BYD electric vehicles at an auto show in Munich, Germany in September. Leonhard 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 other carmakers around the world marvel at is something else about BYD, which is backed by Warren Buffett’s Berkshire Hathaway: its low prices.
“No one can match BYD in terms of price. Period,” said Michael Dunn, CEO of Asia-focused car consultancy Dunn Insights. financial Times, “Boardrooms in the US, Europe, Korea and Japan are in a state of shock.”
BYD can keep its costs down to some extent because it owns the entire supply chain of its EV batteries, from raw materials to finished battery packs. This matters because the battery accounts for about 40% of the cost of a new electric vehicle.
While BYD cars are not yet a common sight on American roads, many experts believe it is only a matter of time, despite high tariffs that help keep them off for now. Currently in the US, EVs made in China are subject to a 25% tariff, which is on top of the 2.5% tariff on imported cars.
But if BYD or other Chinese carmakers come out with a $20,000 car, Dunn said, they would still be in a “good position” despite the higher tariffs, noting that the average price of a new car in the U.S. this year Is approximately $48,000.
BYD launched an EV called the Seagull in China last year at a low price of about $11,000, where it quickly became one of the best-selling EVs. “But it is overseas that EVs could be a truly disruptive force,” wrote UK-based market intelligence firm Autovista Group.
Even today, BYD’s Dolphin hatchback starts at $33,000 in Britain, or about 30% less than the starting price of VW’s rival ID.3 hatchback, according to Reuters.
But BYD plans to export much cheaper models to markets around the world, including Europe, South America and Southeast Asia. And over the past three years, China’s EV exports have increased by 851% new York Times Reported in October.
As for the US, BYD could enter from south of the border. According to the FT, the company is looking at locations for a new manufacturing plant in Mexico.
Mexico has a free trade agreement with the United States and Canada. In November, House lawmakers warned about Chinese giants like BYD “gaining a back door into the US market” through the southern neighbor.
Last year, Ford Motor Executive Chairman Bill Ford Jr. warned that US automakers were “not yet ready” to compete with Chinese rivals on EVs. “They grew very quickly, and they grew them massively, and now they’re exporting,” he told CNN. “They’re not here, but we think they’ll be here at some point.”
BYD also has the advantage of its founder and CEO Wang Chuanfu, a relentless cost-cutter, described by the late Charlie Munger—Buffett’s longtime partner at Berkshire—in this final interview last year.
But acquired Podcast, Munger said Wang could look at someone’s part in the morning “and in the afternoon he could look at it. I’ve never seen anyone like him… He’s a natural engineer and a get-it-done production executive, and that’s a great talent to have in one place.’
He added, “The BYD guy is actually better at building things than Elon.”