First there was DeepSeek, the Chinese AI app that caused astonishment and dismay among the Silicon Valley tech titans. Now BYD, the Chinese electric vehicle company, has overtaken Tesla as the industry leader, posting annual revenue of 777 billion yuan ($107 billion) for 2024 in a filing published at the beginning of this week.
Just over a year ago, BYD was already being hailed as a “Tesla killer”, and reportedly overtook its rival in worldwide sales of fully electric cars in late 2023. This appears to be confirmation – and comes just days after the Chinese firm announced a new battery technology that will allow their cars to drive more than 400 kilometres after charging for only five minutes.
It has come a long way since 2007, when after unveiling a new model it was described as “the laughing stock of the industry” due to the car’s poor fit and finish. How have they done it? By taking their time, not over-promising, and making steady improvements, would be a starting answer.
The company was originally founded in 1995 by Wang Chuanfu, who is still the chief executive today, to make batteries. It bought a car-making factory in 2003, and even if others in the business had mocked BYD’s products, Warren Buffett saw potential in the enterprise, buying a nearly 10 per cent stake in 2008 for $230 million.
In the following years, Mr Wang made a shrewd bet. There would still be a big market for petrol-electric hybrid cars for a long time to come, he reckoned – which helped establish BYD at a time when charging infrastructure was still relatively novel and many consumers were wary of purchasing a wholly electric car.
In 2017, at a time of stalling sales, he made another: he hired Wolfgang Egger, a German who had been chief designer for Alfa Romeo, SEAT, Audi and Lamborghini, who then came up with a completely new and more attractive design identity.
The company’s DNA in making batteries for other firms stood it in good stead in 2020, when it announced its Blade batteries, which had a long life and were far cheaper than standard rechargeable lithium batteries. So in the year when Tesla started manufacturing and selling significant numbers of cars in China, having begun production at its “Gigafactory” in Shanghai at the end of 2019, BYD was ready.
The firm has had support from the Chinese government – estimates vary, although they converge around the $2 billion to $4 billion range. But it’s worked. In 2020, BYD sold 130,970 pure battery electric vehicles. In 2023, they sold 1.6 million. And last year, it sold nearly 1.8 million, as well as just under 2.5 million hybrids – which Tesla doesn’t sell.
It may be that the vast majority of BYD’s sales are in China, but it is also building factories in Brazil, Thailand, Hungary and Turkey, and Mr Wang said on Tuesday that it plans to double its sales outside China to more than 800,000 cars this year.
There could be little cause for such optimism at Tesla, which faces an array of gloomy figures. In February, deliveries from its Shanghai factory were nearly 50 per cent lower than in the same month a year earlier. Sales dropped 72 per cent in Australia, 76 per cent in Germany, again in February. To be fair, some facilities have been suspending production in readiness to relaunch a popular model. But the trend in sales drops is widespread.
The huge public, and now very political, profile of its chief executive, Elon Musk, is undoubtedly a large factor. Some consumers may buy EVs for their efficiency. Environmentalists who purchase them for their sustainability are likely to trend leftwards politically, and will not have been endeared by Mr Musk’s “Roman salute”, his support for Germany’s hard-right AfD party, his vocal criticism of diversity, equity and inclusion policies, his close association to US President Donald Trump (to whom he is senior adviser, as well as head of the Department of Government Efficiency), and his frequent and unfiltered posts on X, which he also owns.
It isn’t just that, however. Critics claim that there isn’t enough variety in Tesla’s range, and that the firm hasn’t innovated enough. Mr Musk may also have a little too much on his plate. As well as Tesla and X, he has an artificial intelligence firm, xAI, and SpaceX, which he says will launch its first mission to Mars by the end of 2026.
He recently admitted that combining all these roles was something he was doing “with great difficulty”. Apple’s Steve Jobs, to whom he is sometimes compared, never had his hands so full.
There’s no doubt that Mr Musk is a capable and talented man. The one time I saw him in conversation was at the Qatar Economic Forum in 2022 when he spoke to an interviewer in Doha via videolink. Given that it was about 4am in the US when he spoke to us, he was rather more fluent than most would be in the middle of the night; I also thought it was decent of him to join us at such an unsociable hour.
But with Tesla, he is coming up against a phenomenon I wrote about only last month. Chinese capabilities have advanced so dramatically that the perceived cachet of western luxury products is not just declining in China – given that local alternatives are in many ways just as good for, very often, half the price – but in other markets, too.
I remember hearing an advert for Audi on UK television in the 1980s and 90s to which the catchline was “‘Vorsprung durch Technik’, as we observe people are saying”. You didn’t have to know what the German meant. It just emphasised and assumed (correctly) that the brand stood for quality.
BYD overtook Volkswagen (which owns Audi) as the best-selling car marque in China in 2023. If Mr Wang delivers on his plan to sell nearly a million of his cars outside China this year, maybe it won’t be long before a similar catchline is developed for global ad campaigns – but in Mandarin.
