Elon Musk’s Chinese competitor toppled Tesla, and now it’s coming to Britain

BYD’s growing popularity has renewed concerns about China’s auto dominance

Berkeley Street in Mayfair is a haven for car enthusiasts. It’s lined with showrooms that display Ferraris, Bentleys, and McLarens through giant windows. A lesser-known brand is located half way down the street, opposite the Rolls Royce store.

The Chinese automaker BYD has opened a glitzy showroom in the former Jaguar Land Rover site.

BYD cars are a fraction of what other vehicles on Berkeley Street cost, but their presence amongst the most sought-after vehicles in the world sends a strong message that it believes it can be competitive.

This week it was able to provide the proof. BYD announced that it sold 526 409 electric vehicles during the last quarter of 2023. This means BYD has overtaken Tesla, and ended Elon Musk’s eight year reign, as the best-selling electric car manufacturer in the world.

It was a landmark moment. Musk mocked BYD in a 2011 interview, laughing dismissively when asked whether they could compete. Tesla’s CEO has since acknowledged BYD as a serious competitor.

BYD founder Wang Chuanfu believes that this is only the beginning. Now, the company is plotting a global takeover. It wants to be the only Chinese consumer brand to achieve this status.

Wang stated in August that the company will help to “demolish old (Western) legends, and achieve new world-class brands”. The aggressively priced electric cars are slowly appearing on British and European roads.

BYD has risen quickly, but is not a newcomer. Wang, who was a Chinese researcher and a graduate in chemistry, saw an opportunity for developing new batteries that were being developed by Japanese companies, but at much lower costs. BYD was founded by Wang in 1995 and quickly became the largest producer of mobile phone batteries in the world. This business made Wang an fortune of hundreds of millions.

Shareholders revolted when the company purchased a struggling car maker in 2003 to test out new electric vehicle technology. BYD was viewed as a cheap, unreliable and ugly Chinese car at the time. Musk made a joke in 2011: “Have You Seen Their Car?”

BYD got a major break in 2008, when Berkshire Hathaway (run by legendary investor Warren Buffett) bought a 10% stake. Wang claimed that the company struggled to survive until 2019.

The company was prepared for the explosion of “new energy” vehicles in China because it had invested in early electric vehicles and excelled at battery manufacturing.

BYD, unlike established US and European automakers who have spent decades outsourcing parts to suppliers like Bosch and Continental and even owning a number of lithium mines, makes nearly every component for its cars.

UBS conducted a “teardown analysis” of BYD’s Seal saloon, and found that 75pc is produced in-house. This compares to just 68pc for a Tesla Model 3 made in the US, and only 35pc for a Volkswagen ID.3 manufactured in Germany.

It has a better control of expenses than European brands. UBS estimates BYD would still have a 25% cost advantage if they moved production to Europe in order to avoid tariffs. Volkswagen would also lose $10,000 per car (£7.900) if it tried to match BYD’s price.

BYD is a major player in the UK, and has been for many years. It’s Britain’s leading supplier of electric busses under a partnership between Falkirk-based Alexander Dennis.

BYD has built more than 1,000 double-decker buses in the nation. As early as 2015, the company began lobbying MPs about the eco-credentials of the vehicles and criticised the freezing of fuel duty as a way to discourage electric vehicle drivers.

In March last year, the company launched its first model in the UK. BYD’s £25.490 Dolphin, a full-sized electric vehicle, is currently the cheapest on the market in Britain. However, David Bailey, a University of Birmingham automotive manufacturing expert, believes that it can compete on quality, too, thanks to innovations like more efficient batteries. Bailey says that because of BYD’s experience with scale, they are leading the pack in attractive entry-level electric cars. But they can also compete in the premium segment.

The critics have praised the cars. BYD announced in December that its first European plant would be located in Hungary.

The rise of the company at the forefront of new Chinese manufacturers has not gone unnoticed. The European Union launched an investigation in October to determine whether Chinese automakers are using state subsidies as a way to undercut European competitors.

Jim Saker of the Institute of the Motor Industry says that German fears of retaliation may limit any actions.

Britain is also becoming more concerned about China’s economic dependency. The Business and Trade Committee of the Commons has launched an investigation into industries that are economically important, including car manufacturing.

Liam Byrne, the chairman of the committee, says that “our national interest requires we have a clear-eyed view on how to deliver climate security as well as economic security and employment security for Britain’s Future.” “Right away, I am not convinced that the UK has a strategy for this new future.”

Saker, however, says that any attempts to stifle Chinese car firms will clash with net zero goals. “Boris Johnson gave the car industry over to the Chinese by putting 2030 in place,” [the proposed prohibition on petrol and diesel sale that Rishi Sunak delayed, but Sir Keir starmer has promised to reinstate].

Because everyone has chosen the EV route, it has played into China’s hand. European, Japanese and US companies have had to radically alter their strategy in order to compete and catch up.

Former Conservative leader Sir Iain Duncan Smith says China has a “vice-like grip on the electric car market” and that the more we rush to buy electric cars, the more our fate is in China’s hand. He calls for the petrol to be banned until a strategy to combat the car makers of the country can be agreed.

BYD is not one to rest on its laurels. The company has plans to open up 100 dealerships across the UK before the end of the year, under agreements with Pendragon Arnold Clark and Lookers. This may be good for Britain’s target of net zero, but some will argue that the price is too high.