Connect with us

Understanding BYD – The Warren Buffett-Backed Heavyweight Chinese EV Company

BYD started out as a mobile phone battery manufacturer.

When we think of the potential size of the future market for electric vehicles (EV), our mind naturally gravitates to China.

One of the world’s biggest EV companies in the world is from China – BYD Co Ltd (HKEX: 1211). And you don’t even need to have lived in China to have experienced one of their vehicles

Today, the company has grown to manufacture not just EV cars but also EV buses, bicycles, trucks and taxis, too. What’s more, it’s also one of the world’s battery-manufacturing powerhouses.

BYD Started Out In Mobile Phones

The origins of BYD can be traced back to 1995 in Shenzhen, China. Standing for Build Your Dreams, BYD was founded by Wang Chuanfu and actually got its start by trying to replicate mobile phone batteries at low cost.

It was only in 2002 that BYD started to make its name in the auto industry by acquiring a failing Chinese automobile manufacturer.

BYD listed its shares on the Hong Kong Stock Exchange in 2002 amid the wave of Chinese listings in the city post-the handover in 1997. However, it was during the Global Financial Crisis (GFC) in 2008 that BYD really captured investors’ attention.

That’s because famed investor Warren Buffett bought a 10% stake of the company that year for US$230 million. Unsurprisingly, for the Sage of Omaha, he got into BYD at the right time – purchasing his stake when its shares were at around HK$8 apiece. Today, they sit at HK$260.

As of December 2022, Warren Buffett’s Berkshire Hathaway owns around 15% of BYD’s Hong Kong-listed H shares.

The company later listed its shares on the China A-shares market in 2011.

Making Waves In Electric Vehicles

One of its biggest EV hits early on was the e6 all-electric compact MPV, which was manufactured from 2009 onwards and released onto the public market in 2011.

Remember, this was in an era when all-electric EVs were rare – with “hybrid” models such as Toyota’s Prius dominating the market for environmentally-friendly cars.

The e6 model initially started out life as part of new taxi fleets in cities within China and other large markets. Future iterations of the e6 EV continued to find buyers both among the Chinese public and city governments worldwide, given its reliability and long range on a single charge.

Sales of plug-in hybrids made by BYD also found a strong niche in the China market, with its models renowned for reliable performance, its quiet engines, and its efficient fuel consumption versus traditional petrol-powered cars.

Today, the company – via its EV subsidiary BYD Auto – has actually become the largest EV company in the world (by sales).

In 2022, it overtook US-based Tesla as BYD sold 1.86 million EV cars in the whole of 2022, about 30% higher than Tesla’s global total for the year. While most of these sales came in China, BYD has ambitious plans to expand meaningfully into Europe and recently launched its first EV model for sale in Norway.

Diversification In Batteries

One of the unique characteristics of BYD – at least in the EV world – is the fact that the company also generates a significant chunk of its revenue from battery technology. That’s because it has developed into an EV battery powerhouse in its own right. BYD has worked over the past 10-15 years to develop its own battery technology for EVs.

That bet has paid off in spectacular fashion as it’s now the world’s second-largest EV battery manufacturer, behind only Contemporary Amperex Technology – also known as CATL. BYD’s LFP (lithium, ion, and phosphate) blade batteries, given its thin and long design, are in huge demand from international automakers.

These batteries are so sought after that even its main EV competitor – Tesla – has had BYD’s batteries supplied to its Gigafactory in Berlin.

BYD – The Future Of EVs

It’s not an understatement to say that BYD is a world-leading EV manufacturer and brand. Given its popularity within China, and its plans to expand abroad, its growth potential remains exciting.

The company itself is also shifting its business model towards the future of EVs. In the first half of 2022, nearly three-quarters of BYD’s revenue came from its automobiles and other related products segment. The remaining 27% of revenue came from its mobile handsets and electronics components business.

That was a massive increase in its EV business’s share, which made up only 52% of overall revenue for the group in the first half of 2021. Perhaps it’s a sign of the times in terms of BYD’s evolution of its business. Regardless, for anyone bullish on China (and the world’s) EV sector in the coming decades, then BYD is one company to watch closely.

Photo by Joshua Fernandez on Unsplash

Understanding Meituan Dianping – The Food Delivery and Online Travel Chinese Tech Giant

Advertiser Message

Invest and trade Chinese stocks and ETFs today through Interactive Brokers (IBKR) , a pioneer in global online trading with over 40 years of track record. Best known for its low commission fees, transparent rates and innovative brokerage services, IBKR provide investors with access to over 150 markets in 33 countries. Open an account with IBKR today.