Speaker 1: Hi, It's suckshat. As a bonus this week, we are
Speaker 1: bringing you an episode from our sister podcast, The Big Take.
Speaker 1: It's about the Chinese electric car company BYD and why
Speaker 1: it's outperforming Tesla. This episode was originally published last week.
Speaker 2: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 3: In the middle of the Mediterranean Sea, between North Africa
Speaker 3: and Italy lies Malta, a sunny, tiny island nation that's
Speaker 3: known for its beaches and ancient temples. But it might
Speaker 3: not seem worth the attention of a disruptive global car brand.
Speaker 3: So when Gabrielle Coppola, a Bloomberg Auto reporter based in Detroit,
Speaker 3: heard that BYD, the Chinese ev company, was selling their
Speaker 3: all electric model, the Auto three, in Malta, she was intrigued.
Speaker 2: They sold new cars on the island of Malta last
Speaker 2: year was around seventy two hundred. How many cars were
Speaker 2: sold in the US over fifteen millions, So that is
Speaker 2: like a piece of a fingernail of the size of
Speaker 2: the US car market.
Speaker 3: Mean, it is tiny, but Malta isn't too tiny for BYD.
Speaker 3: Gabrielle says, Malta and small markets like it are part
Speaker 3: of a key strategy in BYD's global expansion. BYD is
Speaker 3: facing heavy tariffs in some of the biggest auto markets,
Speaker 3: the US and the EU, so it's looking to boost
Speaker 3: sales in emerging countries that don't have their own auto industries.
Speaker 3: One automotive analyst compared its strategy to chicken ribs, because
Speaker 3: chicken ribs don't have much meat on them, but you
Speaker 3: also don't want to throw them away and let them
Speaker 3: go to waste.
Speaker 2: It's like a chicken rib market. You know. You add
Speaker 2: up all those chicken ribs. That's a lot of meat
Speaker 2: in all these countries, and all those little bits of meat,
Speaker 2: all those chicken ribs add up to like ten million cars,
Speaker 2: and you've got a real business. Outside of China.
Speaker 3: BYD is now exporting to roughly ninety five markets, including
Speaker 3: twenty new ones this year. Meanwhile, it's annual sales in
Speaker 3: China are booming, and Bloomberg's China EV reporter Danny Lee
Speaker 3: says the car maker has its eyes on surpassing one
Speaker 3: of the biggest global players in this space.
Speaker 4: It has been hunting down Tesla over the last several
Speaker 4: quarters to being the lead as the best selling electra
Speaker 4: vehicle brand globally.
Speaker 3: Welcome to The Big Take Asia from Bloomberg News.
Speaker 2: I'm Wanha.
Speaker 3: Every week we take you inside some of the world's
Speaker 3: biggest and most powerful economies and the markets, tycoons and
Speaker 3: businesses that drive this ever shifting region. Today on the show,
Speaker 3: the story of BYD, how it became one of the
Speaker 3: world's largest ev manufacturers, and whether it can succeed in
Speaker 3: its quest to become the best selling EV brand in
Speaker 3: the world. BYD began as a battery company in the nineties,
Speaker 3: started by an engineer Wang Chuanfu. He was born in
Speaker 3: rural Anhui Province in eastern China.
Speaker 2: His parents died when he was still pretty young, and
Speaker 2: he was raised by his elder siblings. He is an
Speaker 2: engineer through and through. He focused on batteries and that
Speaker 2: was the early part of his career was he was
Speaker 2: doing very in depth research, experimenting with different battery chemistries
Speaker 2: and seeing what batteries could do.
Speaker 3: Wong was convinced he could make cell phone batteries more
Speaker 3: cheaply than the Japanese companies who were dominating the industry.
Speaker 2: The story goes he got a three hundred and fifty
Speaker 2: thousand dollars loan from his cousin. That was the money
Speaker 2: he used to start BYD and so he went south
Speaker 2: to Sanjan and he started the company.
Speaker 3: BYD had a humble beginning. Its workers were assembling batteries
Speaker 3: by hand, while well Japanese companies were using highly automated equipment. Eventually,
Speaker 3: Wog developed his own manufacturing production line, but the company
Speaker 3: didn't get its big break until the late nineteen nineties
Speaker 3: thanks to a young saleswoman named Stella Lee.
Speaker 2: She had joined the company as an export sales manager,
Speaker 2: and you know, she basically said, put me in coach,
Speaker 2: I want to go out there. I want to make
Speaker 2: this happen. I'm going to land these big contracts I'm
Speaker 2: going to sell.
Speaker 3: So Lee was sent to the US to court Motorola,
Speaker 3: which was then one of the world's biggest mobile phone makers.
Speaker 3: She showed up in Georgia with a box of battery
Speaker 3: samples and spoke very little English, and she spent months
Speaker 3: trying to win over the.
Speaker 4: Team at Motorola to ask them to give BYD a
Speaker 4: chance in order to say, look, we have a product
Speaker 4: which is lower cost and capable of delivering you the
Speaker 4: performance of the margins you need as a business.
Speaker 2: Was just very persistent, always following up, you know, what
Speaker 2: do we have to do next? The people I interviewed
Speaker 2: and told me that at first they thought she was annoying,
Speaker 2: she was a pest because she was just never leave
Speaker 2: them alone. But eventually they were like, holy crap, like
Speaker 2: can we hire this person? Like she's amazing.
Speaker 4: Stella was a fascinating person.
Speaker 3: Danny Lee is Bloomberg's China ev supply chain reporter based
Speaker 3: in Hong Kong, and he co reported this story. He's
Speaker 3: met Lee in person several times.
Speaker 4: When you go to talk to she's such a warm
Speaker 4: and welcoming individual, but you know, when it comes down
Speaker 4: to business, she knows the details, she knows what she
Speaker 4: wants to achieve, and she's very firm with that.
Speaker 3: Eventually, Stella's persistence paid off. The executives at Motorola did
Speaker 3: give BYD a chance. It took two years for them
Speaker 3: to evaluate the products, and in two thousand, BYD officially
Speaker 3: became Motorola's first lithium iron batteries supplier from China, and
Speaker 3: that gave BYD's products a big stamp of approval. So
Speaker 3: how would you characterize Stella Lee's role at BYD versus
Speaker 3: Wang chron Fos, the engineer and company's founder.
Speaker 4: Wang is very much the head of the company. He
Speaker 4: is the thinker, He is the creator. He wants to
Speaker 4: figure out the next steps, however, but for Stella, Stella
Speaker 4: is very much the executor. She'll be executing on all
Speaker 4: of Wong's plans and also being the driving force in
Speaker 4: making sure that that business that they have effectively built
Speaker 4: hand in hand continues to grow at pace.
Speaker 3: Besides being business partners, Wang and Lee are also a
Speaker 3: couple with two kids together. BYD declined to comment on
Speaker 3: it and said the company doesn't discuss personal matters. What's
Speaker 3: clear is that their business partnership has reaped profits. After
Speaker 3: the Motorola deal, other big contracts followed and BYD rode
Speaker 3: the momentum. In two thousand and two, the company went
Speaker 3: public on the Hong Kong Exchange, but just a year
Speaker 3: after the IPO, Wang decided that BYD should pivot its
Speaker 3: future into something beyond batteries. In two thousand and three,
Speaker 3: BYD bought a majority stake in a failing state run
Speaker 3: car company, sion Tinchwan Auto. That decision didn't go over
Speaker 3: well with the company's investors. And shareholders Lan Schwan Food
Speaker 3: didn't even know how to drive a car at the time.
Speaker 3: The car business is a tough business to this day
Speaker 3: is notoriously you know, being a metal basher. It's low margins,
Speaker 3: it's a hot, very capital intensive. This is not what
Speaker 3: BYD's investors were hoping he would do. They did not
Speaker 3: want this.
Speaker 2: Phone lines in shen Jen were ringing off the hook
Speaker 2: with people who are like, what are you doing? He'll
Speaker 2: go into the car business.
Speaker 3: Though it was a big bet. Wang saw cars as
Speaker 3: a natural extension of BYD's battery business. In two thousand
Speaker 3: and four, at the Beijing Auto Show, Wong outlined his
Speaker 3: vision to use batteries to change the future of the
Speaker 3: automotive industry. Very few investors took him seriously, but a
Speaker 3: very important one did. In two thousand and eight, Warren
Speaker 3: Buffett's Berkshire Hathway invested two hundred thirty two million dollars
Speaker 3: in BYD.
Speaker 2: Call it the Buffet effect, but shares of BYD have
Speaker 2: jumped five hundred percent since Buffett first announced his buy
Speaker 2: In September, and.
Speaker 3: The same year that BYD received Berkshire's backing, it launched
Speaker 3: its first plug in hybrid EV model now Danny the
Speaker 3: BYD F three d M. It doesn't roll off your tongue,
Speaker 3: does it? Yeah?
Speaker 4: I couldn't even say it myself.
Speaker 3: And how was it received?
Speaker 4: Badly? Badly? The car that Bid produced in two thousand
Speaker 4: and eight was so poorly received because it looked like
Speaker 4: a cheap knockoff Toyota Corolla. The color, the design, it
Speaker 4: all looked pretty bad. Consumers one something that looks good
Speaker 4: feels good. This was far from it.
Speaker 3: The early models of BYD were so unimpressive that Elon Musk,
Speaker 3: CEO of Tesla, publicly laughed at BYD's design in a
Speaker 3: Bloomberg interview in twenty eleven.
Speaker 4: Vehicles, Warren buffet O on ten percent stake in that
Speaker 4: why do you laugh.
Speaker 3: Trying to compete?
Speaker 1: Why do you laugh?
Speaker 4: Have you seen their car?
Speaker 3: I have seen their car? Yeah, In fact that the
Speaker 3: Berkshire halfway meeting.
Speaker 4: I saw their cars.
Speaker 3: Yeah. Well they tell.
Speaker 4: Me why you're laughing.
Speaker 3: You don't see them at all.
Speaker 4: As a competitive No.
Speaker 3: But a little more than a decade later, Musk would
Speaker 3: hit reverse on his disc of BYD. Last year, Musk
Speaker 3: commented on this old interview on X saying that was
Speaker 3: many years ago. Their cars are highly competitive these days.
Speaker 3: So how did BYD go from being a joke of
Speaker 3: the industry to one of the best selling car brands
Speaker 3: on the road And where are they headed next? That's
Speaker 3: after the break in two thousand and eight, BYD's first
Speaker 3: hybrid EV was a flop, and Bloomberg reporter Danny Lee
Speaker 3: said in the following decade, sales for their other cars
Speaker 3: also fell short.
Speaker 4: BYD over the past decade prior to around twenty twenty
Speaker 4: and was selling cars, but they were just not appealing
Speaker 4: and it got to the point where sales were sliding.
Speaker 4: So by twenty fifteen the company not only saw port sales,
Speaker 4: it had to think about raising money to.
Speaker 3: Figure out how to build better EV. In order to
Speaker 3: sell more, BYD poured money into research and development. They
Speaker 3: brought in expensive designers from Alpha, Romeo and Audi to
Speaker 3: make better looking cars. They also developed what's called a
Speaker 3: vertically integrated supply chain. Here's Danny again.
Speaker 4: BYD largely creates its own products. It doesn't have to
Speaker 4: rely on external forces for the most important components to
Speaker 4: make its automobiles. From the mining of the materials to
Speaker 4: make the electric vehicle batteries all the way through to
Speaker 4: the components that power the cars, from the chips semiconduct
Speaker 4: chips to even the seats for example, that it is
Speaker 4: able to control so much of a supply chain.
Speaker 3: In a teardown of the BYD seal sedan, UBS found
Speaker 3: that about seventy five percent of the parts were made
Speaker 3: in house, giving BYD a twenty five percent cost advantage
Speaker 3: over American and European car makers. And after about a
Speaker 3: decade of hard work, VYD finally hit a golden breakthrough.
Speaker 2: In twenty twenty, VID came out with a blade battery
Speaker 2: and it was a total game changer because it changed
Speaker 2: the way the world looked at this technology.
Speaker 3: Now there are two prominent battery technologies in the world,
Speaker 3: nickel based batteries and lithium iron phosphate or LFP. While
Speaker 3: most researchers outside China were experimenting with the nickel based ones,
Speaker 3: Wong and his team went against the tide and chose
Speaker 3: to make batteries with LFP, which is in general cheaper
Speaker 3: and safer, but it comes with a huge flaw. It
Speaker 3: lacks energy density, meaning it couldn't go very far on
Speaker 3: a single charge.
Speaker 2: People thought LFP could never be used for an individual
Speaker 2: wants to go on a road trip, things like that.
Speaker 2: But through his engineering innovations, the work they had done
Speaker 2: to improve the energy density of LFP chemistry, and the
Speaker 2: work they did to design a pack and the software
Speaker 2: system that can kind of get the maximum amount of
Speaker 2: energy out of that battery, it just showed the world that, hey,
Speaker 2: I can make an electric car with decent range using LFP.
Speaker 3: By any measure, the Blade battery was a real turning
Speaker 3: point for BYD, and it allowed the company to drastically
Speaker 3: reduce overall costs for its vehicles, so much so that
Speaker 3: other automakers couldn't help but follow suit. Today, Ford, Tesla,
Speaker 3: and Toyota all use LFP batteries in their cars in China,
Speaker 3: as do many Chinese automakers. And in just three years
Speaker 3: after BYD released the Blade Battery, it went from selling
Speaker 3: under one hundred eighty thousand electric and hybrid cars to
Speaker 3: selling ten times that much.
Speaker 2: Everyone I talked to says they have mastered the affordable
Speaker 2: ev something that Tesla, Ford, all these other carmakers are
Speaker 2: still trying to do To do that and make money
Speaker 2: at it. No one else has done that the way
Speaker 2: that BYD and Wanchuanfu and Stella.
Speaker 3: And their team have all this gave BYD the cash
Speaker 3: to fund a new overseas push.
Speaker 2: They're building a new assembly plant in northeast Brazil that's
Speaker 2: going to make one hundred pty thousand cars. They just
Speaker 2: opened a new assembly plant in Thailand, are building in Turkey,
Speaker 2: in Hungary. IF stated their intentions to build a plant
Speaker 2: in Mexico. BYD is leaving no stone unturned.
Speaker 3: But BYD cars aren't available in the US. Tariffs have
Speaker 3: kept them and other Chinese made evs out of the country.
Speaker 3: And that's a big market to be missing out on.
Speaker 2: How many cars were sold in the US over fifteen million.
Speaker 2: I mean, you look at Toyota, Hyundai. Without the US market,
Speaker 2: they'd be a lot smaller of a company.
Speaker 3: And it's not just automakers in the US that feel
Speaker 3: threatened by BYD. Earlier this month, the EU, the third
Speaker 3: biggest car market, voted to slap tariffs as high as
Speaker 3: forty five percent on electric ca from China. That was
Speaker 3: in response to an investigation that found that China unfairly
Speaker 3: subsidized its industry. Next week, BYD is expected to post
Speaker 3: strong quarterly earnings and it says it's on track to
Speaker 3: sell four million vehicles by the end of this year. Meanwhile,
Speaker 3: Wall Street expects Tesla to sell just two point two
Speaker 3: million cars this year. But Gabrielle says byd success can't
Speaker 3: just be chalked up to Chinese government support.
Speaker 2: This is not a story about the power of the
Speaker 2: Chinese government. This is a story about the power of
Speaker 2: China's brand of capitalism, where you can have an entrepreneur
Speaker 2: who is very much a capitalist, who clawed his way
Speaker 2: to success after twenty years of hard work and vision
Speaker 2: and innovation, and now he's got the power of the
Speaker 2: Chinese state behind him. It's important to understand that if
Speaker 2: a company wants to figure out how they're going to
Speaker 2: keep their auto industries and keep them competitive, they need
Speaker 2: to truly understand what's going on. And if they tell
Speaker 2: themselves this all about subsidies and nothing else, then they're
Speaker 2: definitely going to fail.
Speaker 3: This is the Big tick Asia from Bloomberg News. I'm
Speaker 3: one Huh. This episode was produced by Young Young, Naomi
Speaker 3: m and Jessica Beck. It was mixed by Alex Suguiera
Speaker 3: and fact checked by Adrianna Tapia. It was edited by
Speaker 3: Caitlin Kenny and Danielle Sachs. Naomi Shaven is our senior producer,
Speaker 3: Elizabeth Ponso is our senior editor, and Sage Bauman is
Speaker 3: Bloomberg's headed podcasts. Please follow and review The Big Take
Speaker 3: Asia wherever you listen to podcasts. It really helps new
Speaker 3: listeners find the show. See you next time,