The Rise of BYD and Shifting Dynamics in the Global Auto Industry

A diminutive electric vehicle is causing a considerable stir in the global automotive sector.

The spotlight isn’t on the electric vehicle per se, but rather its price tag—alongside its potential to shake up domestic auto markets worldwide.

Enter the BYD Seagull, a compact all-electric hatchback manufactured in China, hitting the market with an enticing starting price of just 69,800 yuan (equivalent to less than $10,000). Notably, reports suggest that this model is not only affordable but also yields profits for its maker, the increasingly influential Chinese automaker BYD.

This pivotal aspect—profitability in the electric vehicle segment, a domain where many U.S. automakers have struggled—coupled with the expansion of Chinese automakers into regions like Europe and Latin America, is prompting deep concern among automotive executives and policymakers.

From the corridors of Detroit and Texas to the boardrooms of Germany and Japan, there’s palpable apprehension.

Terry Woychowski, a former executive at General Motors who presently holds the position of president of automotive at the engineering consulting firm Caresoft Global, characterizes the Seagull’s emergence as a potential wake-up call for the broader auto industry. He remarks, “It’s a significant event.”

While the Seagull hasn’t yet made its way to U.S. markets, BYD is ambitiously expanding its vehicle offerings worldwide. Many speculate that it’s merely a matter of time before a broader range of China-manufactured vehicles find their way onto American roads.

Global automakers are grappling with a sense of apprehension as they contemplate the possibility of Chinese competitors such as the Warren Buffett-backed BYD inundating their markets.

There’s a growing concern that this influx could undercut domestic production and vehicle prices, posing a significant threat to their auto industries.

“The introduction of inexpensive Chinese automobiles—made possible by the substantial support and resources of the Chinese government—into the American market could potentially spell disaster for the U.S. auto sector,” warned the Alliance for American Manufacturing, a prominent U.S. manufacturing advocacy group, in a report issued last month.

BYD’s impressive performance underscores these fears. The company achieved sales of 1.57 million battery electric vehicles (EVs) in the past year, a substantial increase from just 130,970 units in 2020. This meteoric sales growth propelled BYD past Tesla, securing its position as the world’s largest producer of electric vehicles by late 2023.

Elon Musk, CEO of Tesla, issued a stark warning in January, highlighting the ascent of Chinese automakers like BYD and suggesting that without trade barriers, they could “demolish” their global rivals.

At Caresoft’s EV facility in Livonia, Michigan, there’s a bustling area dedicated to benchmarking and teardowns, offering insight into the inner workings of electric vehicles.

According to reports from Bernstein, BYD’s remarkable growth, encompassing both electric and non-electric vehicle sales, has been fueled by an increased focus on international markets. Last year, overseas sales accounted for approximately 10% of BYD’s total sales, marking a significant doubling of that share from the beginning of the year.

Despite repeated attempts, BYD did not provide a comment in response to requests for clarification.

How the Seagull stacks up

Driving the Seagull proves to be a comparable experience to operating vehicles like the Chevrolet Bolt, Nissan Leaf, or BMW i3. It boasts swift acceleration, operates quietly, and features aesthetically pleasing screens alongside a combination of plastic and soft touch points, including well-crafted sporty, and comfortable seats.

The Rise of BYD and Shifting Dynamics in the Global Auto Industry
Caresoft’s teardown reveals BYD’s efficient design, signaling its potential to thrive in the fiercely competitive market.

Known as the BYD Dolphin Mini in Latin America, the Seagull is marginally smaller than GM’s now-discontinued Chevrolet Bolt EV.

Despite this, its reported range of approximately 190 miles on a single charge (or up to 250 miles for certain models) falls slightly short of many EVs currently available in the U.S., aligning more closely with the range of many first-generation all-electric vehicles.

Furthermore, with a top speed of about 80 mph and a modest 74 horsepower, the Seagull lags behind most EVs currently on the U.S. market in terms of performance metrics.

However, its key distinctions lie in its construction, battery technology, and the sourcing of components, as outlined by Caresoft.

The consulting firm meticulously disassembled the BYD Seagull, scrutinizing each component to benchmark the small EV against vehicles from both emerging startups and established automakers.

Based in Livonia, Michigan, with a global presence spanning multiple offices, Caresoft has undertaken teardowns and benchmarking analyses of over 30 EVs manufactured in China, including models from BYD, Nio, XPENG, and others.

Caresoft employs a comprehensive approach, digitally and physically examining every aspect of a vehicle, ranging from the minutiae of bolts and latches to the intricacies of seats, motors, and battery enclosures.

Through this exhaustive process, the firm identifies areas where its clients—primarily automakers and suppliers—can enhance efficiencies and reduce costs in their products.

In its initial assessment of the BYD Seagull, Caresoft observed a design that is both efficient and straightforward, executed with precision and simplicity. Despite this simplicity, the vehicle exhibits unexpected quality and anticipated reliability.

Terry Woychowski remarked on the findings, stating, “What they did do is done very well. It’s efficiently done.”

Despite its affordable price point, the BYD Seagull offers a well-equipped package. In fact, BYD recently reduced the starting price of the vehicle by 5% earlier this month, down from roughly $11,000 earlier in the year.

Even with this competitive pricing, Caresoft CEO Mathew Vachaparampil noted during an automotive conference hosted by the Chicago Federal Reserve in January that the company still manages to “make some money” on the Seagull, or at the very least, break even.

While BYD would need to adhere to U.S. federal vehicle requirements to sell the Seagull in the U.S., this would entail additional costs. Nonetheless, even with these additional expenses factored in, the EV could potentially arrive on U.S. soil at a significantly lower price point compared to the current average price of an EV in the U.S., which stands at over $52,000 according to reports by Cox Automotive.

Last month, BYD made headlines by announcing its plans to introduce the Seagull/Dolphin Mini EV to the Mexican market, priced at 358,800 pesos (equivalent to about $20,990).

Caresoft underscores BYD’s achievements in battery technology, internal sourcing (vertical integration), and parts production. Particularly noteworthy is BYD’s advancement in developing lower-cost battery technologies, which are considerably more economical to manufacture compared to the lithium-ion batteries commonly utilized in U.S. EVs.

Originally known as “Build Your Dreams,” BYD initially gained recognition for its innovative “Blade” battery technologies used in smartphones, eventually establishing itself as one of China’s premier automakers.

The company’s emphasis on enhancing vehicle efficiencies draws parallels with U.S. EV leader Tesla, which has similarly succeeded in reducing the cost of its vehicles over time.

Growing concerns

BYD’s ascent comes at a pivotal juncture in the dynamics of the global auto industry.

As China’s automakers assertively expand their presence, traditional American automakers are grappling with contraction in both their domestic market and China.

The Rise of BYD and Shifting Dynamics in the Global Auto Industry
Concerns arise as Chinese automakers expand, triggering proposals for tariffs and calls for swift adaptation by traditional giants.

In the United States, their decline coincides with the emergence of Japanese automakers such as Toyota Motor, Nissan Motor, and Honda Motor, alongside the recent entry of South Korean automotive powerhouse Hyundai Motor and its subsidiary, Kia.

The so-called Big Three U.S. automakers—GM, Ford, and Chrysler, now under the umbrella of Stellantis—have witnessed a steady erosion of their U.S. market share, plummeting from 75% in 1984 to approximately 40% by 2023, according to industry data.

Politicians in the U.S., mindful of the impact on their local auto industries, have directed their attention toward Chinese imports, while lawmakers in Europe have initiated investigations into the surge of China-made EVs.

“We are very concerned about China bigfooting our industry in the United States even as we are building up now this incredible backbone of manufacturing,” remarked Energy Secretary Jennifer Granholm on March 6 during a discussion panel at an Axios event.

Republican Sen. Marco Rubio of Florida has proposed a significant escalation of tariffs on Chinese vehicle imports, suggesting an increase of $20,000 per vehicle to prevent the country “from flooding U.S. auto markets.”

Presently, Chinese-built EVs face a 27.5% tariff upon entry into the U.S. This tariff comprises a 2.5% levy generally applied to imported cars, along with an additional 25% tariff implemented by the Trump administration in 2018 on China-made vehicles.

While Chinese automakers could potentially establish production facilities in Mexico and subsequently import vehicles to the U.S. under the USMCA (formerly the North American Free Trade Agreement, or NAFTA), former President Donald Trump, currently the front-runner among Republicans in the 2024 presidential race, recently suggested the imposition of a 100% tariff on cars manufactured in Mexico by Chinese companies if he were to secure a second term.

“What we’ve seen over time is automotive manufacturers eventually enter all the markets that matter … Ultimately the Chinese will come to the U.S.,” emphasized Marin Gjaja, chief operating officer for Ford’s EV unit, in a recent interview with CNBC.

Gjaja acknowledged that while Ford cannot influence regulations or the expansion of Chinese automakers, it can focus on becoming highly competitive in the technologies that customers demand and strive for greater efficiency to attract customers.

To effectively compete with Chinese brands like BYD, Terry Woychowski argues that traditional automakers must adapt rapidly by learning, unlearning, and evolving.

He contends that legacy automakers, such as those based in Detroit, have entrenched procedures, standards, and workflows spanning a century that need to be rethought to better compete against Chinese automakers before models like the BYD Seagull make their way to U.S. markets.

“You have to learn. You have to unlearn, and you have to do it quickly,” he emphasized. “Just because you’ve been doing something for 100 years, doesn’t mean you should continue. It’s no longer suitable.”

Sajda Parveen
Sajda Parveen
Sajda Praveen is a market expert. She has over 6 years of experience in the field and she shares her expertise with readers. You can reach out to her at [email protected]
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