BYD vs Tesla: China’s EV Giant Challenges Elon Musk

Table of Contents

• Who Is Wang Chuanfu?
• Creation Of BYD Auto
• Warren Buffet’s entry in BYD:
• The Rise Of BYD:
• What The Future Holds?

Tesla was the undisputed king of the EV market and it was beyond imagination that anyone could challenge its domination.

Everyone had bought the dream, its stock post-2020 rallied and reached valuations unheard for a car company and became the most valuable car company worldwide.

Investors were in awe of this company, with it being the next Apple and Elon the next Steve Jobs.

But the dream is about to end.

There is a new competitor in town, coming for tesla’s throne, that wants to take it all.

A company backed by Billionaire Warren Buffet.

A company that has a history that is longer than that of Tesla, founded in China by Wang Chuan fu, who was born in poverty in a poor village in China and had lost both his parents by his teens.

So this is the story of BYD.

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Who Is Wang Chuanfu?

Wang was born in 1966 to a family of farmers in Wuwei County, in eastern China’s Anhui province.

He was the 2nd youngest of the 8 children and his parents died when he was a teenager and was supported by his older siblings through his high school and university education.

He studied Chemistry and worked as a government researcher.

And in 1995, Wang came up with a brilliant idea, he noticed that market for rechargeable batteries in china heavily relied on imports particularly from companies like Sony and Sanyo in Japan.

Wang thought why don’t I manufacture here and tap into enormous domestic market.

And Wang than raised $300,000 from friends and relatives and rented a space of 2000 sq meters in city of shenzen, China and established a battery factory specifically for mobile phones.

And by 2000, BYD became one of the largest manufacturers of mobile phone batteries in the world.

Primarily producing batteries for Nokia, Motorola, Sony Ericsson and Samsung.

In 2002, BYD entered the Hong Kong stock exchange to increase its capital, it aimed to expand its presence in the battery industry where it had become a global leader.

And at this stage, Wang decided to enter into a new industry and wanted to utilize his expertise in Battery manufacturing in it.

And the industry which he decided to disrupt was the automobile industry by developing a battery powered electric car.

Creation Of BYD Auto

In 2003, when wang first came up with an idea to make an EV, it was nothing short of a dream as there was no real evidence that could suggest it would be a success.

On the contrary General Motors, that had launched its first EV in 1996 called EV1, could sell only 1100 units.

And GM, declared EV’s to be commercial failure and in 2003 recalled all 1100 units it had sold and destroyed all of them.

Tesla back then had just launched and Elon had invested a initial 6.5 Million Dollars as seed capital and it would not be until 2008, that tesla would launch its first car.

But Wang was undeterred and decided to take a leap of faith.

But there was one small problem.

Wang had no experience in the automotive industry and manufacturing a car is a complex process with so many variables involved.

So, BYD in 2003 acquired a failing Chinese car company Quinchuan Auto and was later renamed to BYD Auto.

And it became the foundation on which Wang built his automotive project.

Initially Wang decided to create a regular functioning car with a internal combustion engine, this was just to get started and learn the secrets of the automotive industry.

And in 2005, BYD created a regular compact car called F3.

And it was a Hit, becoming the best selling vehicle in China and no one would have thought that a tiny car company would give giants like Toyota and General Motors a run for their money.

And in 2008, BYD launched its first Hybrid EV, called F3 DM.

But it didn’t sell well and demand for it was very weak, until April 2009 only 80 cars were sold, the situation however improved when the government of Shenzen decided to support BYD and purchase some of its cars.

However, the hybrid car had a difficult start but Wang didn’t loose his vision.

Warren Buffet’s entry in BYD:

Wang on his journey had won a fair share of admirer’s and one of them being Warren Buffet’s partner and Berkshire’s Vice Chairman Carlie Munger.

And seeing Charlie Munger’s enthusiasm for Wang and BYD, Warren sent his trusted partner David Sochol (check for spelling) to travel to china and access byd’s operation on ground.

And Based on this, Buffet made him an offer to buy a quarter of BYD but Wang refused to sell more than 10% of the company, which impressed Buffet and in a comment to forbes magazine buffet said that this guy doesn’t want to sell his company and it is a good sign.

In September 2008, amidst the financial crises, Buffet purchased 10% of BYD that is 225 million share of BYD for 230 million dollars and today it is considered one of Buffet’s most successful investments.

The Rise Of BYD:

Now with fresh infusion of capital and new found confidence by receiving a backing from the oracle of Omaha, Wang was focused on his mission.

And in 2011, it launched BYD E6, which was fully electric, this car became popular in many Chinese cities especially as taxi’s and this was also exported to Europe and united states where it was used by companies like uber and other ride sharing services.

And in April of 2012, launched a completely new generation hybrid car with improved specifications, called BYD Han.

And it quickly became one of the world’s best selling Hybrid car and this marked BYD’s true entry in the global car market.

But Elon still did not consider BYD a true competition to Tesla.

However it was all about to change when in 2016, BYD hired Wolfgang Egger as design chief, a role he previously played for Audi and Alfa Romeo. It also lured away other international executives, including Ferrari’s head of exterior design and a top interior designer for Mercedes-Benz.

And fast forward to today, BYD manufactures 2 types of cars, Hybrid cars and Fully electric cars and has now completely stopped manufacturing Fuel powered cars as of march 2022.

Its most expensive model today is — the Yangwang U8 sport utility vehicle which costs 1.09 million yuan ($152,600).

And is the world’s largest manufacturer of rechargeable batteries specifically in the automotive battery industry, it ranks 2nd globally after Chinese company CATL.

BYD’s dominance in the battery sector is due to its advanced manufacturing technology compared to its competitors, in 2020 BYD introduced its famous battery, the blade battery which is the safest battery in the world.

It has passed rigorous safety test and is highly stable with high energy density, it provides a long driving range and is cost effective.

BYD uses it in its own vehicle and also sells it to its competitors such as Toyota and Tesla, this highlights a very distinctive aspect of BYD, which is its control over a significant part of the supply chain.

BYD owns lithium mines and uses the lithium to manufacture its batteries, it also produces its own vehicles and semiconductor components through its subsidiary “BYD Semiconductor”.

Moreover BYD directly handles the shipping of its cars to foreign markets, showcasing its commitment to control its entire supply chain.

In October of last year, BYD invested 710 million dollars to acquire 6 ships, each ship can carry 7,700 cars in order to secure its control over shipping activities.

In summary, BYD is determined to become the most integrated automobile company in the world, relying on itself more than others.

This is part of its ambitious plan to become the largest and most important car company in the world.

This dream which started about 15 years ago, may be seen as foolish and naïve by some but today it is within BYD’s reach to achieve.

What The Future Holds?

The only problem with BYD right now is that it sells most of its cars in the domestic market where as Tesla has a global presence.

But it is also true that China right now is the biggest market for electric EV’s as it accounts for 58% of the global Market Share, Relying on which BYD has achieved all of its successes.

But this strategy is fast changing as it plans to compete with Tesla and others in foreign markets, particularly in the massive European market, BYD plans to establish 2 car manufacturing plants in Europe.

And Wang right now is travelling across the globe, between auto shows, new market launches and meetings with heads of states.

He’s touched down in countries including Japan, Germany, Vietnam, Brazil, Mexico and Chile and has set up shop in some 60 countries and territories in just the last two years.

Analysts also expect BYD to launch its third-generation EVs next year offering more technology, such as automated-driving capabilities.

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