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Right now, the most influential carmaker in the world is a Chinese-owned company backed by Warren Buffett, putting Elon Musk in a tough spot.
BYD, a carmaker that Elon Musk once made fun of, surpassed Tesla as the best-selling electric vehicle brand in the world by the end of last year (although Tesla reclaimed the lead in the first quarter of this year, and now they are very close). And now, BYD is challenging Toyota with a new hybrid powertrain that can supposedly take you from New York to Miami without needing to stop for gas.
This new hybrid powertrain boasts an impressive range of 1,300 miles on a single tank, far surpassing the typical range of other hybrid vehicles on the market. Major global hybrid carmakers usually offer ranges just above 680 miles, according to The Wall Street Journal.
BYD’s Hong Kong shares shot up more than 5% on Wednesday.
There are a few reasons why all of that matters.
Tesla, the best-selling electric vehicle in America, is facing tough competition from foreign rivals who can offer more affordable options. Despite being a pioneer in the electric vehicle industry, Tesla has not introduced any major innovations in recent times to justify its higher prices. This has allowed companies like BYD, known for producing both electric vehicles and hybrids, to gain an edge over Tesla in the global market.
China is home to the world's largest auto market, with BYD being the top seller, surpassing Volkswagen last year.
Moreover, BYD offers affordable sedans. The two models equipped with the new drivetrain start at approximately $14,000. (To put it into perspective, the Toyota Prius, the best-selling hybrid in the US, starts at $28,000.)
From being a small producer of clunkers, BYD has transformed into a global powerhouse brand, much to the surprise of skeptics like Musk. In a 2011 Bloomberg interview, Musk had dismissed BYD.
The All-Electric Ford Mach-E is displayed during the 2023 Los Angeles Auto Show at the Los Angeles Convention Center on November 24, 2023 in Los Angeles, California.
The All-Electric Ford Mach-E is displayed during the 2023 Los Angeles Auto Show at the Los Angeles Convention Center on November 24, 2023 in Los Angeles, California.
Josh Lefkowitz/Getty Images
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During the conversation, Musk chuckles smugly when asked about BYD competing with Tesla. He rhetorically questions the interviewer if they have seen BYD's car. When pressed further, he explains that he finds BYD's product unattractive and believes the technology is not very advanced.
In the decade that followed, a lot of things happened. Musk admitted in January that he was wrong when he said Chinese EV makers could outperform most other car companies unless trade barriers are strengthened. (This happened two weeks ago.)
On the other hand, BYD has an advantage over Tesla because it also produces hybrids.
Hybrid cars like the Prius were once seen as a temporary solution on the path to a fully electric future. However, in the United States, electric vehicle (EV) sales have been struggling, partly due to the lack of infrastructure to support them.
EV technology has significantly improved, with most models now offering over 300 miles of range on a single charge. This is more than enough for the average person's daily driving needs. The issue lies in the insufficient number of charging stations available on highways and in urban areas, making consumers hesitant to switch to electric vehicles.
The main reason why many US customers are hesitant to consider purchasing an electric vehicle is the lack of charging stations available, as highlighted by 52% of consumers in a recent JD Power survey.
As an alternative, many consumers are opting for hybrid vehicles instead. Hybrids are generally more affordable than electric vehicles, help reduce fuel costs in the long run, and are slightly more environmentally friendly compared to traditional engines. However, it's important to note that hybrids still rely on fossil fuels and do not contribute significantly to meeting climate goals, unlike the widespread adoption of electric vehicles.
Currently, Tesla and other American car manufacturers are protected from competition from China due to high tariffs and strict regulations. However, it remains uncertain how long this protection will last if US consumers start to prefer the cheaper options from abroad.
Editor's P/S:
The rise of BYD, a Chinese-owned carmaker backed by Warren Buffett, has shaken the automotive industry and put Tesla in a precarious position. BYD's success is a testament to the growing competitiveness of foreign rivals, who offer more affordable options and are not afraid to innovate. Tesla's failure to introduce significant innovations in recent times has allowed BYD to gain an edge in the global market, particularly in China, the world's largest auto market.
The shift towards hybrid vehicles, such as BYD's new hybrid powertrain with an impressive 1,300-mile range, is a reflection of the challenges faced by electric vehicles in the United States. The lack of charging infrastructure has hindered the widespread adoption of EVs, making hybrids a more attractive option for consumers who are hesitant to commit to fully electric vehicles. This trend could potentially benefit BYD and other hybrid manufacturers, while putting pressure on Tesla to address the infrastructure challenges.
