After moving to Booleroo Centre in January, the 36-year-old high school teacher was faced with a daily commute of over 50 miles to and from his new school. He decided to use an electric vehicle. He says that fuel costs add up when moving to the countryside.
The cheapest EV in the world, the Model 3, was briefly considered by Saxena, but he settled on the metallic gray Atto 3 from China's BYD Co. The BYD is expected to cost two-thirds of the cost of the Model 3 when it arrives. He says that it is not expensive like some of the high range cars but has enough to get you there.
Musk's vision of the future of electric mobility has caught the attention of investors and drivers around the world. The founder and CEO of BYD, Wang Chuanfu, is trying to transform his company into a major global player in electric transport by taking a very different approach. If he succeeds in expanding internationally, it will bring a level of recognition and scale that has not been achieved by any other Chinese car company.
BYD is not the same asTesla. Wang from the start focused on developing affordable cars within reach of middle-class Chinese drivers, while Musk focused on selling luxury cars. BYD has a diversified plug-in product line that includes trucks, forklifts, and buses. Wang has a unionized workforce that makes buses for the US market.
Musk and Wang have different approaches to government relations in their home countries. If BYD combines the spirit of science and craftsmanship, it could be an ace.
BYD's embrace of vertical integration could prove to be its biggest difference fromlegacy automakers only now entering the EV space Wang, a chemistry graduate from a farming family, was an early advocate of the strategy, with BYD producing its own chips and batteries. It is now the world's third-largest producer of batteries for electric vehicles with a 14 percent share of the global market. BYD is a supplier of batteries to Toyota Motor Corp.
Wang is counting on a payoff from building close ties with upstream producers of the metal as a result of the growing demand for electric vehicles. An affiliate of Youngy Co. won a major order from BYD in June, according to the vice chairman. In March, BYD agreed to invest up to 3 billion dollars in Chengxin Lithium Group Co., a supplier with projects in China, Argentina and Indonesia.
The CEO of Snow Bull Capital says that BYD is the most vertically integrated company he has ever seen. BYD already does most of the things thatTesla is attempting.
The idea of cheap and well-equipped electric vehicles for the average person has been around for a long time. Musk made headlines when he said that his company could make a $25,000 car in three years. Musk repeated the promise in 2020. The arrival ofTesla's everyman EV would have been set in this way. In January of this year, Musk told investors that the company was too busy with other projects to focus on a cheap car for the average person. The cheapest vehicle in the US is $46,990 and the cheapest in China is 280,000. BYD has a cheapest EV that starts at 96,000.
Wang sees opportunities to replicate his company's successful mass market strategy in Australia. According to Citigroup, BYD accounts for 26% of new energy vehicle sales in China. BYD forged agreements with partners to open dealerships in Australia and New Zealand, and recently revealed plans to enter several countries, including Germany, Israel, and Thailand.
Wang thinks that expansion will give BYD a head start as the world transitions to plug-in cars. Most major auto companies are still in the early stages of their EV roll outs. For BYD, that means they have the chance to build a certain level of scale. There aren't a lot of brands with competitive products
Wang has succeeded in his strategy. BYD has a market cap of about $127 billion, making it the third most valuable car company. BYD stopped making internal combustion engine cars in April. Through July, it sold more new-energy passenger vehicles than it did in all of the previous year. The company is committed to meeting the needs of more market segments with safer, more reliable new energy technologies and products.
According to an analyst in Hong Kong with Daiwa Capital Markets, BYD has been able to avoid some supply chain problems because of its self-reliance. He says that over the past year, only BYD has recorded consistent sales increases.
In Japan, where Toyota and other big players won't have large numbers of EV available for several years and are more exposed to supply chains, Wang is considering selling in the country. The head of BYD Auto Japan Inc., Atsuki Tofukuji, says that the company can rely on its own high- performance batteries. He says that's their biggest advantage.
How long that advantage lasts is a big question for Wang. Toyota can't compete with BYD's electric cars for now. According to Kota Yuzawa, head of Asia auto research at Goldman Sachs Group Inc., established players will likely catch up quickly when they are ready to push EV in a few years. He says that the first-mover advantage will be small.
Government officials may not be as BYD-friendly as their Chinese counterparts, so it's risky to invest in overseaslithium production. BYD was reminded of that in June when the Supreme Court of Chile threw out the government contract that BYD had won. It will be difficult to get projects online and have them be consistently producing, according to the co-author of a recent report.
The biggest question for Wang right now is what Buffett is doing. The BYD shares that Warren Buffet bought in 2008 have grown into an $8 billion stake. There was a BYD position matching the size of Berkshire in Hong Kong in the middle of July. Such moves are often seen by traders as a sign that a transaction is about to take place. The company didn't respond to questions.
There is a spotlight on the company's thin profit margins due to the possibility of aBuffett exit. Less than 2% of revenue was accounted for by earnings. BYD sells mass- market cars. The Atto 3 in overseas markets sells for as little as 137,800 yuan after subsidies. The Model Y is the closest competitor to the electric car company.
BYD is focused on overseas growth rather than short-term profitability according to Steve Man. He says to try to get in the door and build bigger. They have their sights set outside of China.
Back in Booleroo Centre, teacher Saxena is eager to get behind the wheel of his BYD, while at the same time acknowledging he is taking a risk. He doesn't have a problem with the engineering quality, but how much do they know about the markets outside of China? That is a huge leap of faith. Wang has a plan to get into the lane ofTesla.
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