The Electric: How Byd Became the Best-Selling Carmaker in China
Today's column is from Dalibor Petkovic, a freelance researcher specializing in Chinese industrial policies. Since 2017, he has focused on the Chinese EV market, as well as smart cities, urban logistics and battery recycling management.
Chinese automaker Byd in April became the first homegrown brand in 36 years to lead the nation in sales, according to the China Passenger Car Association. Significantly, Byd’s ascent to the top spot came the same month the Shenzhen-based company said it had stopped producing traditional internal-combustion vehicles, to focus on electric vehicles and plug-in hybrids.
Byd, whose investors include Warren Buffett, has thrived by offering mid-tier plug-in hybrids that incorporate its innovative Blade battery technology, helping the cars to achieve up to 60 miles per gallon. The middle market accounts for roughly half of vehicle sales in China. But there are fewer EVs aimed at the middle market, as most EV makers are focused on either cheaper low-end models or high-end vehicles.
Byd seized the opportunity and markets plug-in hybrids to price-sensitive mid-tier consumers skeptical of novel EV technology. It prices its hybrids roughly $5,000 less than popular Japanese hybrid models. The strategy helped Byd sell more than 100,000 vehicles in each of the past two months despite lockdowns, rising battery prices and parts shortages.
These days, Byd is rolling out its new Ocean series of pure EVs aimed at the middle and high end of the markets. But it will face more competition in coming months as rivals including Volkswagen, Toyota, Shanghai Auto and Beijing Auto introduce their own mid-tier EV models.
Byd’s focus on the middle market means it’s less profitable than some other automakers in China. Byd’s automotive gross profit margin in the first quarter was 15.6% based on Citigroup calculations, less than half of Tesla’s 32.9% margin; Chinese EV makers NIO and Lixiang recorded gross margins of 19% and 22%, respectively. Byd’s average Q1 sales price was 158,000 yuan, while Tesla’s was around 350,000 yuan, according to the analysts.
But Byd has a powerful ally in the national government, which wants home-grown brands to become leading global manufacturers like Toyota or Volkswagen. To do that, Chinese automakers including Byd need to improve and expand their high-end offerings, which tend to generate larger profit margins. So Byd has tapped government subsidies to convert traditional auto plants to make EVs, as well as government-brokered technology-sharing agreements and aid to develop new technologies. Now, it needs to change its image from a maker of cheap, low-end vehicles and emulate companies like Tesla and NIO in creating an image that appeals to higher-income motorists.
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About Steve LeVine
Steve LeVine is editor of The Electric. Previously, he worked at Axios, Quartz and Medium, and before that The Wall Street Journal and The New York Times. He is the author of The Powerhouse: America, China and the Great Battery War, and is on Twitter @stevelevine