BYD, a Chinese automaker and battery manufacturer, has overtaken Tesla as the world's largest producer of electric vehicles and batteries. BYD produces more electric vehicles and batteries annually than any other company, including 8 times as many batteries as Tesla's Gigafactory. However, BYD remains relatively unknown outside of China compared to Tesla due to its focus on production and scale rather than branding. BYD aims to leverage its large production capacity and lower costs to become a major global player in electric vehicles and energy storage.

1. Home / Business / Transport / Automobile
May 19 2017 at 8:00 PM Updated May 19 2017 at 8:00 PM
China's BYD has overtaken Tesla in the battery and electric car
business
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BYD forecasts by 2020 there will be 5 million electric vehicles on Chinese roads, up from 1 million today. Olivia
Martin-McGuire
In the foyer of BYD's global headquarters an overheard
conversation captures the mood.
In a tone betraying surprise and scepticism, a middle-aged
European man asks, in puzzlement; "So you're bigger than Tesla?"
The question in his voice is probably because nothing in the
appearance of China's BYD, the world's largest battery and electric vehicle maker,
suggests it warrants a comparison with Elon Musk's slick car and renewable-energy
company.
But it's Tesla that should be flattered by the comparison to BYD.
by Angus Grigg
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While Musk and much of the American media breathlessly noted the opening of
Tesla's "Gigafactory" in January, that same milestone (1 gigawatt of annual battery
production) was reached by BYD at least three years ago.
These days BYD has a single battery factory near the southern city of Shenzhen that is
more than eight times larger than Musk's in the Nevada desert.
Yet the Hong Kong and Shenzhen-listed BYD, which counts Warren Buffett as an 8.25
per cent shareholder, can't escape the shadow of Tesla.
"Tesla has done a great job in branding and image ... we really appreciate that," says
Liu Xue-liang, the Asia-Pacific general manager of BYD's auto sales division.
That is the most backhanded of compliment – the inference being BYD is focused on
the performance of its batteries, while Tesla is more concerned about branding and
design.
An employee installs brake pads on a BYD S6 sport-utility vehicle (SUV) at the company's assembly plant in
Shenzhen. Bloomberg
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BYD brand communication manager Richard Li makes the point in a different way
when talking about the company's founder, Wang Chuanfu.
"He [Wang] is a very humble guy, you won't see him make speeches or do public
events ... he's more focused on real things," Li says over lunch.
This idea of so called "real things" sums up BYD, which, despite producing more
electric vehicles and batteries than anyone else in the world, is barely known outside
China.
Its anonymity is partly due to refreshingly bad PR.
Workers leave BYD's headquarters in Shenzhen, China. Angus Grigg
During AFR Weekend's visit to its Shenzhen headquarters we were driven around in a
BYD petrol car that would make a Holden Barina look innovative, despite the
company churning out a sleek new range of fully electric cars and hybrids.
Even its name doesn't quite work. BYD stands for Build Your Dreams, and it was added
long after the company was founded
Full automation goal
The lack of Silicon-Valley sheen has a lot to do with BYD's founder Wang, a lab coat-
wearing chemist who flies economy and appears to care little for the amenity of his
headquarters, which is a mixture of industrial brutalism and corporate bland.
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4. Liu Xue-liang, the Asia-Pacific general manager of BYD's auto sales division. Sydney Airport has bought six
buses, the same number of electric cars and 20 forklifts. Angus Grigg
Its dusty campus on the outskirts of Shenzhen gives the impression of being a state-
owned enterprise in the rust belt, not an innovative company seeking to change the
world with electric vehicles and distributed power.
There are dank meeting rooms, drab workers' dormitories and, at one entrance, piles
of rubbish.
Yet the scrunge impression evaporates when you enter BYD's latest battery factory, a
short drive from the main campus. From the outside, it looks like any other low-end
factory across China.
Inside, the 8.6-gigawatt factory, which spans five buildings of four floors each, is 99
per cent automated. Robots hand components to robots in near silence, as
preprogrammed cranes move batteries around the factory floor.
The BYD showroom in Shanghai. The company increased its electric vehicle sales in China 70 per cent to
114,000 units last year. Olivia Martin-McGuire
The only people to be seen are those in the packaging and dispatch departments, but
according to the brand manager, Li, they may not be required for much longer.

5. "Our goal is full automation," he says. "This factory is the backbone of the company."
Not that any of it can be photographed. The shambolic guided tour goes into overdrive
when it comes to secrecy.
Cameras are strictly banned inside the factory. Visitors must submit to having tape
placed over the lens of their mobile phones. Employees working on the factory floor
use special phones that don't have a camera. AFR Weekend is obliged to delete even
exterior photos of batteries and other components being loaded onto trucks.
This is how BYD keeps the world's eyes off a factory set over 10 hectares that produces
enough lithium-iron phosphate batteries each year to power 335,000 standard
sedans, equivalent to a third of all the new vehicles sold in Australia during 2016.
South Australia push
And that's just one of BYD's factories. It plans to bring a further 4 gigawatts of capacity
online by the end of the year, making its annual battery output 12 times larger than
Tesla's.
The ability to reach such scale so quickly is a demonstration of the so-called "China
Model" of production.

6. A BYD charging point. The automaker plans a 48-fold increase in the number of charging points nationwide to 4.8
million by 2020. Olivia Martin-McGuire
It's also allowed BYD to diversify away from car and mobile phone batteries to
produce everything from electric buses and garbage trucks to forklifts and, most
recently, a monorail system.
"If it has wheels we want to put a battery in it," says Liu.
The company has also moved into energy storage, with small household systems and
large-scale battery technology to support electricity grids during peak periods.
In mid-March, BYD said it would bid on one of Australia's largest grid-scale battery
storage projects, in South Australia, being hastily installed after blackouts crippled
the state last summer.
But unlike Tesla or Zen Energy, chaired by economist Ross Garnaut, BYD's name has

7. hardly been mentioned in relation to the project, even though it issued a press release
on the subject.
"The company is confident it can meet South Australia's requirements and demands,"
BYD said, noting it was the world's largest supplier of rechargeable batteries.
The price is right
And if its experience in the US is anything to go by, it should be highly competitive on
price.
BYD chairman Wang Chuanfu "is a very humble guy, you won't see him make speeches or do public events ...
he's more focused on real things", says a colleague. Bloomberg
"BYD is now setting the battery price in North America, because of its scale," says one
person who works for a major utility in the US and asked not to be named.
"Everyone else has come down to meet BYD's price."
The price advantage has been achieved through the rapid deployment of scale, which
has come with the tacit support of the state.
For BYD this has not been done through a government shareholding, but through
access to credit mostly from state-owned banks in China, leaving the company with a
gearing ratio above 60 per cent and gross debt of nearly 90 billion yuan ($17.6 billion).
That's the type of leverage that would usually make investors nervous, who like to see
debt ratios about 30 per cent. But in the case of BYD it comes with the implicit
guarantee of China's central government, which is seeking to develop a string of
national champions and ultimately become a clean-energy superpower.
Having come late to the conventional auto game, Beijing is now focused on promoting
BYD and others in the electric vehicle space in the hope that one day they will form
the backbone of a new export industry.
The first step in this model of state-sponsored capitalism is to build the home market
through cheap finance, government subsidies and favourable policy.

8. In all three areas China is leading the world.
"If it has wheels we want to put a battery in it," says Liu Xue-liang.
Central and local governments provide cash subsidies of 66,000 yuan ($12,900) for
approved China-made electric vehicles. Also, cities like Shanghai give away number
plates to people driving electric vehicles, a saving of 90,000 yuan ($17,600) compared
with the plates for a conventional car.
This means in Shanghai the effective subsidy to BYD is approaching $30,500, which
makes the company's best-selling passenger car, the E6 400, price competitive with
petrol cars in its category.
Such support led to 45,000 so-called new-energy cars being registered in Shanghai
alone in 2016, a 74 per cent increase on the previous year, according to government
figures.
But more than the high up-front price, the biggest hurdle for the development of
electric vehicles has been the lack of public charging points.
In this area Beijing is also deploying the full resources of the state.
It plans a 48-fold increase in the number of charging points nationwide to 4.8 million
by 2020, by which time it forecasts there will be 5 million electric vehicles on Chinese
roads, up from a million today.
Long march
"This is not just a new product, it is a new industry," says sales manager Liu.

9. "This should not be seen as a subsidy but as support."
These subsidies helped BYD to increase its electric vehicle sales in China 70 per cent
to 114,000 units last year, although a cut in the subsidy had sales fall 12 per cent in the
first three months of the year.
Liu said the market stabilised in April and is growing strongly again, although far
slower than previously.
He said such fluctuations are inevitable and believes government subsidies will be
largely gone by 2020, by which time the likes of BYD are expected to be major
international players.
"We see ourselves as an international company. We want overseas sales to be bigger
than China, but this will be a long process," he says.
At present international sales make up just 1 per cent of the business, and this is
where "brand China" and BYD's own lack of marketing savvy appears to be an
issue. Take Australia.
BYD has spent the past three years chasing deals and has emerged with just one client
in the form of Sydney Airport, which has bought six buses, the same number of
electric cars and 20 forklifts.
"Still that's 100 per cent of the electric bus market in Australia," jokes You Wing, BYD's
Australian sales director.
"But it's really tough for producers of Chinese brands."
This might be owing to the "Great Wall effect". The Chinese car company came into
Australia with aggressively priced pick-up trucks in 2009, but was forced to leave the
market after poor safety tests and the discovery of asbestos in some of its
components.
Great Wall has since relaunched in Australia, but its poor safety rating remains.
The Australian sales director, You, said overcoming this negative perception of
Chinese vehicles had been difficult, although the company is confident of winning two
upcoming city bus projects.
This is perhaps the biggest difference between Tesla and BYD.
While Tesla is focused on selling direct to consumers, BYD is increasingly looking
towards mass transport, believing its products are best suited to fleets, including
buses, taxis, garbage trucks and forklifts.
"Tesla's products are for the super-rich, which is only a very small group, our products
are mainly for mass transportation," says Liu.
If Stanford University economist Tony Seba is right then BYD's focus on "mass
transportation" could be a winner. In a report that has captured the attention of many,
he predicts there will be no more petrol cars sold within eight years, as the price of
batteries plummets and consumers gradually switch to self-driving electric cars.
"We are on the cusp of one of the fastest, deepest, most consequential disruptions of

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transportation in history," Seba says in his report. "What the cost curve says is that by
2025 all new vehicles will be electric, all new buses, all new cars, all new tractors, all
new vans, anything that moves on wheels will be electric, globally."
That sounds a lot like BYD's aim of putting a battery in "anything that has wheels" and
is perhaps what Warren Buffet liked about the company when he bought into its
Hong Kong-listed stock in September 2008.
The investment has delivered Buffett more than five times his money or a $1.4 billion
paper profit in 10 years, but his return could be many multiples of this if Seba's view of
the world does indeed prove correct.
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