As China Sales Sag, BYD Gains Global Edge

Henry Ford, according to folklore, observed that if he had asked people what they wanted, they would have said faster horses. Today, a slightly wiser world might answer cheaper EVs, and that’s music to BYD’s ears.

In its recent earnings call, the Chinese EV-maker reported that its overseas sales trumped its domestic sales for the first time in company history. It’s a sign both of booming global demand and a shifting Chinese market. Either way, Western carmakers could be in trouble.

A BYD In Every Garage

BYD’s overseas sales in the first half of the year rose 34% to $27 billion, accounting for 53% of total sales. Meanwhile, Chinese revenue dipped 31%, battered by the increasingly brutal dynamics of the domestic market. Industry-wide car sales in China have been in a nearly yearlong decline, according to the China Passenger Car Association, which recently said that sales in July had fallen 21% year over year. In a double whammy, fierce pricing competition means selling cars at home is a razor-thin-margin business.

It’s why the global market is a matter of both opportunity and survival for BYD. Not so coincidentally, BYD achieved quarterly profit growth for the first time in over a year during the second quarter as its export business gained speed; net profit reached $1.2 billion, up 30% year over year.

As BYD rounds the corner into a global player, it’s become something of a perverse weather vane for Western carmakers. What’s bad for BYD is bad for Western players, and what’s good for BYD is also bad for Western players:

• The pain felt by BYD at home is felt far more acutely by Western carmakers. In July, Mercedes said a 30% decline in China sales offset growth in all other markets; in August, GM discontinued its Chevrolet brand in China following a 99% sales collapse from a 2014 peak.
• Meanwhile, BYD’s global success, particularly in developing markets, is swallowing up longtime international strongholds for legacy brands. For instance, BYD outsold Toyota, 17,354 bookings to 15,750, at this year’s Bangkok International Motor Show, despite Toyota’s longtime Thai dominance; in Brazil, BYD is now neck and neck with Volkswagen, which has been assembling cars there since the 1950s.

No Thank EU: The European Union may soon follow the US’s example, and is considering imposing at least some tariffs on BYD’s plug-in hybrid vehicles to protect domestic manufacturers. Meanwhile, Canada seems to be welcoming BYD. The brand is due to launch in The Great White North later this year. And last week, Brampton, Ontario, Mayor Patrick Brown said BYD had approached him about taking over a struggling Stellantis plant, saying “If the US takes a position that causes us to no longer be able to be a partner with them on autos, there is a world of possibilities.”