BYD, a Chinese automaker, is competing with Tesla in the worldwide electric car market, despite increased restrictions to entry in the US.
The Shenzhen-based corporation has already tested the waters in a number of nations, with some initial sales success, often within a year of arriving.
Given policy uncertainties surrounding Chinese EV exports to major markets such as the United States and Europe, BYD is attempting to boost international sales by shifting production to regions thought to be more hospitable. The corporation already has factories in Thailand, Brazil, Indonesia, Hungary, and Uzbekistan under construction.
“They are targeting countries without very strong domestic auto industries, where they are likely to face less political pushback or headwinds from a policy perspective,” said CLSA research analyst Xiao Feng, stressing that recent developments in the United States highlighted the need for such a strategy.
Last month, the Biden administration said that it had initiated an investigation into whether Chinese-made cars pose national security dangers, with the possibility of limiting the vehicles. The United States has attempted to encourage domestic use of electric vehicles, but sales penetration remains far lower than in China.
BYD is moving swiftly, starting with Thailand, where the company aims to open its first production outside China by the end of the year. According to Marklines data, the carmaker overcame Toyota to take the lead in passenger car sales in Thailand in January, despite having no sales there the previous year.
Once operational, the Thailand factory is anticipated to supply the remainder of Southeast Asia. EY believes that the region’s electric car market would develop exponentially to at least $80 billion in annual sales over the next decade.
According to Counterpoint Research, BYD has established itself as the top-selling EV brand in Southeast Asia, capturing more than one-third of the market last year despite previously selling only a few vehicles.
Edge versus Tesla
According to Counterpoint Research, BYD sold 70,000 electric cars in Southeast Asia last year, accounting for 35% of the market, ahead of competitors Vinfast and Tesla.
One of BYD’s advantages versus Tesla is its wide range of mass-market options, as well as a combination of hybrid and battery-powered vehicles. Tesla only produces more expensive, battery-powered vehicles. Having hybrid choices is useful in emerging economies where battery-charging infrastructure is lacking.
According to Canalys automotive analyst Alvin Liu, Southeast Asia will likely remain BYD’s greatest international market in the short term as the business works toward doubling its car exports from last year to 500,000 by 2024.
“The Southeast Asian EVs market is still in its early stages, and consumer habits need to be cultivated,” Liu went on to say. “Cost-effectiveness” is also crucial, he continued, with BYD’s Atto 3 and Dolphin models available in the region at relatively low pricing.
Local media claimed in January that the business is also investing $1.3 billion to create an electric car factory in Indonesia by 2024. This year, BYD is also expected to dramatically boost the number of outlets in Singapore and the Philippines.
The corporation did not respond to a request for comment on the rumored plans.
While BYD does not break down capital expenditure by nation, it recorded 81.52 billion yuan ($11.33 billion) in auto-related capex in the first half of 2023, nearly doubling the 45.94 billion yuan reported for all of 2022.
In contrast to Tesla’s direct-dealership strategy, BYD frequently relies on local distributors and partners for sales in countries outside of China. For example, in late 2022, BYD entered into a distribution arrangement with Sime Darby Motors in Malaysia.
Plan for the Americas
While US scrutiny of China’s electric vehicle domination grows, BYD is expanding in Brazil and has its sights set on Mexico, which is near the US border.
Stella Li, the company’s Americas CEO, told Reuters that BYD is exploring opening a facility in Mexico, where it has begun to sell more electric vehicles.
If BYD builds a factory in the country, it may become a “beachhead for the Americas,” according to Bill Russo, the founder and CEO of investment advice firm Automobility, who recently spoke with CNBC’s “Squawk Box Asia.”
“Mexico is part of the USMCA, so there is an opportunity to export from Mexico to North America,” he said, referring to the free trade agreement signed by the US, Mexico, and Canada in 2020.
BYD does not want to sell passenger automobiles in the United States, Li reportedly stated at the end of February.
The company did not return a request for comment on this article.
China remains BYD’s largest market. Last year, the corporation produced more than 3 million new energy passenger vehicles, of which slightly more than 242,000 traveled overseas.
BYD and other Chinese electric car businesses’ quick expansion has caused concern among rival automakers.
In February, the Alliance for American Manufacturing issued a report warning that low-cost Chinese imports might be a “extinction-level event for the U.S. auto sector” and urging Washington to prohibit Mexican imports early.
That came just weeks after company announcements indicated that BYD was far ahead of Tesla in terms of vehicle manufacturing.
Europe and Other Markets
A global push to go electric has opened up new market opportunities for Chinese automakers, particularly as domestic development slows.
“BYD needs to look for more overseas opportunities in other regions where the EV penetration will accelerate with infrastructure development for its long-term sustainable growth, not losing share against the US and European automakers,” Liz Lee, an associate director at Counterpoint Research, said.
BYD revealed late last year that it would establish a facility in Hungary, and in January stated that production would begin in three years.
The disclosure came just months after the European Union started an investigation into the role of subsidies in Chinese-made electric vehicles.
BYD sells cars in Australia, the Middle East, and Africa, and in January announced the start of production at its jointly owned facility in Uzbekistan.
