BYD electric cars at an auto show in Munich, Germany, in September. Leonard Simon/Getty Images
When China’s BYD recently overtook Elon Musk’s Tesla as the global leader in electric vehicle sales, casual observers of the auto industry may have been surprised.
But what has surprised other automakers around the world is something else about BYD, which is backed by Warren Buffett’s Berkshire Hathaway: its low prices.
“No one can match BYD on price. Period,” Michael Dunne, CEO of Asia-focused auto consultancy Dunne Insights, told The New York Times. Financial Times. “Boards of directors in America, Europe, Korea and Japan are in a state of shock.”
BYD can keep its costs low in part because it owns the entire supply chain for electric vehicle batteries, from raw materials to finished battery packs. This is important because the battery represents about 40% of the price of a new electric car.
While BYD cars are not yet a common sight on American roads, many experts believe it’s only a matter of time, though high tariffs are helping to keep them at bay for now. Currently in the United States, electric cars made in China are subject to a 25% tariff, which exceeds the 2.5% tariff on imported cars.
But if BYD or other Chinese automakers come out with a $20,000 car, Dunn noted, it will still be in a “good position” despite the higher tariffs, given that the average price of a new car in the U.S. this year is It is about $48,000.
BYD launched an electric car called the Seagull with a hefty price tag of about $11,000 last year in China, where it quickly became one of its best-selling electric cars. “But abroad the electric vehicle could be a truly disruptive force,” UK-based market intelligence firm Autovista Group wrote.
As of today, BYD’s Dolphin hatchback starts at $33,000 in Britain, according to Reuters, or nearly 30% less than the starting price of Volkswagen’s rival ID.3 hatchback.
But BYD plans to export much cheaper models to markets around the world, including Europe, South America and Southeast Asia. Over the past three years, China’s exports of electric vehicles have jumped by 851%. The New York Times Reported in October.
As for the United States, BYD may enter from south of the border. In Mexico, the company is exploring sites for a new manufacturing plant, according to the Financial Times.
Mexico has a free trade agreement with the United States and Canada. In November, House lawmakers warned that Chinese giants like BYD were “gaining a back door into the U.S. market” through the southern neighbor.
Last year, Ford Motor Co. CEO Bill Ford Jr. warned that American automakers were “not yet ready” to compete with Chinese rivals in the electric vehicle space. “They developed very quickly, developed it on a large scale, and now they are exporting,” he told CNN. “They’re not here, but they will come here we think at some point.”
BYD also has the advantage of its founder and CEO Wang Quanfu, a relentless cost-cutting man whom the late Charlie Munger — Buffett’s longtime partner at Berkshire — described in one recent interview last year.
On the acquired podcast, Munger said Wang can look at someone’s role in the morning “and in the afternoon he can do it. I’ve never seen someone like that… He’s a natural engineer and a hard-working production manager, and that’s a big talent to have in one place.”
“The guy at BYD is better at making things than Elon,” he added.