China’s BYD is Catching up to Tesla

Hello, welcome to another episode of Cold Fusion. You may not be familiar with a little-known Chinese car brand called build your dream or byd, but they sell more electric vehicles than Tesla, from the battery manufacturer to the largest EV or EV manufacturer in China. Byd is getting closer. to unseat Tesla as the world's largest electronic vehicle manufacturer Chan, you've seen one and ridden in one of their vehicles without knowing it. Its electric buses, public transportation, buses, trucks and taxis, circulate in countless cities around the world. Its influence is expanding rapidly in Latin America. and Southeast Asia are reshaping transport in the regions of Australia where I live, you see them everywhere in China, they are the number one manufacturer of electric vehicles and are now considering substantial growth prospects in Europe.

Interestingly, they have a factory in the US and in 2008 Warren Buffett. you chose to invest in them instead of Tesla for just $10,000, you can have your own electric car and that is attractive to a lot of people, but what is the history of this company? Are Byd cars really good and how they came to have such a massive global presence in this episode, we'll find out to help make sense of it all. I interviewed Elliot Richards, Chargers correspondent in China. He has intimate knowledge of what is happening in China. I'll include some clips from our chat throughout this episode you're watching C Fusion TV the growing popularity of electric vehicles is an opportunity for automakers globally.

Electric vehicle designs are simpler, with fewer moving parts and less complexity, making the playing field new compared to combustion vehicles. Tesla was by far the biggest player in Space Rivan Postar and Lucid were also making names for Souls, but suddenly, out of nowhere, in late 2023, Byd appeared to knock Tesla out of the number one spot. Byd likes to promote itself as the biggest car brand you've never heard of and it's true, at least in the context of sales figures, byd recently overtook Tesla as the world leader in electric vehicle sales. Tesla tried its best by delivering a whopping 484,000 vehicles in the final quarter of 2023, a solid 11% increase from the previous quarter, but it wasn't enough.

To maintain its title as the number one electric vehicle manufacturer, BYD surged in sales, reaching 526,000 vehicles during the same period, BYD has an impressive 35% market share in China, its three most popular models, the Yuan, plus the seagull and the dolphin, despite the extravagant names. They are proving to be a force to be reckoned with B They have been making cars for 20 years The cars the last 18 years have not been very good The last 3 years I have really seen a lot of Chinese brands focus on gimmicks I think to be honest. with you and I think what we're seeing now in 2024 is actually a shift in the things that people care about, like efficiency, the efficiency of an electric vehicle, you know, safety, you know the important basics instead to focus on the bright cherry.

Also, I mean what's been happening in Europe, the UK and Australia, is that they are just offering their cars and I think people are surprised at how good they are, these three models cater to different segments of the market, from sedans and hatchbacks. to SUVs, while Tesla's Model Y secures fifth place as the best-selling electric vehicle in China, it feels lonely because it is the only representative of American EV efforts within the top 15. BYD's electric vehicles also They have made significant progress globally, particularly in Israel and Thailand, where they lead electric vehicle sales. Electric taxis roam the streets of Bangkok Indonesia's largest taxi operator also plans to buy 80% of its electric vehicles from B and D The Chinese automaker is also expanding into Mexico, Brazil and other Latin American countries, as well as the Middle East.

East in Europe byd aims to start producing electric cars by 2025 and are currently exploring locations in France, Spain and Germany. Now, if you're American, you might be confused and thinking: why haven't I heard of these guys? That's because BYD electric passenger vehicles are not available in the United States and is primarily a political issue. China and the US aren't exactly friendly when it comes to trade, which is why byd decided to skip the United States for its electric passenger vehicles, but that's not all. The Inflation Reduction Act has strict criteria for prioritizing federal tax credits. Local US-based production that meets this criteria would increase the cost for Byd, as much of its refinement is based in China.

Recently Elon even said that Chinese manufacturers will demolish most competitors without trade barriers, so all this is not to say that Byd does not have any presence in the US, you will see that byd makes electric vehicles without passengers, such as trucks, buses and forklifts. They also have a 550,000-foot bus manufacturing plant in California that employs more than 750 workers. Other operations can be found in Illinois and San Francisco, where byd has a service center for its electric buses and trucks, the company also manufactures garbage distribution trucks, distribution vehicles, specialized tractors for ports and airports and even a huge truck 60 ton dump truck used for mining.

This wide range of vehicles is sold to global customers. um and then they've also been able to scale overseas much faster than anyone else, to the point that they're building their own ships, so they have a container, well, a roll-on ship space of 7,000 cars built and we're planning seven ships. more in the next two years or so. No other automaker has been able to do that so far, so even if you haven't heard of them, you now know it's absolutely huge, how can a company become so massive? and diversify so quickly to understand that we need to go back to the origins of the company and its founder, interestingly, it's a battery company first and it makes sense, do the hard part yourself and become an expert at it and then build vehicles. around the core of the company, if you have followed this channel since the early days you will know that I have been covering the rise of electric cars for many years, but I have to say that in recent years things really seem to be accelerating.

I'm excited to say that this week I'll be in Sydney, Australia. I will participate in the all things electrical event. I will be doing a special talk on AI microchips and the Revolution electrical solution with Robert Lellan. Come see my talk and if you're around I'd love to say hello to some of you. Use the promo code Cold Fusion and get 20% off tickets, which is only $60 for three days of admission to the event or $40. for one day only, February 9th, which is the day of my talk, so if you're interested in electric vehicles and the latest in electric technology, definitely check it out.

All the information is in the description below, so thank you for all your support and I hope to see you there. Byd started its journey as a battery manufacturing company and still is to this day. They manufacture batteries of all types. Founded in 1995 by Wang Chuan Fu, a former researcher and assistant professor at Beijing Technical University, BYD had a big vision. To revolutionize battery production in China, setting up shop in Shenzhen, often known as China's Silicon Valley, was a well thought out move, contrary to what you might think, B&D did not dive headfirst into batteries to electric vehicles;

Its initial product was rechargeable batteries intended for mobile phones. They later supplied batteries for laptops and various electronic devices. His client list included major companies such as Motorola, Nokia and Samsung. In 2002, Byd had claimed the title of the world's second largest producer of rechargeable batteries, with a market share of 25%. Also that same year the company went public. on the Kong Stock Exchange in 2003, Wang took advantage of the opportunity of a lifetime: he would buy a struggling company called Chin Chuan. Investors were bewildered and thought Wang had lost his mind. As a result, Byd's share price fell, but for Wang it was an opportunity to expand his business. and he leveraged his battery experience to establish a research and development center in Shanghai.

He had his engineers dismantle his Mercedes S-Class and this set the tone for byd's initial strategy: imitate the big boys, learn to copy and produce this reverse engineering tactic that paid dividends, allowing byd to offer great looking cars. premium at affordable prices. Initially they imitate Toyota models but at a better price than other Chinese competitors, but starting in 2006, amid a booming Chinese economy, their domestic sales skyrocketed, although at that time they were mainly gasoline vehicles. Wang's next goal was to create electric vehicles. vehicles and the first example came in 2008, this was the same year Warren Buffett's Birkshire Hathaway bought 10% of Hong Kong-listed Byd shares.

Credit for bringing Byd to Warren Buffett's attention goes to Berkshire vice chairman, the late great Charlie Munga Warren Buffett. He recalled this moment vividly in an interview with CNBC in 2018. Quote Char called me one day and said we have to buy, this guy handles it better than Thomas Edison's manga. He echoed the sentiment that he compares W CH Fu to a mix of Thomas Edison and Jack. Welch, a problem-solving genius who may have taken an idea or two like Edison, and an effective executor like Welch. Their initial investment of 232 million in 2008 turned into a staggering 7.4 billion by 2021, representing a staggering 30x or 3,000% gain and This simply shows the brilliance of their investment move and is also a testament to the meteoric Byd's growth and success, initially domestically in China and backed by Warren Buffett, increased its public profile and international recognition as of January 2024.

Byd has a market capitalization of 74.8. billions consolidating its position as the 207th most valuable company in the world one of the main reasons for byd's success was the strong support of the Chinese government, as you can imagine China seriously launched EVS in the early 2000s with the goal of moving away from combustion engines. Strategy generous tax breaks and incentives for both manufacturers and buyers of electric vehicles. A staggering $30 billion tax break was announced between 2009 and 2022, with an additional $97 billion in the pipeline through 2027. Tax rates for electric vehicle companies would be reduced from the standard 25% to 15%. % and all this was enough for the electric vehicle industry to stir, restrictions on license plates were removed and electric vehicles in China began to absolutely fly out of showrooms.

For an astute businessman like Wang, it was a golden opportunity, since he already had an automobile manufacturing company. and in-house expertise in battery manufacturing, so the move towards EVS was a no-brainer, so as demand for EVS grew, it expanded the range of its EV models and Chinese consumers couldn't get enough, for what you might be thinking about me, this Wang. The Chinese government just goes with the flow of the Chinese government and that's why it's successful, although there is some truth to the fact that there is genuine innovation within the company. A notable success story at byd is the creation of the Blade battery, a cobalt-free alternative to traditional lithium iron batteries.

This innovation is touted for its greater security and stability. Byd not only incorporates these batteries into its own vehicles but also sells them to other automakers, apparently even including Tesla along with the technological Edge. It comes with a vertical integration. Byd owns the vast majority of its supply chain for its EVS, from batteries and motors to chips and software, byd manufactures 75% of its parts in its flagship model. The comparison seal Tesla manufactures 68% of its components and model. byd even has a byd semiconductor chip manufacturing arm which of course manufactures the chips used. At EVS, this allowed B&D to avoid the global chip shortage that affected many of the other automakers by having its own battery and chip production. byd can reduce its costs, improve its quality and can innovate significantly faster than its competitors.

Another reason for byd's success is its price competitiveness: the Tesla Model 3 was supposed to be theelectric car for everyone, but starting at around $35,000 it's not exactly cheap for that price, the Bas Tesla Model 3 gives you a range of about 272 Mi, on the other hand, the byd seagull. It starts at around $10,000 and offers two battery options, one for the 190 Mi and another for the 251 Mi. These price and feature differences are important, especially in price-sensitive markets like China, Southeast Asia, and Latin America. Byd's popularity over Tesla in these markets is simply because it is cheaper, but how can byd offer its EVS at such a low price?

One reason is vertical integration, as we just discussed, but lower production costs and economies of scale also help knowing that BYD has also dominated the battery market and now they can. buying lithium minerals in such volume that they come at a really good price and generally in China if you know you're making a car most of the materials come from here you know the labor is a lot cheaper , so everything is simple. on a more economical scale, so it can be done at a much lower cost, which is why they can produce these amazing cars for so little money.

It's the perfect combination of affordability and impressive features that sets byd apart, but of course, you have to get it. I know what many of you are thinking, if you buy one of these things, the wheels will simply fall off when you reach highway speeds, while the cheaper models leave a lot to be desired, according to Elliot, who lives in China and has hands-on experience with these cars, they are not as bad as you might think at first, yes absolutely, something like the seagull is really a culmination of byd's experience and knowledge in all areas, so it is very well designed, the quality of the battery, you know, the battery.

The engineering is very good and it actually looks pretty good too, you know, the Byd cars of the past, from about 2015, were horrible things, they looked horrible, no one would really want to buy one, but I think they've improved a lot. so fast that now they can be very competitive against things like the Ford Fiesta or the GM you know. The Chevy screws up those smaller cars and you know quality hasn't really been an issue with Chinese made products like this for at least five or six years, so you think you know our iPhones or Android phones, they are all made in China. or this Apple computer that I'm using was made in China, it's good quality so it's not a case that you know these products are now poorly made and come from China because as you can see all the things that we use in our All around are made in China, so this basically carries over to things like the byd SE go, but I don't expect it to break or fall apart very quickly.

You know, they are all entering Europe this year and all of the Chinese cars entering Europe have five-star Euro endcap ratings, which is not easy to get, but they have all managed IT so far, so I don't think it will be a big deal. concern with these cheaper EVS, byd's flagship model. seal is a much more interesting case, seal byd is a mid-size sedan with a stylish design and good overall performance, it has been tagged as a genuine threat to the Tesla Model 3, so what is the final verdict on the seal that the flourishing Chinese brand has? built an electric sports car capable of surpassing Tesla in the sales race;

Honestly, that's pretty unlikely given the Head Start that Tesla has, but there's really no reason not to consider the seal if you're looking for your first electric car, then it's a pretty compelling proposition, obviously, you can argue that it's cheaper and more affordable than a Model 3, but again, that's only part of the story. Annoying security systems, apart from this seal is fast, silent, dynamic, elegant, comfortable and good value for money. At the end of the day, all that makes it a very attractive package for an electric vehicle right now, however, it's not all sunshine and rainbows, the vehicle has been criticized for its over-reliance on touchscreens for functions, systems overly demanding safety assistance programs and a confusing and irregular warranty.

In terms of terms, it is clear that while By has made significant progress in the electric vehicle market, there is still a lot of room for improvement, perhaps in a couple of years we will all think differently. Despite Byd's impressive growth, there were still bumps in the road in 2022. They faced a setback in Australia that paused delivery of the BYD ATO 3 du due to a non-standard child safety seat compliance issue. Little thing. Another notable development was that Warren Buffett, who after holding his position for a remarkable 14 years, began selling his byd shares in August 2022. Buffett's Birkshire Hathaway has since reduced his stake in byd by more than 60%. %.

The reasons are not revealed, but anything from geopolitical factors to a profit-taking strategy could be an explanation. In October 2023, the European Commission launched an anti-pr investigation investigation into several listed Chinese electric vehicle manufacturers, including B&D, the investigation aims to determine whether punitive tariffs should be imposed, as the reason is protection of European EV manufacturers, the focus will be on determining whether Chinese-made EVs, particularly those made by BYD, unfairly benefit from state subsidies. I think that is a rather interesting point. The investigation is ongoing and has lasted 13 months. Byd management has expressed full cooperation with the EU investigation authorities, so we will have to wait and see what happens.

I think, to be honest, Byd goes. to be the new Toyota Toyota, for example, last year sold only 100,000 electric cars b and d sold that in about 3 weeks last year by d uh Toyota seems determined to bury its head in the sand and ignore what's happening around the world , while B is simply dedicated to vacuuming its Only in the last decade in the market have we witnessed the explosion of electric cars from almost zero to 10.2 million on the roads. By some estimates, this number is expected to grow to 300 million by 2030. The entire electric vehicle game is evolving.

Chinese companies, especially pioneers like Byd, have been quick to take advantage of the trend that is outpacing their Western counterparts, although we cannot ignore the enormous influence of the Chinese government on this, but that is how things are at the moment. I think it's a fascinating space to look at, so what's your take on this? Do you think I would do it? Have you ever received something like a byd? Do you distrust Chinese cars or does that not affect you? I'd love to hear your ideas, so share your thoughts in the comments section below anyway. That's all from me.

My name is toogo and you have been. I'm watching Cold Fusion and will see you again soon for the next episode. Greetings guys, have a good time. They don't take C. Okay, I'll do it on my own. Alright. Cold Fusion. It's a new thought.