BYD, China’s electric car powerhouse, charges into Europe

The men of Germany kicked off Euro 2020 in Munich on Friday. Munich has a rich football history, but also holds a special place in Germany’s self-image because it is home to BMW – one of Germany’s leading car exporters.

But it won’t be logos from BMW or German competitors like Volkswagen or Mercedes-Benz that will be plastered all over stadiums and television coverage. BYD, a Chinese carmaker, is the sole sponsor of Europe’s most prestigious international football tournament.

Auto Trader reported that the advertising campaign was the reason for a 69% increase in the number of views on their website of BYD vehicles during the first weekend, from Friday to Sunday.

BYD’s own Euro drama is unfolding, as the EU threatens to impose tariffs on its products. BYD faces its own Euro drama as EU threatens imposing tariffs on its products .

The EU highlighted the alleged unfair subsidy for the trio BYD Geely SAIC Motor. BYD could face 17.4% tariffs if the negotiations with China are confirmed. This is to protect European automakers and their 3 million employees.

Many experts do not believe that tariffs will be sufficient to stop BYD’s march on the European car market.

BYD founder believes that tariffs by US, and EU are signs of China’s newfound strength in the car industry. Wang Chuanfu, often referred to as China’s Elon Musk, told a group of car executives in Chongqing last week: “If you don’t have the strength they won’t be afraid of you.”

Wang studied metallurgy at Hunan Province before founding BYD in 1995 as a company that produces batteries. He acquired Motorola and Nokia customers before buying a bankrupt auto factory in 2003 for the production of hybrids, which are vehicles that combine a gasoline engine with a battery. Wang built BYD from a small battery manufacturer to the second largest in the world, only behind Chinese rival CATL. He also made BYD the second largest maker of electric vehicles, after briefly surpassing Tesla at the end 2023.

BYD has a lower rate of tariffs than other Chinese automakers such as Geely, which is 20% and SAIC, which is 38.1%. This is partly due to its close cooperation with the EU but also because an analysis showed that it received less subsidies than competitors.

This would be surprising, since previous estimates by the Kiel Institute for the World Economy of Chinese subsidies suggested that BYD “receives exceptionally high subsidies”, such as €2bn in 2022 (£1.7bn), according to public filings. BYD also has benefited from China’s generous grants for electric cars.

The company’s Pingshan headquarters, located on the outskirts Shenzhen and rivaling Volkswagen Wolfsburg, is a massive facility. Gregor Sebastian, a consultant at Rhodium Group who covers Chinese industry, said that the city’s aid played a significant role in BYD’s development.

BYD’s cars aren’t particularly impressive. This is a huge change from the cheap feeling of Chinese petrol and diesel cars. At a test day for the industry last month, BYD, its Chinese rivals Omoda (owned by SAIC), Ora, and MG were able to compete with German and Korean brands.

Both BYD Seal and Dolphin, the entry-level model from BYD, come with features that rivals might charge extra for. The rotating screen on the central display felt solid when this reporter tugged at it instead of pressing the button. Noteworthy, digital features that are becoming increasingly important such as voice assistants seem to be better implemented than the much more expensive European competitors.

Matthias Schmidt, an electric vehicle analyst based in Berlin, stated that BYD sold less than 10,000 cars in Western Europe in the first quarter of 2024. He added that BYD could have begun with “ambitious prices, probably designed to absorb any increase in European tariffs”.

The lowest version of the Dolphin starts at £25490. This is less than a Volkswagen ID.3. In China, a Dolphin version sells for 99.800 yuan, which is about PS10,700. This is a large amount of tariff-absorbing room, even if you account for the extra costs due to stricter UK and European regulations. A planned auto factory in Hungary would be able to export to the EU without tariffs, and a BYD executive said last week that they were committed to building another.

Rupert Mitchell said that tariffs won’t sink China Automotive below the surface. Mitchell worked in the Chinese automotive industry for years for the now bankrupt startup WM Motor. Mitchell, who runs the Blind Squirrel Macro website, stated: “We felt we had a significant cost advantage over the rest of world.”

BYD has ambitious electric goals that go beyond cars. BYD has already established a strong presence in the electric-bus market. This includes in the UK, where Canadian-owned Alexander Dennis manufactures the bodywork for BYD chassis.

The company appears to be trying to maintain a tight grip on its public image despite its efforts to court local authorities that buy buses. BYD invited UK journalists last month to see its latest electric bus. However, the company rescinded the invitation on short notice because it was uncomfortable with the idea of questions from newspapers.

The company attributed the “misunderstanding” to an unspecified “misunderstanding”, between the company’s external public relations agencies and the company that handled the invitations. Specialist media covered the event.

BYD appears to have benefited from its roots as a manufacturer of batteries. Sebastian from Rhodium said that vertical integration, which involves owning your supply chain and not buying parts elsewhere, has given you “a lot more control over costs”.

Tu Le, managing director of Sino Auto Insights a consultancy firm, has highlighted the company’s ownership of battery factories and computer chip plants. He added that “they have scale” and predicted 4m cars sales in this year, about half of which will be pure electrics. BYD is the only company that can build as many clean-energy vehicles as BYD.

BYD is the first carmaker to use the less expensive lithium iron phosphate chemistry.

Al Bedwell, director of global powertrains at LMC Automotive said BYD “invested heavily in [LFP] and optimised it so that it could compete”, for example through designs that minimize the packaging around the battery cells.

BYD has opened plants in Brazil, Indonesia and other fast-growing but poorer countries.

Sebastian said, “You wouldn’t be able to achieve such success [in global transition] if BYD wasn’t there.” Tesla is the only company like this. “Only they are driving the EV switch at scale.”