BYD is already delivering what Tesla and Elon Musk eulogise, could the crown be slipping?

Tesla has enjoyed a successful reign on the EV throne, appearing to be untouchable as Elon Musk’s empire conquered the automotive market. However, earlier this month, a much less-known yet just as ambitious company overtook Tesla to take pole-position as the king of the battery-powered car.

BYD, short for ‘Build Your Dreams’, is now the world’s largest EV manufacturer, recording 641,000 sales in six months, beating Tesla’s 564,000. Based in China, BYD, which has U.S. billionaire Warren Buffet as a shareholder, is dominating the Chinese market through launching EVs on time and at scale.

How has it done this? BYD has the benefit of having an already-integrated supply chain due to its investment in manufacturing critical parts – from batteries to semiconductors. By doing this, BYD has provided itself with the key components to build its vehicles and avoided the well documented pains of many other automakers.

So far Tesla and BYD haven’t really been in competition – BYD and Tesla until very recently made quite different vehicles; and in Tesla’s US backyard, BYD doesn’t sell vehicles due to the tariffs on car imports. But internationally, they are about to compete, with the BYD Seal having the Tesla Model 3 firmly in its sights. In China, BYD reported that it had over 22,000 orders in just a few hours after the Seal launch. The car is an attractive well priced package (equivalent to $32,000) in China. BYD has reported a fast ramp-up of production, and it appears likely to be attractive to consumers outside China too.

So BYD are now making increasingly luxurious cars to compete with Tesla and other EV vendors such as VW, Ford, GM, etc. – but how are they going beyond the Tesla playbook?

One really key difference is that although all its vehicles are manufactured in China, BYD has been able to avoid the worst of the China lockdown supply-chain issues by making its own chips through its BYD Semiconductor subsidiary, for which there are plans to float on the Shenzhen ChiNext market.

When it comes to batteries, again BYD is ahead of Tesla through making its own batteries. Yes, Tesla has a joint venture with Panasonic to produce batteries through The Sparks, Nevada, Gigafactory, but for all its China and many of its US produced cars, Tesla buys off-the-shelf batteries from third-party companies such as CATL.

BYD makes BYD Blade batteries, a specialised Lithium Iron Phosphate (LFP) battery, which it sells to other automotive OEMs and there have been rumours that they are about to provide batteries to Tesla too. The automotive OEMS said to be choosing BYD Blade’s for cars made for or aimed at the Chinese market include Ford, GM and Toyota.

To ensure that BYD has a continued source of Lithium for its batteries it is involved in lithium mining projects, with rumours that it is to buy six lithium mines in Africa. BYD is also thought to be planning new higher-end vehicles, moving its average sale price higher. It appears that BYD is finding it easier to launch new vehicles than Tesla, which has delayed new models multiple times and may go through 2021 – 2023 without shipping any new models.

So, for BYD, going beyond the Tesla playbook means that is the company is already doing things that Elon Musk has only talked about: it makes its own chips, sells a model priced at $25,000, is rumoured to be buying Lithium mines so that it can make enough batteries to meet its own demand, and sells batteries to third parties. And critically BYD appears to have cracked designing and launching new models quickly, something Tesla has struggled with recently: and BYD does all of this profitably.

The automotive industry and the public is used to seeing Tesla as the tech leader in the automotive space. But as BYD continues to be able to do things that Elon Musk has only talked about but failed to deliver, we can expect the competition between the two companies to push the EV landscape to new heights.

Tesla has enjoyed a successful reign on the EV throne, appearing to be untouchable as Elon Musk’s empire conquered the automotive market. However, earlier this month, a much less-known yet just as ambitious company overtook Tesla to take pole-position as the king of the battery-powered car.

BYD, short for ‘Build Your Dreams’, is now the world’s largest EV manufacturer, recording 641,000 sales in six months, beating Tesla’s 564,000. Based in China, BYD, which has U.S. billionaire Warren Buffet as a shareholder, is dominating the Chinese market through launching EVs on time and at scale.

How has it done this? BYD has the benefit of having an already-integrated supply chain due to its investment in manufacturing critical parts – from batteries to semiconductors. By doing this, BYD has provided itself with the key components to build its vehicles and avoided the well documented pains of many other automakers.

So far Tesla and BYD haven’t really been in competition – BYD and Tesla until very recently made quite different vehicles; and in Tesla’s US backyard, BYD doesn’t sell vehicles due to the tariffs on car imports. But internationally, they are about to compete, with the BYD Seal having the Tesla Model 3 firmly in its sights. In China, BYD reported that it had over 22,000 orders in just a few hours after the Seal launch. The car is an attractive well priced package (equivalent to $32,000) in China. BYD has reported a fast ramp-up of production, and it appears likely to be attractive to consumers outside China too.

So BYD are now making increasingly luxurious cars to compete with Tesla and other EV vendors such as VW, Ford, GM, etc. – but how are they going beyond the Tesla playbook?

One really key difference is that although all its vehicles are manufactured in China, BYD has been able to avoid the worst of the China lockdown supply-chain issues by making its own chips through its BYD Semiconductor subsidiary, for which there are plans to float on the Shenzhen ChiNext market.

When it comes to batteries, again BYD is ahead of Tesla through making its own batteries. Yes, Tesla has a joint venture with Panasonic to produce batteries through The Sparks, Nevada, Gigafactory, but for all its China and many of its US produced cars, Tesla buys off-the-shelf batteries from third-party companies such as CATL.

BYD makes BYD Blade batteries, a specialised Lithium Iron Phosphate (LFP) battery, which it sells to other automotive OEMs and there have been rumours that they are about to provide batteries to Tesla too. The automotive OEMS said to be choosing BYD Blade’s for cars made for or aimed at the Chinese market include Ford, GM and Toyota.

To ensure that BYD has a continued source of Lithium for its batteries it is involved in lithium mining projects, with rumours that it is to buy six lithium mines in Africa. BYD is also thought to be planning new higher-end vehicles, moving its average sale price higher. It appears that BYD is finding it easier to launch new vehicles than Tesla, which has delayed new models multiple times and may go through 2021 – 2023 without shipping any new models.

So, for BYD, going beyond the Tesla playbook means that is the company is already doing things that Elon Musk has only talked about: it makes its own chips, sells a model priced at $25,000, is rumoured to be buying Lithium mines so that it can make enough batteries to meet its own demand, and sells batteries to third parties. And critically BYD appears to have cracked designing and launching new models quickly, something Tesla has struggled with recently: and BYD does all of this profitably.

The automotive industry and the public is used to seeing Tesla as the tech leader in the automotive space. But as BYD continues to be able to do things that Elon Musk has only talked about but failed to deliver, we can expect the competition between the two companies to push the EV landscape to new heights.

What do car manufacturers need to learn from Silicon Valley?

Just as I was planning to write this blog about Silicon Valley and the car manufacturers (OEMs), I came across an interview with Prof. Dudenhöffer, Director of the CAR Center Automotive Research by Thomas Schmidtutz of Merkur.de (https://bit.ly/2EGUIb1) discussing this very topic.

There was a discussion of Tesla’s rather underwhelming “Battery Day” announcements and a general discussion of most European OEMs embracing of the EV. The interview finished with Prof. Dudenhöffer saying that he believed that Tesla’s main advantage over OEMs is the speed at which it can work rather than any technological edge. The professor described OEMs as being like tankers moving at a snail’s pace because innovation is accompanied by seemingly endless presentations, strategy discussions, board meetings, production workshops, etc.

In comparison the professor called Tesla “a kind of speedboat”. He believes that the main competitive advantage Tesla has is Elon Musk, who drives fast decisions on innovation in the same way that Steve Jobs drove Apple. With the result that Tesla is sprinting away from the competition.

When I last talked about Tesla in August this year (https://bit.ly/33eCur4), I talked about how OEMs are adopting the practices of Silicon Valley, with the end goal of being rated by stock analysts as Silicon Valley stocks like Tesla rather than being rated as a manufacturer of steel boxes. And asked the question: Might Tesla be the OEMs best friend?

If Prof. Dudenhöffer is right, I guess my questions this time around are: Can car companies take decisions and drive innovation as fast as Elon Musk at Tesla? And what happens if they don’t?

I can’t answer these questions. However, my hunch is that the answer is to adopt the best practices of Silicon Valley, while keeping the best features of the OEMs culture. All I’m certain of is that it’s going to be fascinating watching how the OEMs compete and attempt to overtake Tesla.

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