BYD - Bold, Young, and determined.
Imagine waking up one morning and reading that a Chinese underdog car company has taken over EV sales of Elon's Tesla. Sounds unachievable. Doesn't it? Well, that's what many people said when Wang Chaunfu said that he would build a world-class car company that would beat Tesla in every aspect. May it be design, comfort, or battery efficiency, he proved to the world that you can build it if you can dream it. Automobiles are one of the most fragile businesses in the world. It's like the touch-me-not plant. Very sensitive. The world has experienced one of the best engines in the past century, yet only a handful of them have survived. Apart from competitors like Ford, Toyota, Mercedes, GM (even though it almost went bankrupt in 2008), etc., most of them have either left the industry, been thrown out of the industry, or have merged with a rival. For example, Daimler-Benz and Chrysler, Fiat and Chrysler, Volkswagen AG and Porsche SE, or even the prominent Indian example of JLR and Tata Motors, for that matter.
25% of the vehicles sold in China are electric, and BYD is responsible for about half of those sales. BYD's tentacles stretch into many areas, from batteries to mining and semiconductors, which is a large reason behind its success. In 1996, BYD began manufacturing lithium-ion batteries, the type that are in our modern-day smartphones. This coincided with the growth of mobile phones. BYD went onto supply batteries to Motorola and Nokia in 2000 and 2002, respectively, two of the mobile phone industry's behemoths at that time.
It wasn't until 2003 that BYD acquired a small automaker called Xi'an Qinchuan Automobiles. Why do Chinese people have weird names? I used to believe that anything you couldn't pronounce was French. I think they have a competition. Anyway, moving forward, two years later, it launched its first car called the F3, which was a combustion model. And then in 2008, when the auto industry around the world was burning, they launched F3DM, its first foray into electric vehicles. That same year, Warren Buffett's Berkshire Hathaway made what was, at the time, a $230 million investment in BYD. This gave a boost to BYD's electric car ambitions. BYD continued to push into the EV space, and this is where its history as a battery maker came into play. In 2010, the company launched the Blade battery, which many argued helped spark BYD's growth in EVs.
An Indian conglomerate is almost taking the same steps that BYD took. They are very close to launching their own EV. I'll give you a hint: they have nothing to do with the car business. Even though their main business is indirectly related to cars, they have as much experience in running a car company as Adani has in ruining an airport. Long story short, the man has built everything that is needed to build a car. Steel, paint, batteries, etc. You name it, he has built it. Any guesses? Write it in the comments section below. Back to BYD.
The blade battery is a lithium-ion-phosphate battery. At the time, many battery makers were moving away from LFP batteries due to perceptions that they had poor energy density, i.e., they were too heavy for the amount of energy they were able to provide. John Maxwell once said that a leader is one who knows the way, goes the way, and shows the way. Using the same battery configurations, BYD introduced Han, a sedan that was seen as a rival to the Tesla Model S. BYD used the same battery, introduced many more variants, and sold nearly 130,970 pure-battery electric vehicles. In 2021, the company sold 1.57 million battery EVs. Keep the vision and stay on course. In 2022, Tesla cut the price of their models three times in a year but still couldn't beat BYD in sales. Tesla sold 1.3 million vehicles, whereas BYD sold 1.9 million vehicles.
Wang Chuanfu then had the wherewithal to acquire a broken-down local Chinese automobile brand and was able to focus on innovating on battery technology enough so that it could sell to other automakers. If that wasn't enough, they were head-down grinding, continually improving the design, engineering, and quality of their own stable of vehicles. At the start, BYD did not jump straight into pure electric EVs. The company still sold hybrid cars. In the early stages of the Chinese EV market, BYD chose to simultaneously launch a battery-powered EV and a plug-in hybrid EV. This strategy allowed BYD to win the market when charging infrastructure was not well established and users were not very clear about the advantages of EVs. The Chinese government also played a pivotal role and supported the country's EV sector. Over the past few years, Bejing has offered subsidies to incentivize buyers of electric cars and offered state support to the industry. These measures began around 2009, when BYD was looking to ramp up its EV push.
After dominating China's EV market, BYD is now expanding aggressively overseas. It sells cars in a number of countries, from the UAE to Thailand and the UK. In southeast Asia, BYD has a 43% market share in EVs. But BYD's international expansion is not just about selling cars; it involves manufacturing and materials too. The battle between Tesla and BYD, the world's biggest EV makers, is set to continue. Most automotive companies, for the longest time, didn't take BYD seriously. That's where part of their journey mirrors Tesla's, because people didn't take Tesla seriously in the early days either.
Happy Investing.
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