China’s leading electric vehicle maker, BYD, has seen its share price drop by more than 10% in the past year, as competition intensifies in the world’s biggest car market. The company, which is backed by US billionaire Warren Buffett, has been overtaken by Tesla as the top-selling EV brand in China, and faces pressure from both domestic and foreign rivals. BYD’s challenges reflect the changing dynamics of China’s EV market, which is undergoing a rapid transformation amid policy shifts, technological innovations, and consumer preferences.
BYD, which stands for Build Your Dreams, was founded in 1995 as a battery maker, and entered the car industry in 2003. The company gained international attention in 2008, when Buffett’s Berkshire Hathaway invested $232 million for a 10% stake. BYD’s strategy was to leverage its expertise in battery technology and low-cost manufacturing to produce affordable and reliable EVs for the mass market. The company also benefited from China’s generous subsidies and preferential policies for EVs, which aimed to reduce air pollution and foster a domestic industry.
BYD’s strategy paid off, as the company became the world’s largest EV maker by sales in 2015, and maintained its position until 2019. BYD’s flagship model, the Qin plug-in hybrid sedan, was the best-selling EV in China for three consecutive years from 2015 to 2017. The company also expanded its product portfolio to include buses, trucks, and other commercial vehicles, as well as battery storage and solar power solutions. BYD’s revenue and profit grew steadily, reaching 127.9 billion yuan ($19.8 billion) and 1.6 billion yuan ($247 million) respectively in 2019.
However, BYD’s dominance began to erode in 2020, as China’s EV market entered a new phase of development. The Chinese government gradually phased out subsidies and tightened regulations for EVs, raising the bar for quality and performance. At the same time, consumer demand shifted from low-end to high-end models, driven by rising incomes, changing tastes, and environmental awareness. Tesla, the US-based EV pioneer, entered the Chinese market in 2019, and quickly gained popularity with its sleek design, advanced technology, and premium brand image. Tesla’s Model 3 sedan became the best-selling EV in China in 2020, surpassing BYD’s Qin and other models.
BYD also faced fierce competition from other domestic EV makers, such as Nio, Xpeng, and Li Auto, which are collectively known as the “new energy vehicle (NEV) pioneers”. These companies, which are backed by tech giants such as Tencent, Alibaba, and Baidu, have focused on developing smart and connected EVs that cater to the young and affluent urban consumers. They have also adopted innovative business models, such as battery swapping, online sales, and subscription services, to differentiate themselves from traditional carmakers. The NEV pioneers have seen their sales and valuations soar in 2020, attracting more investors and customers.
As a result of these factors, BYD’s sales and market share declined in 2020, while its costs and debt increased. The company’s revenue fell by 7.6% to 118.2 billion yuan ($18.3 billion) in 2020, while its net profit dropped by 7.5% to 1.5 billion yuan ($232 million) in the same period. BYD’s share price also plunged by 42% from its peak of 280.6 Hong Kong dollars ($36.1) in August 2020 to 162.4 Hong Kong dollars ($20.9) in December 2020. The company’s market capitalization fell from 778.6 billion Hong Kong dollars ($100.3 billion) to 449.2 billion Hong Kong dollars ($57.9 billion) in the same period, losing its crown as the most valuable carmaker in China.
BYD’s comeback plan
Despite the setbacks, BYD has not given up on its ambition to be a global leader in EVs. The company has launched a series of initiatives to regain its competitive edge and reclaim its market share. BYD’s comeback plan is based on three pillars: innovation, diversification, and expansion.
Innovation
BYD’s core strength lies in its battery technology, which is the key component of EVs. The company has invested heavily in research and development, and has introduced a new generation of batteries, called the Blade Battery, in 2020. The Blade Battery claims to have several advantages over conventional lithium-ion batteries, such as higher energy density, longer lifespan, lower cost, and greater safety. The Blade Battery is also designed to fit into the chassis of the car, saving space and weight. BYD has applied the Blade Battery to its new models, such as the Han sedan and the Tang SUV, which have received positive reviews and strong orders.
BYD has also upgraded its software and hardware capabilities, to meet the rising demand for smart and connected EVs. The company has developed its own operating system, called DiLink, which integrates various functions and features, such as navigation, entertainment, security, and remote control. The company has also partnered with Huawei, China’s leading telecom equipment maker, to use its 5G and artificial intelligence technologies in its EVs. BYD has also improved its design and quality standards, to appeal to the high-end consumers. The company has hired former Audi designer Wolfgang Egger as its chief designer, and has adopted a new brand logo and slogan, “Build Your Dreams”.
Diversification
BYD’s second pillar is to diversify its product portfolio and revenue streams, to reduce its reliance on the passenger car segment, which is highly competitive and cyclical. The company has expanded its presence in the commercial vehicle market, which has a higher entry barrier and a more stable demand. BYD is the world’s largest maker of electric buses, and has supplied more than 60,000 buses to over 300 cities in 50 countries. The company has also entered the electric truck market, and has delivered more than 12,000 trucks to various industries, such as logistics, mining, and construction. BYD has also ventured into the rail transit market, and has developed a new type of train, called the SkyRail, which runs on elevated tracks and uses battery power.
BYD has also diversified its revenue streams by providing battery and energy solutions to other industries and sectors. The company has established a separate division, called FinDreams, which offers battery, powertrain, and cloud services to other carmakers and mobility providers. The company has also leveraged its battery expertise to provide energy storage and solar power solutions to various customers, such as utilities, grid operators, and households. BYD has also explored new business opportunities, such as online ride-hailing, car-sharing, and vehicle leasing, to tap into the emerging mobility market.
Expansion
BYD’s third pillar is to expand its global footprint and market presence, to increase its brand awareness and customer base. The company has established production and sales networks in several key markets, such as the US, Europe, Japan, and India. The company has also formed strategic partnerships and alliances with various local players, such as Toyota, Daimler, and Hino, to leverage their resources and expertise. BYD has also participated in various international events and exhibitions, such as the Paris Motor Show, the Consumer Electronics Show, and the World Economic Forum, to showcase its products and technologies. BYD has also launched various marketing and promotional campaigns, such as sponsoring sports teams, celebrities, and social media influencers, to enhance its brand image and reputation.
BYD’s outlook
BYD’s comeback plan has shown some positive results, as the company has recovered some of its lost ground in 2021. The company’s sales and market share have increased in the first half of 2021, driven by the strong performance of its new models, such as the Han and the Tang. The company’s revenue and profit have also improved, reaching 80.9 billion yuan ($12.5 billion) and 1.7 billion yuan ($263 million) respectively in the first half of 2021, representing a growth of 54.8% and 29.4% respectively from the same period in 2020. The company’s share price has also rebounded, rising by 27.3% from 162.4 Hong Kong dollars ($20.9) in December 2020 to 206.8 Hong Kong dollars ($26.6) in January 2021. The company’s market capitalization has increased from 449.2 billion Hong Kong dollars ($57.9 billion) to 571.9 billion Hong Kong dollars ($73.7 billion) in the same period, regaining its position as the second most valuable carmaker in China, after Tesla.
