When BYD launched its line of electric vehicles in the mid-2010s, its models were named for Chinese dynasties. The Qin, China’s first dynasty, is a popular entry level option. The Han, imperial China’s first golden age, is the company’s flagship EV. The Tang, China’s most prosperous dynasty, is an imposing SUV. 

The cars have been a roaring success. BYD overtook Tesla in the first half of 2022 to become the world’s most popular new-energy vehicle producer. Thanks to its early bet on electric cars, the company is at the forefront of the automotive world’s clean energy transition. Now, as BYD looks to break into international markets, it may be building a dynasty of its own. 

This week, The Wire looks at BYD, the formidable conglomerate and China’s most successful electric vehicle maker: its origins, how it sidestepped supply chain woes to dominate China’s EV market, and its hopes of becoming China’s first internationally successful car company. 

VERTICALLY INTEGRATED

BYD’s founder Wang Chuanfu started the company in 1995. Raised by farmers in Anhui province and a chemist by training, Wang began his career as a lecturer at the Beijing Non-Ferrous Research Institute. Wang’s attraction to entrepreneurship brought him to the boomtown of Shenzhen in the mid-1990s, where he founded BYD. (Contrary to popular belief, the company’s name isn’t “Build Your Dreams,” although that is its motto. The BYD letters are derived from its Chinese name, 比亚迪 biyadi.)

The company started off making batteries for early mobile phones. Wang surprised investors in 2003 when he decided to pivot to cars by buying a failing automaker, Qinchuan Machinery Works, from Norinco, a state-owned defense conglomerate. That company became BYD Auto, a wholly owned subsidiary of BYD Co.

In this sense, BYD’s origins echo those of other Chinese companies which have grown to become giants in the EV sector. CATL, the world’s largest EV battery maker, similarly got its start supplying cell phones. CALB, another competitor, was spun off from a state-owned defense firm.

Where BYD stands out is its vertical integration. When one of its vehicles rolls off the assembly line, just about every feature will have been made in-house, except for the tires and glass. BYD controls its own supply of minerals and batteries: it operates raw material processing plants and has planned investments in lithium mines in China and Africa. 

With roughly 80 gigawatt hours of capacity, it was China’s second largest battery maker in 2021. BYD supplies batteries to its own cars and to competitors including Tesla and Toyota. It also produces computer chips, and is a leading smartphone ODM, meaning it designs and manufactures smartphones on behalf of third party clients.

As a result BYD has sidestepped many of the supply chain problems that have flummoxed automakers globally since the start of the Covid pandemic. Three of China’s top-10 best selling EVs in 2021 were BYD cars, according to data from Automobility, an automotive consultancy, with its Qin model outselling Tesla’s models while undercutting them on price.

BYD took on its most prominent investor in 2008, when Warren Buffett’s Berkshire Hathaway paid $232 million for 10 percent of the company. That investment was spearheaded by Buffett’s longtime partner, Charlie Munger, who was enamored with Wang’s business acumen and obsession with solving technical problems, calling him a “combination of Thomas Edison and Jack Welch” in a 2009 interview with Fortune. 

Although it is a private company, BYD has also received substantial state support in the form of generous subsidies. A 2018 estimate by the Center for Strategic and International Studies suggests the Chinese government has spent close to $60 billion to assist the new-energy vehicle sector, equivalent to over 42 percent of the sector’s commercial activity. BYD itself has received almost $2 billion in government grants and subsidies between 2011 and 2021, according to company annual reports.

Today, China is undergoing an EV boom. BYD’s sales have soared over the last year. The company smashed its own earnings records in the third quarter, achieving a year-on-year net profit increase of 350 percent to $790 million. The company added 130,000 employees in the first half of this year, a 45 percent increase. It now employs more than twice as many people as Ford. Wang Chuanfu is among the top 100 richest people in the world, with a net worth exceeding $19 billion, according to Forbes.

Berkshire has surprised the market by cutting its stake in BYD. The value of its shares had grown to $7.5 billion in August, when Berkshire first announced it would pare back its investment. It has trimmed its stake several more times since then, most recently in mid-December when it sold $34 million worth of shares. Speculation that Berkshire may exit its entire position in BYD has sent the company’s stock into a slump. 

CROSSING OCEANS

With BYD having secured a solid share of the Chinese EV market, the firm is now setting its sights abroad.

The company has had early success with its commercial vehicles: it is a leading provider of electric buses, having delivered tens of thousands to over 20 countries in Europe, as well as Japan, India, Canada and the U.S. It is also getting deeper into urban rail: in 2020, it signed a contract in 2020 with Sao Paulo Metro to build a monorail; it also has a preliminary agreement with the city of Los Angeles.

Cracking the West’s private auto sector would be a sweeter victory — not only for BYD, but China’s automotive industry as a whole. Chinese automakers struggled to overcome negative perceptions about the safety and build quality of their cars during the internal combustion engine era; China’s early lead in the electric vehicle transition offers the chance for a reset. 

BYD hopes to crack Europe first, where Chinese carmakers already produce around five percent of battery EVs, according to Transport & Environment, a clean transport advocacy group.¹Page 20 Several Chinese automakers, including BYD, NIO, and state-owned Great Wall have announced intentions to accelerate their European expansions. Their pricing may be a key advantage: T&E estimates that Chinese EV brands are on average four to 10 percent cheaper than the average EV on sale in Europe.

In September, BYD said it aims to sell three models in Europe by the end of the year. The company has scored a major partnership with German rental car company Sixt, which announced in October it would buy 100,000 EVs over the next six years. In a sign of BYD’s international ambitions, it is also revamping its branding. Instead of Chinese dynasties, its newest models have oceanic names: the Dolphin, Seal, Destroyer and Frigate.

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