Business modernity is based on legends and the explosion of the Chinese automobile manufacturer BYD is led by Wang Chuanfu (56). Born in a small town, orphaned as a teenager, graduated in chemistry, specialized in battery technologies and founded a small company thanks to the $300,000 a friend loaned him along with his cousin Lu Xiangyang. These are the beginnings of a company that began selling battery cells to cell phone makers Motorola and Nokia in the late 1990s and became known to the world as the world's largest maker of electric cars in January this year.
Although Tesla remains the largest electric vehicle maker year-over-year, BYD surpassed it last quarter with 526,000 units sold, compared to Tesla's 484,000. The company has given a recognizable name to the Chinese wave of zero-emission vehicles, which automotive companies already take for granted.
BYD has some similarities with the company that Elon Musk founded. In his cover letter he avoids the term car manufacturer and prefers that of a technology company. Its headquarters are not in Wuhan, China's Detroit, but in entrepreneurial Shenzhen, the Asian giant closest to America's Silicon Valley. And another similarity is that it is one of those neo-companies that scare the traditional automotive industry. Not only has it overtaken Tesla, but it has also replaced Volkswagen as the automotive leader in the highly competitive Chinese market in 2023. As consulting firm Sino Auto Insights pointed out when the brand overtook Ford for market share in August (2023 was its year): “If that doesn't ring alarm bells in Detroit, Dearborn, Stuttgart, Wolfsburg, Munich, Toyota and Auburn Hills.” Turin, Seoul and the other motor capitals, so we don’t know what it will be like.”
The truth is that BYD is more than just a car manufacturer. One of the obsessions of its president – also described as a Stakhanov character, and the obsession with cost cutting also attributed to other big names in the automotive sector such as Carlos Ghosn (former president of Renault and Nissan) or Carlos Tavares (Stellantis) – is, that the group can be as self-sufficient as possible, which is why, in addition to entering the rail transport business, it has also developed businesses related to batteries and semiconductors. Thanks to all this, sales were able to reach 55,000 million euros in 2022 (last published annual data), almost doubling compared to the previous year. It had already exceeded this revenue in the first three quarters of last year. “Vertical integration gives BYD long-term staying power while pushing out smaller competitors that are not yet vertically integrated,” Chuanfu said in a sentence hinting at future prospects in 2022 when he gave an interview to Forbes in which he also was active described his character: “Do more and talk less.”
The company's problem may lie in its price, which does not have the resources that Tesla has shown every time it has shown a good result. Its shares are worth around 187 yuan, which corresponds to a market capitalization of around 69 billion euros. That's four times more than when it was listed in 2019, but is also well below the 358 yuan at which it was listed in June 2022. The good results of 2023 have had little impact.
good godfather
Despite everything, the stock market has a good godfather who avoids volatility: Berkshire Hathaway, Warren Buffett's investment firm, which invested $230 million 15 years ago to acquire 10% of the group. The biggest supporter of this investment (which was partially discounted by significant capital gains) was its vice president, Charlie Munger, whom BYD described as a “mentor” at X when he died last November: “In 2008, we had the honor of receiving his support (. ..). “This historic milestone marked the first recognition of BYD by a top international investment institution.” Two years after this financial support, Musk laughed at the brand in a Bloomberg interview: “Have you seen their cars?” A decade later, he corrected the shot and assured that it was one of the most competitive vehicles.
Munger was convinced that BYD would be better than Tesla, but right now investors don't see this. It is possible that BYD is conditioned by a triad of arguments: the first is that it is not positioned in the monoculture of pure electric vehicles in which Tesla is located and that it also uses the hybrid car to benefit from the designation ” ” New vehicle”. Energy”, which is subsidized by the Chinese state and enables total sales of three million cars. The second reason is that its business still relies heavily on its local market and less than 10% of the three million vehicles sold in 2023 were exported to 70 countries. And the third reason is that it has focused on the low-to-mid segment of the market, which not only makes profitability per vehicle sold difficult under normal conditions, but also makes it difficult when a price war breaks out, like the one affecting electric vehicle manufacturers , and which is already having an impact on Tesla's decline in profitability.
But the company recognizes that this needs to change and has set a goal of achieving a 10% share of the global market, excluding the US and Europe. “It has more potential than Tesla because it has a range of products suitable for both emerging and developed markets, and BYD has a much broader catalog that includes city cars, urban SUVs or sedans,” says analyst Felipe Muñoz from the specialist consulting firm Jato.
After a good start, especially in the Thai and Indian markets, the biggest bet is now in Indonesia, the largest country in Southeast Asia, where the group plans to invest more than 1,000 million euros in the construction of a factory with an initial capacity to assemble 150,000 electric vehicles Car units and batteries. He also has plans for Europe. The company has committed to building a factory in Hungary with a similar capacity to Indonesia. This is one of the first attempts by a Chinese company to establish itself on the Old Continent. And an announcement that comes just as the European Commission is examining possible public aid for Chinese car manufacturers' exports. A few years ago, Chuanfu admitted that he viewed two Chinese resources as a path to growth: labor and the extensive market. It has served him well so far, but it seems that it is no longer enough.
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