Why BYD just slashed their prices

When China’s Wang Chuanfu switched from making batteries to cars back in 2003, he didn’t even know how to drive one. His investors were furious. 

And they might be feeling similar vibes this week after he offered discounts of up to 34% on 22 BYD models until the end of June. Yay for Main Street, boo for Lujiazui Street, which sent the world’s biggest EV-maker’s stocks immediately tumbling 8.3%.

But there’s more to the Build Your Dreams story right now. 

In China…

• Consumer demand is sluggish
• Competition is intense (Li, Great Wall, Geely, Chery, Xiaomi)
• The local EV market is already saturated (half of all new car sales), and
• China’s dealerships are now overloaded with inventory.

So Wang and his business partner and wife Stella Li decided to slash prices, betting their sheer scale would help them withstand a temporary price war sacrificing profit for market share. And the scale they’re looking for leads us…

Abroad…

With trade barriers rising and BYD already blocked from the US market during the Biden presidency, Wang has now expanded aggressively into Europe and Central Asia, via billion dollar investments in Turkey, Hungary, Thailand, Indonesia, Brazil, and beyond(with thousands of jobs promised at each location).

There are signs Wang’s big bet is already paying off, with reports emerging last week that BYD has now surpassed Tesla in Europe, seemingly shrugging off the EU’s tariffs that were intended as a brake on China’s local EV resurgence.

And interestingly, Wang is not just expanding horizontally across borders, but also vertically up and down his entire supply chain:

• In Brazil, he’s bought two plots in the country’s vast ‘Lithium Valley’, and
• In Chile, he nearly pulled the trigger on an entire lithium plant for $290M.

But as Wang pushes this omnidirectional strategy, he’ll need more capital to keep the ball rolling, particularly as he hits political and logistical hurdles like…

• A ban in India (where the commerce minister just said BYD is “not welcome”)
• China-imposed delays on its Mexico plant (citing fears the US will steal the tech!)
• A labor conditions lawsuit in Brazil (alleging “slavery-like conditions”), and
• Rising fears in the EU that BYD will white-ant the big European automakers.

So, who cares? BYD, a firm founded a decade before Beijing even identified EVs as a strategic sector, is revealing how China’s companies are navigating today’s trade wars by:

• Owning entire supply chains 
• Sidestepping the US entirely 
• Investing in third markets to keep other capitals onboard, and
• Innovating (BYD just announced a battery with a 5-minute charge time)

So sure, BYD has (like China’s other EV-makers) benefited from a cool ~$230B or so in mostly state subsidies. But that’s just part of the story.

Intrigue’s Take

The story of BYD’s rise feels to us like a mix of big bets and missed signals.

First on the big bets, while BYDs were once rough enough to trigger a hearty Musk laugh, they now rival Teslas in many respects, thanks partly to big bets like:

• Wang’s big battery bet back in the 1990s, his big auto pivot in 2003, and his big design bet in 2016 (hiring Audi’s famous Wolfgang Egger)
• Wan Gang (China’s then tech minister) then made a big bet on EVs in 2009, solving what he saw as China’s uneasy reliance on both foreign cars and oil, and
• President Xi then backed both those commercial and national bets via his Made in China initiative, shrewdly sensing the strategic value of all that underlying tech.

The cumulative result has seen China come from nowhere to overtake — in just four years — the US, then Japan, and then Germany, to become the world’s top auto exporter. It’s now making more cars than the rest of the world, combined. And it’s not an easy sector, either — ask Apple, which invested $10B over a decade before abandoning EVs altogether.

As for missed signals? US policymakers woke up to this existential trend years ago when they moved to block BYD’s entry to the US. But beyond Tesla, it’s not clear America’s big automakers have made the most of that stay of execution — their share of international markets keeps shrinking, while they keep doubling down on the US market instead.