WEBVTT - How China’s BYD Became King of the Affordable EV

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>In the middle of the Mediterranean Sea, between North Africa

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<v Speaker 2>and Italy lies Malta, a sunny, tiny island nation that's

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<v Speaker 2>known for its beaches and ancient temples. But it might

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<v Speaker 2>not seem worth the attention of a disruptive global car brand.

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<v Speaker 2>So when gabriel Coppola, a Bloomberg auto reporter based in Detroit,

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<v Speaker 2>heard that BYD, the Chinese ev company, was selling their

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<v Speaker 2>all electric model, the Auto three, in Malta, she was intrigued.

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<v Speaker 3>They sold new cars on the island of Malta last

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<v Speaker 3>year was around seventy two hundred. How many cars were

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<v Speaker 3>sold in the US over fifteen million, So that is

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<v Speaker 3>like a piece of a fingernail of the side of

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<v Speaker 3>the US car market.

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<v Speaker 2>Mean, it is tiny, but Malta isn't too tiny for Gabrielle, says.

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<v Speaker 2>Malta and small markets like it are part of a

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<v Speaker 2>key strategy in BYD's global expansion. BYD is facing heavy

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<v Speaker 2>tariffs in some of the biggest auto markets, the US

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<v Speaker 2>and the EU, so it's looking to boost sales in

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<v Speaker 2>emerging countries that don't have their own auto industries. One

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<v Speaker 2>automotive analyst compared its strategy to chicken ribs, because chicken

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<v Speaker 2>ribs don't have much meat on them, but you also

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<v Speaker 2>don't want to throw them away and let them go

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<v Speaker 2>to waste.

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<v Speaker 4>It's like a chicken rib market.

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<v Speaker 2>You know.

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<v Speaker 3>You add up all those chicken ribs. That's a lot

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<v Speaker 3>of meat in all these countries, and all those little

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<v Speaker 3>bits of meat, all those chicken ribs add up to

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<v Speaker 3>like ten million cars, and you've got a real business

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<v Speaker 3>outside of China.

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<v Speaker 2>Byd is now exporting to roughly ninety five markets, including

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<v Speaker 2>twenty new ones this year. Meanwhile, It's annual sales in

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<v Speaker 2>China are booming, and Bloomberg's China EV reporter Danny Lee

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<v Speaker 2>says the car maker has its eyes on surpassing one

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<v Speaker 2>of the biggest global players in this space.

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<v Speaker 1>It has been hunting down Tesla over the last several

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<v Speaker 1>quarters to being the lead as the best selling electro

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<v Speaker 1>vehicle brand globally.

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<v Speaker 2>Welcome to the Big Take Asia from Bloomberg News.

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<v Speaker 4>I'm Wanha.

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<v Speaker 2>Every week we take you inside some of the world's

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<v Speaker 2>biggest and most powerful economies and the markets, tycoons and

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<v Speaker 2>businesses that drive this.

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<v Speaker 4>Ever shifting region. Today, on the.

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<v Speaker 2>Show the story of BYD, how it became one of

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<v Speaker 2>the world's largest EV manufacturers, and whether it can succeed

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<v Speaker 2>in its quest to become the best selling EV brand

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<v Speaker 2>in the world. BYD began as a battery company in

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<v Speaker 2>the nineties, started by an engineer Wang chuanful. He was

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<v Speaker 2>born in rural Anhui Province in eastern China.

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<v Speaker 3>His parents died when he was still pretty young, and

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<v Speaker 3>he was raised by his elder siblings. He is an

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<v Speaker 3>engineer through and through. He focused on batteries and that

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<v Speaker 3>was the early part of his career was he was

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<v Speaker 3>doing very in depth research, experimenting with different battery chemistries

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<v Speaker 3>and seeing what batteries could do.

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<v Speaker 2>Wong was convinced he could make cell phone batteries more

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<v Speaker 2>cheaply than the Japanese companies who were dominating the industry.

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<v Speaker 3>The story goes he got a three hundred and fifty

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<v Speaker 3>thousand dollars loan from his cousin. That was the money

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<v Speaker 3>he used to start BYD, and so he went south

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<v Speaker 3>to Shanjan and he started the company.

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<v Speaker 2>BYD had a humble beginning. Its workers were assembling batteries

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<v Speaker 2>by hand, while Japanese companies were using highly automated equipment. Eventually,

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<v Speaker 2>Wang developed his own manufacturing production line, but the company

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<v Speaker 2>didn't get its big break until the late nineteen nineties

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<v Speaker 2>thanks to a young saleswoman named Stella Lee.

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<v Speaker 3>She had joined the company as an export sales manager,

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<v Speaker 3>and you know, she basically said, put me in coach,

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<v Speaker 3>I want to go out there. I want to make

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<v Speaker 3>this happen. I'm going to land these big contracts. I'm

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<v Speaker 3>gonna sell.

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<v Speaker 2>So Lee was sent to the US to court Motorola,

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<v Speaker 2>which was then one of the world's biggest mobile phone makers.

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<v Speaker 2>She showed up in Georgia with a box of battery

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<v Speaker 2>samples and spoke very little English, and she spent months

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<v Speaker 2>trying to win over the team at.

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<v Speaker 1>Motorola to ask them to give BYD a chance in

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<v Speaker 1>order to say, look, we have a product which is

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<v Speaker 1>lower cost and capable of delivering you the performance of

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<v Speaker 1>the margins you need as a business.

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<v Speaker 3>Sella was just very persistent, always following up, you know,

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<v Speaker 3>what do we have to do next. The people I

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<v Speaker 3>interviewed and told me that at first they thought she

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<v Speaker 3>was annoying, she was a pest because she was just

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<v Speaker 3>never leave them alone.

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<v Speaker 4>But eventually they.

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<v Speaker 3>Were like, holy crap, Like can we hire this person?

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<v Speaker 3>Like she's amazing?

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<v Speaker 1>Stella is a fascinating person.

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<v Speaker 2>Danny Lee is Bloomberg's China ev supply chain reporter based

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<v Speaker 2>in Hong Kong, and he co reported this story.

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<v Speaker 4>He's met Lee in person several times.

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<v Speaker 1>When you go to talk to she's such a warm

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<v Speaker 1>and welcoming individual. But you know, when it comes down

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<v Speaker 1>to business, she knows the details, she knows what she

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<v Speaker 1>wants to achieve, and she's very firm with that.

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<v Speaker 2>Eventually, Stella's persistence paid off. The executives at Motorola did

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<v Speaker 2>give BYD a chance.

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<v Speaker 4>It took two years.

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<v Speaker 2>For them to evaluate the products, and in two thousand,

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<v Speaker 2>BYD officially became Motorola's first lithium iron battery supplier from China,

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<v Speaker 2>and that gave BYD's products a big stamp of approval.

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<v Speaker 2>So how would you characterize Stella Lee's role at BYD

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<v Speaker 2>versus Wang Chan Fou's the engineer and company's founder.

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<v Speaker 1>Wang is very much the head of the company. He

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<v Speaker 1>is the thinker, He is the creator. He wants to

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<v Speaker 1>figure out the next steps. However, but for Stella, Stella

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<v Speaker 1>is very much the executor She'll be executing on all

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<v Speaker 1>of Wong's plans and also being the driving force in

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<v Speaker 1>making sure that that business that they have effectively built

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<v Speaker 1>hand in hand continues to grow at pace.

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<v Speaker 2>Besides being business partners, Wang and Lee are also a

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<v Speaker 2>couple with two kids together. BYD declined to comment on

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<v Speaker 2>it and said the company doesn't discuss personal matters. What's

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<v Speaker 2>clear is that their business partnership has reaped profits. After

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<v Speaker 2>the Motorola deal, other big contracts followed and BYD rode

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<v Speaker 2>the momentum. In two thousand and two, the company went

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<v Speaker 2>public on the Hong Kong Exchange, but just a year

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<v Speaker 2>after the IPO, Wang decided that B one should pivot

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<v Speaker 2>its future into something beyond batteries. In two thousand and three,

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<v Speaker 2>BYD bought a majority stake in a failing state run

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<v Speaker 2>car company, sion Tinchuan Auto. That decision didn't go over

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<v Speaker 2>well with the company's investors and shareholders.

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<v Speaker 3>Lan Schwan Food didn't even know how to drive a

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<v Speaker 3>car at the time. The car business is a tough

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<v Speaker 3>business to this day is notoriously you know, being a

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<v Speaker 3>metal basher. It's low margins, it's a hot very capital intensive.

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<v Speaker 3>This is not what BYD's investors were hoping he would do.

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<v Speaker 3>They did not want this. Phone lines in shen Jen

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<v Speaker 3>were ringing off the hook with people.

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<v Speaker 4>Who are like, what are you doing.

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<v Speaker 3>Don't go into the car business.

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<v Speaker 2>Though it was a big bet. Wog saw cars as

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<v Speaker 2>a natural extension of BYD's battery business. In two thousand

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<v Speaker 2>and four, at the Beijing Auto Show, Wang outlined his

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<v Speaker 2>vision to use batteries to change the future of the

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<v Speaker 2>automotive industry. Very few investors took him seriously, but a

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<v Speaker 2>very important one did. In two thousand and eight, Warren

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<v Speaker 2>Buffett's Berkshire Hathway invested two hundred and thirty two million

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<v Speaker 2>dollars in BYD.

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<v Speaker 3>Call it the Buffet effect, but shares of BYD have

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<v Speaker 3>jumped five hundred percent since Buffett first announced his buy

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<v Speaker 3>In September.

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<v Speaker 2>And the same year that BYD received Berkshire's backing, it

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<v Speaker 2>launched its first plugin hybrid EV model now Danny, the

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<v Speaker 2>BYD F three d M. It doesn't roll off your tongue,

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<v Speaker 2>does it?

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<v Speaker 1>Yeah? I couldn't even say it myself.

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<v Speaker 4>And how was it? Received?

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<v Speaker 1>Badly? Badly? The car that BID produced in two thousand

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<v Speaker 1>and eight was so poorly received because it looked like

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<v Speaker 1>a cheap knockoff Toyota Corolla. The color, the design, it

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<v Speaker 1>all looked pretty bad. Consumers want something that looks good

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<v Speaker 1>feels good. This was far from it.

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<v Speaker 2>The early models of BYD were so unimpressive that Elon Musk,

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<v Speaker 2>CEO of Tesla, publicly laughed at BYD's design in a

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<v Speaker 2>Bloomberg interview in twenty eleven.

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<v Speaker 1>Vehicles, Warren Buffett On and ten percent stake in that

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<v Speaker 1>why do you laugh.

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<v Speaker 4>Trying to compete? Why do you laugh?

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<v Speaker 2>Have you seen their car?

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<v Speaker 4>I have seen their car?

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<v Speaker 2>Yeah, In fact that the Berkshire halfway meeting.

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<v Speaker 4>I saw their cars.

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<v Speaker 3>Yeah, well they're a tell me why you're laughing?

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<v Speaker 4>You don't see them at all as a competitor.

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<v Speaker 2>No, But a little more than a decade later, Musk

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<v Speaker 2>would hit reverse on his diss of BYD. Last year,

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<v Speaker 2>Musk commented on this old interview on X saying that

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<v Speaker 2>was many years ago. Their cars are highly competitive these days.

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<v Speaker 2>So how did BYD go from being a joke of

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<v Speaker 2>the industry to one of the best selling car brands

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<v Speaker 2>on the road?

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<v Speaker 4>And where are they headed next? That's after the break.

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<v Speaker 2>In two thousand and eight, BYD's first hybrid EV was

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<v Speaker 2>a flop, and Bloomberg reporter Danny Lee said in the

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<v Speaker 2>following decade, sales for their other cars also fell short.

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<v Speaker 1>BYD over the past decade prior to around twenty twenty

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<v Speaker 1>and was selling cars, but they were just not appealing

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<v Speaker 1>and it got to the point where sales were sliding.

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<v Speaker 1>So by twenty fifteen the company not only saw poor sales,

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<v Speaker 1>it had to think about raising money to.

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<v Speaker 2>Figure out how to build better evs. In order to

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<v Speaker 2>sell more. BYD poured money into research and development. They

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<v Speaker 2>brought in expensive designers from Alfa, Romeo and Audi to

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<v Speaker 2>make better looking cars. They also developed what's called a

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<v Speaker 2>vertically integrated supply chain. Here's Danny again.

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<v Speaker 1>BYD largely creates its own products. It doesn't have to

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<v Speaker 1>rely on external forces for the most important components to

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<v Speaker 1>make its automobiles, from the mining of the materials to

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<v Speaker 1>make the electric vehicle batteries all the way through to

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<v Speaker 1>the components that powder cars, from the chips semiconductor chips

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<v Speaker 1>to even the seats, for example, that it is able

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<v Speaker 1>to control so much of a supply chain.

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<v Speaker 2>In a teardown of the BYD seal Sedan ubs found

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<v Speaker 2>that about seventy five percent of the parts were made

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<v Speaker 2>in house, giving BYD a twenty five percent cost advantage

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<v Speaker 2>over American and European carmakers, and after about a decade

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<v Speaker 2>of hard work, BYD finally hit a golden breakthrough.

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<v Speaker 3>In twenty twenty, BID came out with the Blade battery

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<v Speaker 3>and it was a total game changer because it changed

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<v Speaker 3>the way the world looked at this technology.

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<v Speaker 2>Now there are two prominent battery technologies in the world,

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<v Speaker 2>nickel based batteries and lithium iron phosphate or LFP. While

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<v Speaker 2>most researchers outside China were experimenting with the nickel based ones,

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<v Speaker 2>Wong and his team went against the tide and chose

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<v Speaker 2>to make batteries with LFP, which is in general cheaper

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<v Speaker 2>and safer, but it comes with a huge flaw. It

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<v Speaker 2>lacks energy density, meaning it couldn't go very far on

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<v Speaker 2>a single charge.

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<v Speaker 3>People thought LFP could never be used for an individual

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<v Speaker 3>wants to go on a road trip, things like that.

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<v Speaker 3>But through his engineering innovations, the work they had done

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<v Speaker 3>to improve the energy density of LFP chemistry, and the

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<v Speaker 3>work they did the design a pack and the software

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<v Speaker 3>system that can kind of get the maximum amount of

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<v Speaker 3>energy out of that battery. It just showed the world that, hey,

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<v Speaker 3>I can make an electric car with decent range using LFP.

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<v Speaker 2>By any measure, the Blade battery was a real turning

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<v Speaker 2>point for BYD, and it allowed the company to drastically

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<v Speaker 2>reduce overall costs for its vehicles, so much so that

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<v Speaker 2>other automakers couldn't help but follow suit. Today, Ford, Tesla,

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<v Speaker 2>and Toyota all use LFP batteries in their cars in China,

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<v Speaker 2>as do many Chinese automakers. And in just three years

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<v Speaker 2>after BYD released the Blade battery, it went from selling

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<v Speaker 2>under one hundred eighty thousand electric and hybrid cars to

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<v Speaker 2>selling ten times that much.

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<v Speaker 3>Everyone I talked to says they have mastered the affordable

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<v Speaker 3>EV something that Tesla, Ford, all these other carmakers are

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<v Speaker 3>still trying to do. To do that and make money

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<v Speaker 3>at it, no one else has done that the way

0:13:46.040 --> 0:13:49.080
<v Speaker 3>that BYD and Watchwanfou and Stella and their team have.

0:13:49.600 --> 0:13:53.200
<v Speaker 2>All this gave BYD the cash to fund a new

0:13:53.240 --> 0:13:54.240
<v Speaker 2>overseas push.

0:13:54.640 --> 0:13:57.800
<v Speaker 3>They're building a new assembly plant in northeast Brazil that's

0:13:57.800 --> 0:13:59.680
<v Speaker 3>going to make one hundred pty thousand cars. They just

0:13:59.720 --> 0:14:03.360
<v Speaker 3>opened new assembly plant in Thailand or building in Turkey,

0:14:03.720 --> 0:14:06.600
<v Speaker 3>in Hungary, if stated their intentions to build a plant

0:14:06.640 --> 0:14:10.599
<v Speaker 3>in Mexico. BYD is leaving no stone unturned.

0:14:11.080 --> 0:14:15.000
<v Speaker 2>But BYD cars aren't available in the US. Tariffs have

0:14:15.120 --> 0:14:18.120
<v Speaker 2>kept them and other Chinese made evs out of the country,

0:14:18.800 --> 0:14:21.280
<v Speaker 2>and that's a big market to be missing out on.

0:14:21.760 --> 0:14:25.320
<v Speaker 3>How many cars were sold in the US over fifteen million.

0:14:25.760 --> 0:14:29.080
<v Speaker 3>I mean, you look at Toyota, Hyundai. Without the US market,

0:14:29.160 --> 0:14:31.320
<v Speaker 3>they'd be a lot smaller of a company.

0:14:31.520 --> 0:14:34.240
<v Speaker 2>And it's not just automakers in the US that feel

0:14:34.280 --> 0:14:38.840
<v Speaker 2>threatened by BYD. Earlier this month, the EU, the third

0:14:38.920 --> 0:14:42.320
<v Speaker 2>biggest car market, voted to slap tariffs as high as

0:14:42.400 --> 0:14:46.600
<v Speaker 2>forty five percent on electric cars from China. That was

0:14:46.600 --> 0:14:50.320
<v Speaker 2>in response to an investigation that found that China unfairly

0:14:50.440 --> 0:14:55.600
<v Speaker 2>subsidized its industry. Next week, BYD is expected to post

0:14:55.680 --> 0:14:59.040
<v Speaker 2>strong quarterly earnings, and it says it's on track to

0:14:59.080 --> 0:15:03.200
<v Speaker 2>sell four million vehicles by the end of this year. Meanwhile,

0:15:03.600 --> 0:15:07.240
<v Speaker 2>Wall Street expects Tesla to sell just two point two

0:15:07.440 --> 0:15:12.040
<v Speaker 2>million cars this year. But Gabrielle says by D success

0:15:12.280 --> 0:15:13.080
<v Speaker 2>can't just be.

0:15:13.200 --> 0:15:15.640
<v Speaker 4>Chalked up to Chinese government support.

0:15:16.240 --> 0:15:18.360
<v Speaker 3>This is not a story about the power of the

0:15:18.440 --> 0:15:20.520
<v Speaker 3>Chinese government. This is a story about the power of

0:15:20.600 --> 0:15:23.600
<v Speaker 3>China's brand of capitalism, where you know, you can have

0:15:23.640 --> 0:15:26.560
<v Speaker 3>an entrepreneur who is very much a capitalist, who clawed

0:15:26.640 --> 0:15:29.040
<v Speaker 3>his way to success after twenty years of hard work

0:15:29.040 --> 0:15:32.240
<v Speaker 3>and vision and innovation, and now he's got the power

0:15:32.280 --> 0:15:35.560
<v Speaker 3>of the Chinese state behind him. It's important to understand

0:15:35.600 --> 0:15:37.680
<v Speaker 3>that if a company wants to figure out how they're

0:15:37.680 --> 0:15:40.400
<v Speaker 3>going to keep their auto industries and keep them competitive,

0:15:41.000 --> 0:15:43.480
<v Speaker 3>they need to truly understand what's going on. And if

0:15:43.520 --> 0:15:46.120
<v Speaker 3>they tell themselves this is all about subsidies and nothing else,

0:15:46.200 --> 0:15:47.720
<v Speaker 3>then they're definitely going to fail.

0:15:52.680 --> 0:15:55.480
<v Speaker 4>This is the Big Tack Asia from Bloomberg News. I'm

0:15:55.480 --> 0:15:55.920
<v Speaker 4>one Huh.

0:15:56.440 --> 0:16:00.480
<v Speaker 2>This episode was produced by Young Young, Naomi Mum and Quebec.

0:16:00.960 --> 0:16:03.600
<v Speaker 2>It was mixed by Alex Suguiera and fact checked by

0:16:03.600 --> 0:16:07.400
<v Speaker 2>Adrianna Tapia. It was edited by Caitlin Kenny and Danielle Sachs.

0:16:08.040 --> 0:16:11.480
<v Speaker 2>Naomi Shaven is our senior producer, Elizabeth Ponso is our

0:16:11.520 --> 0:16:13.640
<v Speaker 2>senior editor, and Sah Bauman.

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