Decoding BYD: Exploring the Chinese EV Powerhouse that Surpassed Tesla

Don't miss out on CNN's Meanwhile in China newsletter for the latest on the country's global impact. Last year, BYD surpassed Tesla to become the top seller of electric vehicles worldwide, marking a remarkable achievement for the Chinese company.

In the three-month period leading up to December 31, the company exceeded Tesla's electric car deliveries for the first time and significantly closed the sales gap held by Elon Musk's company over the entire year. How did this relatively unknown Chinese battery maker rapidly rise to become Tesla's main competitor?

A sleeping giant

Established in 1995 by Wang Chuanfu, a discreet former academic who continues to lead the company, BYD is headquartered in the bustling Chinese metropolis of Shenzhen. According to Wang, the acronym "BYD" does not have any specific meaning. He intentionally selected a "rather unusual" name to distinguish the company from other emerging businesses.

China's leading electric vehicle (EV) producer, BYD, exports electric taxis, buses, and other vehicles globally, with key markets in Europe, South America, Southeast Asia, and the Middle East. In addition to EVs, BYD also manufactures plug-in hybrids, setting it apart from Tesla (TSLA). BYD has achieved significant success in overseas markets, with Israel and Thailand as its top markets for EV sales.

The best-selling passenger cars from BYD are the Qin and Song models. The Qin is a compact sedan offered as a plug-in hybrid or all-electric car, while the Song consists of a series of compact crossover SUVs.

In comparison to Tesla, BYD is renowned for providing more budget-friendly vehicles, making them more accessible to a broader range of consumers. Their entry-level model is priced at just over $10,000 in China, whereas the cheapest Tesla Model 3 is priced at over $32,000.

BYDs passenger cars are not yet available in the United States. But its electric busesmade in Lancaster, Californiaare sold in the country.

Wang Chuanfu, chairman and chief executive officer at BYD Co., during an event at the company's dealership in Sao Paulo, Brazil, on Tuesday, October 10, 2023.

Victor Moriyama/Bloomberg/Getty Images

Made in China

Wang, an engineer, initially relocated to Shenzhen in the early 1990s to oversee the operations of a battery manufacturing business on behalf of a government research institute based in Beijing, as stated in his official resume included in the company's filings.

Government positions in China were often referred to as "iron rice bowls," indicating job security. However, Wang left his government job and went on to establish BYD. This marked the beginning of his entrepreneurial journey, which aligned with the opening of the Chinese economy to the world. Deng Xiaoping, the former leader of China, had established the country's first special economic zone in Shenzhen, attracting numerous manufacturing businesses due to its liberal economic policies and lower labor and land costs.

By 1997, Wang had expanded his small workshop into a medium-sized cellphone battery manufacturer with annual sales exceeding 100 million yuan ($14 million).

The Asian financial crisis in that year presented a growth opportunity, causing competitors to go out of business as battery prices dropped. Wang's company was able to endure due to its cost advantage, as reported by the Southern Weekly newspaper.

By 2003, BYD had become the worlds largest producer of nickel-cadmium batteries, which were widely used in mobile phones.

Backed by Buffett

Despite angering the company's strategic investors and causing a significant drop in the company's Hong Kong-listed shares, Wang pursued more by entering the car industry in 2003. This move involved acquiring a state-owned automaker in the city of Xian for 269 million yuan ($38 million), driven by the future growth of EVs. Wang remained resolute in his decision, despite the initial backlash.

Despite the share price plunge, he confidently stated that he builds cars because of his optimism about the future development of electric vehicles, as reported by state-owned Beijing Business Today. In 2008, he was proven right when he received a $230 million investment from his most famous backer, Warren Buffett, who purchased around 10% of the company at about $1 per share. This show of confidence led to the company's stock soaring by as much as 1,370% over the next year.

BYD introduced its inaugural plug-in hybrid model in late 2008, propelling the company's growth as an EV manufacturer, with support from the Chinese government. Warren Buffett has been reducing his ownership in BYD since 2022, capitalizing on significant profits. Recent filings from Buffett's Berkshire Hathaway indicate a stake of nearly 8% in BYD, valued at 18.28 billion Hong Kong dollars ($2.3 billion) as of late October.

Competing with Tesla

Since 2015, BYD has been the leader in the Chinese EV industry, surpassing both domestic and overseas competitors in the world's largest car market. A key factor in its advantage over Tesla, the second-largest player in China, is its competitive pricing.

The four models offered by Tesla- the Model 3, Model Y, Model S, and Model X- range in price from $40,000 to $120,000 in the US. Meanwhile, the base Model 3 in China starts at 229,900 yuan ($32,375) and boasts a range of 272 miles on a full charge, with a top speed of 140 miles per hour. In contrast, the BYD Seagull is available in China at a starting price of 73,800 yuan ($10,392) and has a top speed of 81 miles per hour. It comes with options for either a smaller battery with a 190-mile range or a larger battery with a 251-mile range.

Making its own batteries

Both Tesla and BYD vehicles have been assessed and received safety ratings from international organizations. In 2022, Teslas Model Y and BYDs Atto 3 were each awarded a five-star Australasian New Car Assessment Program (ANCAP) rating.

Since 2020, BYD has been producing its "Blade Batteries," a type of lithium iron phosphate battery (LFP), for its own vehicles and for sale to other car manufacturers, including Toyota.

According to the company, the blade-shaped battery is thinner and more durable than traditional lithium iron cells, allowing for maximum use of available space within the battery pack. Additionally, BYD states that the Blade Battery is less prone to catching fire even when severely damaged.

Tesla reportedly utilizes BYD Blade Batteries for its Y cars manufactured at the Berlin Gigafactory, as per reports from German media.

Elon Musk refuted a media report in March 2023 claiming that Tesla was terminating its partnership with BYD for battery supply.