Charge to the top

EV sales have been booming

“Few seem to realise that China is leading the world in renewable energy generation and electric vehicles,” noted Tesla supremo Elon Musk in a post on Twitter and Sina Weibo this Monday. “Whatever you may think of China, this is simply a fact.”

What Musk didn’t add is how this might impact on Tesla’s prospects over the longer term as the world’s bestselling passenger electric vehicle (EV). One potential challenger elicited much laughter when Musk was asked about it in a 2011 TV interview, for instance.

The company in question is BYD. When asked to explain his mirth, Musk queried whether the Bloomberg journalist had actually seen any of BYD’s cars.

“I don’t think they have a great product,” he said. “It’s not attractive. The technology isn’t particularly strong,” said Musk.

“BYD has pretty serious problems on its home turf in China. I think they should focus on not dying there,” he continued.

That was then. BYD’s sales now make it much more of a contender. In April, it sold 105,475 vehicles in a record-breaking month. In the process, it grabbed seven slots out of China’s EV top 10.

Tesla didn’t even figure in the top 20, although much of the sales discrepancy relates to the location  of its factories in China. Tesla’s production base is in Shanghai, which has been under lockdown. BYD is based in Shenzhen, which has not suffered from the same restrictions. All the same, the disruption means that BYD may now surpass its American rival over the course of 2022.

It began the year with a 1.2 million unit sales target, compared to Tesla’s 1.5 million global one. In 2021 Tesla sold 936,172 vehicles worldwide (half of them produced in its Shanghai gigafactory) compared to BYD’s 593,743. However, BYD was already closing the gap during this year’s first quarter, selling 285,849 vehicles to Tesla’s 310,048. Tesla’s supply chain issues are having a big impact with total Chinese output (domestic sales and exports) down to just 1,512 vehicles.

BYD now has an EV product range that includes most types of sedan and SUV, large and small. And later this year it’s planning to take a leap into luxury branding, with the unveiling of an off-road SUV that it is producing in association with Huawei.

Domestic auto bloggers are excited about the Interstellar (Xingji in Chinese), its reputed name, which is rumoured to have a price tag between Rmb800,000 ($120,000) and Rmb1.5 million. That compares to BAIC’s high-end SUV, the BJ90, which retails for Rmb1.28 million. However, the BJ90 is effectively a rebodied Mercedes GL. BYD’s new offering would be groundbreaking as a domestic design and potentially mark a turning point for Chinese car companies at the high-end of the market.

Others are eyeing the same space, with NIO launching the ES7 and XPENG the G9 to compete against Tesla’s Model Y.

“2022 may be the first year of Chinese luxury [auto] brands in the truest sense of the word,” one car sector blogger celebrated.

Local journalists also have a favourable view of the BYD-Huawei tie-up. Huawei’s MDC intelligent driving platform is designed to plug one of the few remaining gaps in BYD’s increasingly integrated supply chain. Likewise, BYD’s design and production expertise will help Huawei to understand how to build products that tap into the expanding EV sector.

Many wonder whether Huawei might branch out completely on into its own into making EVs, after putting plans to do something similar on hold in 2019 to support other brands instead.

The move wasn’t welcomed by all. In 2021, SAIC Motor chairman Chen Hong said that brands that partner with Huawei will “lose their soul” to the telecom networks giant, presumably as its software and operating control systems grow into the key components of vehicle value.

In the meantime BYD wants to leverage its manufacturing platform to produce cars for other brands. Both NIO and Xiaomi already have agreements in place to purchase BYD’s blade batteries in bulk volumes as well.

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