- BYD considered entering the US market last year: sources
- Aggressive US expansion unlikely for now – sources
- BYD could sell 10 million cars by early 2030s – shareholder
BEIJING, Jan 18 (Reuters) – Chinese electric vehicle (EV) giant BYD ( 002594.SZ ) is embarking on a rapid global expansion to challenge Tesla ( TSLA.O ) but is stuck in the slow lane for now of his rival’s land. .
While BYD has not fully articulated its global ambitions in public, a concerted global push has become the most important strategic focus for China’s largest electric vehicle maker, four sources familiar with the thinking said. from BYD management.
In addition to a trip to some European markets already underway, BYD spent much of last year conducting a study on how to establish a North American distribution network for its latest electric models, the two said. of the sources.
They described the study as advanced and serious, with specific recommendations from Detroit-based consultancy Urban Science on how many outlets in each state and city BYD would need, as well as formats for brick-and-mortar stores.
Momentum was building towards an announcement at this year’s CES global technology show in Las Vegas, where BYD planned to showcase a new generation of battery electric vehicles (BEVs) and plug-in hybrids for the US market , a BYD official said.
The announcement never came.
Strained relations between Washington and Beijing, anti-China sentiment in the United States and President Joe Biden’s decision to prioritize domestic production of electric vehicles and batteries pushed BYD to hit the pause button, one of the sources said.
BYD management has yet to give the project a definitive green light, and aggressive U.S. expansion remains unlikely in the foreseeable future, the source said.
“BYD is taking a cautious approach in the US,” the person said. “Think about all the political tensions between the United States and China and then think about the craziness of the whole world right now. You don’t want to jump into a big mess.”
BYD’s US project was complicated by the Biden administration’s Inflation Reduction Act (IRA), which imposes rules on where battery materials are sourced and disqualifies electric vehicles produced outside America from the North for a discount of $7,500.
“Who would start selling cars at a $7,500 disadvantage?” another of the sources said.
BYD declined to comment on this report.
HALF A TURN
BYD, which stands for Build Your Dreams, was the world’s largest seller of BEVs and plug-in hybrids in 2022 with a total of 1.86 million sales, the vast majority in China and well ahead of Tesla with 1.3 millions in total.
BYD remains ahead of Tesla in terms of all-electric cars by almost 400,000, although the Chinese company plans to increase sales quickly at home and abroad, having increased its BEV sales by 184% in 2022 compared to the previous year.
Of course, BYD isn’t the only Chinese auto company holding back its American ambitions due to the geopolitical backdrop and Biden’s moves to promote local production.
Chinese battery giant CATL ( 300750.SZ ) has slowed its planned investment in battery plants in the United States and Mexico amid concerns that IRA rules on materials sourcing would increase its costs .
American company HAAH Motors Holdings tried to import cars designed by China’s state-owned Chery Automobile and came up with plans for an American factory that would bring jobs to the United States.
But the two pulled the plug in 2021 when HAAH was unable to raise enough money to do so, due to what executives described as concerns about US tariffs and trade tensions.
BYD has been making electric buses in the United States for years, supplying cities like Los Angeles and Long Beach from a factory in Lancaster, Calif., built a decade ago.
But when it comes to electric vehicles, BYD leaders, including Chairman Wang Chuanfu, knew five years ago that their cars were not ready for the global market, because of their quality and other shortcomings, two of the sources
They have since made a U-turn.
Leveraging its latest range of electric cars such as the Han sedan and Tang crossover, BYD has become a major leader in China and has made inroads into other markets starting with Norway in 2021, and now including Australia, Britain , Brazil and Costa Rica. , Germany, Japan, Mexico and Singapore.
BYD is betting on lower costs than most rivals to overtake the world’s biggest carmaker Toyota ( 7203.T ) as electric vehicles become the cars of choice.
In the medium term, BYD, which is backed by Warren Buffett’s Berkshire Hathaway ( BRKa.N ), is shooting to sell more than 3 million cars a year worldwide, two of the sources said.
BYD did not respond to requests for comment on the sales targets.
Global consultancy LMC Automotive believes the idea of selling more than 3 million vehicles by 2030 is not far-fetched, although it said the majority of sales would still be in China.
LMC said BYD’s ability to offer a comprehensive range of globally attractive and well-priced full electric vehicles in mainstream and premium markets made its sales aspirations credible.
Zhang Wei, founder of Yuanhao Capital Management and BYD’s 10th largest shareholder as of the first quarter of 2022, believes BYD’s outlook should be even better.
He told Reuters that the 3 million target would be within reach by 2025 and that BYD should be able to sell 10 million vehicles a year by the early 2030s.
Zhang, who began building a major stake in BYD around 2015, told Reuters he likes the company because its chairman has created the kind of vertically integrated, cost-competitive electric car maker Elon Musk is still fighting for it.
Unlike many rivals, BYD can meet most of its battery and EV system needs on its own. It sources key battery materials from some of its mines in China and makes its own batteries and semiconductors, including power management chips that are crucial components in electric vehicles, Zhang said.
“Apart from windshields and tires, they can make almost everything on the car themselves. They have their own construction company that helps them build factories. That’s how they can speed things up,” he said. “I would say that BYD at this point is already better positioned than Tesla in the era of electric vehicles.”
According to two Toyota officials close to Toyota’s joint R&D center with BYD in Shenzhen, BYD’s product development cost is 20% to 30% lower than the automaker’s Japanese cars
“The high level of vertical integration in its battery supply chain gives it a clear cost advantage over similar automakers, an enabler for rapid expansion both inside and outside of China,” he said. LMC analyst Al Bedwell.
Still, while BYD is now taking a cautious approach to the U.S., it will likely focus on the U.S. auto market in the long term, the sources said.
“America will be a key, key part of this global push strategy,” said one.
Reporting by Norihiko Shirouzu; Additional reporting by Zoey Zhang in Shanghai; Editing by David Clarke
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