unlikely in the near future, the source said.
“BYD is taking a cautious approach to the US,” the person said. “Think about all the political tensions between the US and China, and then think about the craziness of the whole world right now. You don’t want to get into a big mess.”
BYD’s US project was complicated by the Biden administration’s Inflationary Reduction Act (IRA), which imposes regulations on where to source battery materials and revokes the $7,500 rebate for EVs outside of North America.
“Who starts selling cars with a $7,500 deficit?” said other sources.
BYD declined to comment on the report.
U-GARNISH
BYD, which stands for Build Your Dreams, was the world’s largest seller of BEVs and plug-in hybrids in 2022, with a total of 1.86 million sales – the vast majority in China, and a total of 1.3 over Tesla. million is long ago.
BYD still leads Tesla in terms of all-electric vehicles by nearly 400,000, although the Chinese company plans to rapidly increase sales at home and abroad and has already increased its BEV sales by 184% in 2022 compared to last year.
To be sure, BYD isn’t the only Chinese auto company to block U.S. targets due to geopolitical concerns and Biden’s moves to promote local manufacturing.
Chinese battery giant CATL ( 300750.SZ ) has slowed plans to invest in battery plants in the United States and Mexico as IRA rules on sourcing raise its costs.
US-based HAAH Motors Holdings has sought to import Chinese state-owned Chery Automobile and plans for an American plant that would bring jobs to America.
But the two pulled the plug in 2021 when HAAH was unable to raise enough money as executives cited concerns over U.S. tariffs and trade tensions.
BYD has been building electric buses in the United States for years, supplying Los Angeles and Long Beach from a plant in Lancaster, California, built a decade ago.
But when it comes to EVs, BYD executives, including chairman Wang Chuanfu, knew as early as five years ago that their vehicles were not ready for the global market due to quality and other shortcomings, two sources said.
They have since completed a U-turn.
Using its latest series of electric cars, such as the Han sedan and crossover, BYD has entered a commanding lead in China, and from 2021 it will enter other markets from Norway, and now including Australia, Britain, Brazil, Costa Rica. , Germany, Japan, Mexico and Singapore.
BYD has lower costs than most rivals to eventually overtake the world’s biggest automaker, Japan’s Toyota ( 7203.T ), as EVs become the vehicles of choice.
VERTICAL INTEGRATION
In the medium term, BYD, which is backed by Warren Buffett’s Berkshire Hathaway ( BRKa.N ), will sell more than 3 million vehicles a year worldwide, the two sources said.
BYD did not respond to requests for comment on sales targets.
Global consultancy LMC Automotive believes that the idea of selling more than 3 million cars by 2030 is not far-fetched, although it says most sales will still be in China.
LMC said BYD’s ability to offer a complete range of world-class EVs at a good price in the mainstream and premium markets has given credibility to its sales efforts.
Zhang Wei, founder of Yuanhao Capital Management and BYD’s 10th largest shareholder in the first quarter of 2022, believes BYD’s outlook should be even better.
He told Reuters that the 3 million target will be met by 2025 and that BYD should sell 10 million vehicles a year by the early 2030s.
Zhang, who began building a significant stake in BYD around 2015, told Reuters he likes the company because its chairman has created the kind of vertically integrated and competitive electric car maker that Elon Musk still struggles to achieve. takes
Unlike many competitors, BYD can handle most of EV’s battery and system needs on its own. Zhang said it partly sources the main battery materials from its mines in China and makes its own batteries and semiconductors, including power management chips, which are critical components of EVs.
“They can build everything inside the car on their own except windshields and tires. They have their own construction company that helps build factories. That’s how they can accelerate.” “I would say that BYD is better positioned than Tesla in the EV era at this point.”
According to two Toyota officials close to Toyota’s joint R&D center with BYD in Shenzhen, BYD’s product development costs are 20% to 30% lower than those of Japanese automakers.
“The high level of vertical integration in the battery supply chain gives it a clear cost advantage over similar automakers, allowing for rapid expansion both inside and outside of China,” said LMC analyst Al Bedwell.
However, although BYD is currently taking a cautious approach to the United States, it is likely to focus on the US car market in the future, the sources said.
“America is going to be a key, key part of this global leverage strategy,” one of them said.
Report by Norihiko Shiruzu; Additional reporting by Zoey Zhang in Shanghai; Edited by David Clarke
Our Standards: The Thomson Reuters Trust Principles.
