Telltales Founder Stories: BYD Company Limited
The Rise of BYD: The inspiring journey of Wang Chuanfu and his quest to dominate the global EV market
This document is Gwendolyn Lawrence’s private work and should not be disseminated without her permission. It is prepared for research purposes only and does not constitute investment advice.
Wang Chuanfu was born in Wuwei County, China, in 1966, to a poor farming family. After graduating from high school, during which his older siblings cared for him in the wake of his parents’ deaths, he studied metallurgical physical chemistry at the Central South University. After graduating in 1987, Chuanfu attended the Beijing Non-Ferrous Metal General Research Institute and earned his master’s degree. He started his career as a government-funded researcher, but grew disillusioned by insufficient funding for his research. Chuanfu quit the public sector in favor of an entrepreneurial pursuit: setting up a company called BYD1.
Chuanfu founded BYD in 1995 in Shenzhen, China, a city known as China’s tech hub. At first, BYD produced small rechargeable batteries for small appliances and cell phones. At the time, most batteries were made in Japan, not China, and were fairly expensive. Wang sought to bring the price down, and focused on a strategy of vertical integration. Wang employed cheap Chinese labor, breaking down the process of manufacturing into individual, simple steps that an assembly line could quickly complete without highly trained workers. Previously, companies manufacturing batteries like BYD’s used capital-intensive, automated processes. BYD’s innovation reduced unit costs approximately five or six times over. BYD, in contrast with other manufacturers, was able to avoid fluctuations in prices and delays from external suppliers2.
BYD’s start in manufacturing lithium-ion batteries conveniently coincided with the rise of mobile phones, allowing the company to expand along with consumer demand. Though Wang achieved mass production of affordable batteries, BYD’s customer base remained almost exclusively Chinese3. BYD’s executives lacked foreign connections, so Wang appointed Stella Li, BYD’s marketing head of foreign exports, to form ties with American companies4. With no contacts in the U.S., Li showed up to appliance companies uninvited in order to sell BYD’s services. In 1999, Li opened BYD’s first European office in Rotterdam. In 2000, BYD began supplying batteries to Motorola, and in 2002 added Nokia to their list of customers. That same year, BYD listed on the Hong Kong Stock Exchange.
Chuanfu hoped to expand BYD to producing batteries for electric vehicles, and eventually manufacturing the vehicles themselves. While Chuanfu possessed extensive knowledge in battery production, he had none in car manufacturing. In order to learn how to do so, Chuanfu bought electric vehicles from different companies, disassembled them, and then reverse engineered the cars. In 2003, BYD acquired Xi’an Qinchuan Automobile, a small auto manufacturer, and began producing vehicles.
While Chaunfu’s strategy of reverse engineering allowed him to learn about the manufacturing of cars, it also meant BYD’s production resulted in Toyota lookalikes. With low cost of manufacturing from BYD’s effective vertical integration, however, customers were eager to buy cars that were essentially Toyotas but more affordable. In fact, many customers bought BYD cars and then replaced the logos with Toyota’s or other brand’s signs in order to take advantage of lower pricing while retaining brand status. While the vehicles were not optimal quality, their low costs meant BYD did not have to compete with other companies’ quality. In 2005, BYD launched its first car, and in 2008 its first electric vehicle.
The same year of BYD’s launch of their first electric vehicle , Warren Buffett met with Chuanfu to discuss an investment. After Chuanfu broke open a battery and drank the fluid in order to prove the safety of his vehicles, Buffett pledged $230 million in exchange for a 10% stake in BYD. Buffett’s investment lent BYD credibility and improved the company’s reputation worldwide5.
The Chinese economy provided more advantages for BYD than cheap labor. The Chinese government, eager to promote green initiatives and electric vehicle manufacturing, provided huge incentives for both electric vehicle companies and customers. BYD benefited enormously from these policies. However, Tesla eventually expanded its presence in China, adding competition with better quality and broader range vehicles. In response, BYD manufactured a new, cheaper, battery, one that cost just a third of Tesla’s. Between 2020 and 2022, BYD’s sales quadrupled, and in 2023 it surpassed Tesla in sales.
Some weaknesses for BYD in foreign markets comes from mounting tensions between the U.S. and China. In addition, China’s customer base is attracted to different benefits than American markets. For example, American consumers tend to value quality above lower costs. However, BYD’s vertical integration once again serves as a huge reason for success, despite these deficiencies. Uncommon among electric vehicle manufacturers, vertical integration allows BYD to lower costs and shorten the development process, meaning BYD can spend time on research and solve integration issues before they arise. Central to success in battery and electric vehicle manufacturing is the speed of technological innovation a company can achieve. With control over the entire supply chain, BYD avoids reliance on outside sources to enable innovation.
BYD’s scientific talents are able to stay on the cutting edge of battery and automotive manufacturing, edging out the competition to stay at the forefront of their market. BYD has become the leading rechargeable battery manufacturer in the world. In the last quarter of 2023, BYD overtook Tesla in sales, becoming the leading manufacturer of EVs. 90% of these sales came from China, the world’s largest automobile market. Now, BYD hopes to expand into European and American markets6. While calls for increased tariffs from American auto manufacturers have posed a threat to BYD’s sales, construction of factories abroad provide potential for BYD to succeed in foreign markets despite these restrictions.
BYD’s success over the previous forerunner of the electric vehicle industry, Tesla, can also be attributed to the disparity between the two companies’ vehicle designs and target demographics. Tesla aims for a middle to high luxury audience, producing fancier and more expensive vehicles. BYD focuses on affordable, practical cars. During China’s current economic slowdown, BYD’s price point became more attractive to consumers than the status a Tesla purchase offered. Though a Tesla boasts advantages such as advanced software, name recognition, and ubiquitous charging infrastructure, BYD’s everyday accessibility to the middle class consumer succeeds in tumultuous times, such as the end of the COVID-19 lockdowns.
BYD’s strategic vertical integration and mastery of battery manufacturing, unlike competing auto manufacturers with lesser knowledge of rechargeable batteries, have pushed the company to its current success. Along with efforts to corner foreign markets outside of China, BYD remains on the cutting edge of electric vehicle manufacturing.
Wang Chuanfu remains the CEO of BYD in 2024. His personal business values have shaped both the founding BYD and the growth that has brought it to its current success. In an interview with Forbes Magazine, Chuanfu explained, “To have the innovative consciousness of being the first, we need to constantly explore unknown fields and move forward firmly.” He added, “Perseverance is an important part of entrepreneurship.” Chuanfu shows no sign of retiring anytime soon, and continues to push BYD into new innovations and strategies7.
$BYDDY $BYDDF