Tesla need not worry too much about BYD, but everyone else should be gripped by panic, says author and Asia-focused automotive industry consultant Michael Dunne, of Dunne Insights.

Dunne is the former managing director of J.D. Power China and author of the book ‘American Wheels, Chinese Roads,’ which chronicled GM’s entry into China. It’s considered the best English-language book explaining the inner workings of China’s 2000s era automotive industry.

In his latest newsletter, Dunne explained that BYD’s cars are sold 20 percent more expensive in export markets than in China, implying that there is room for further price cuts and BYD is comfortable making thin margins to win market share.

“BYD achieved global sales leadership in EVs while selling 92% of its production inside China. Now the company is moving aggressively into global markets. BYD is already winning a record number of customers in Australia, Brazil, Israel, Mexico, Sweden, and Thailand (where it already controls 33% of the Kingdom’s EV market).

“What is scary is that prices on exported vehicle today are 10-20% higher than the same BYD products sold in China. That means BYD has room to offer even lower prices on products going overseas in 2024,” said Dunne.

Giving an example of BYD’s cost advantage in export markets, Dunne says in the UK, the Blade Battery-powered BYD Dolphin is 30 percent cheaper in the than a VW ID.3 hatchback.

“Think of the Blade as the equivalent of a high-quality Toyota gasoline engine: reliable, affordable and efficient.”

On BYD’s export ambitions and threat to traditional car makers, Dunne said:

“What does this mean for global automakers not named Tesla? BYD will continue to win large chunks of market share from legacy automakers worldwide.

“China's market, the world's largest, no longer needs or wants foreign makers. Jeep, Suzuki and Mitsubishi are already gone. VW, Ford, Hyundai, Nissan, and others will depart within five years. GM, once the poster-child for successful US business in China, will likely be gone, too. (GM sales in China are already down by more than 50% from their 2017 peak).

“BYD announced plans to invest in a greenfield plant in Hungary last month. Suppliers tell me that they expect BYD to build another plant in Mexico by 2025. A decision on the timing of entry into the US market will likely come after US presidential election.”

If there is one brand that need not be concerned about BYD, it is Tesla, which enjoys a much stronger brand image than BYD, which unlike Tesla, needs to spend a lot more on marketing.

“Tesla enjoys extraordinary global brand power. The BYD image is rather bland, evoking little emotion. As a battery company that moved up into cars, BYD is still searching for an identity that clicks with customers.

“Sources close to the company say that BYD is “spending only 10% of what it needs to” on marketing. The hesitation to invest more is one of the reasons why BYD got off to a slower-than-anticipated start in Europe.

“Price points and customers are different, too. Tesla (premium) and BYD (mostly mass market) serve different customers. Things could change. But today few people looking at a Tesla opt for a BYD.”

In a previous newsletter, Dunne explained the foundation of Tesla’s strength has little to do with the environment, but Tesla’s image as a technology leader. The quote below, taken from his earlier newsletter, explains it succinctly.

“I bought my Teslas because of the super cool features. Even if [my Teslas] were running on coal, I would still buy them,” says Dan Gittleman, technology expert and former senior executive at Lear. “It’s all about the innovation.”

Dunne said that while BYD’s strength lies in batteries, clunky software is its biggest weakness.

“BYD’s core competence is battery-making. It is not easy to move from batteries into advanced technologies like software, AI and autonomous driving. Tesla, on the other hand, is the original software-define vehicle,” said Dunne.

“Tesla owns its own (charging) network. BYD relies on third-party charging services. When BYD steps into European or North American markets, it will be seen as another second-rate charging citizen, along with other non-Tesla brands. Tesla is miles ahead because the experience is totally integrated – no payment hitches or hook-up surprises. Even if BYD joins Tesla’s network, it will still need to overcome irritating delays and complexities like software handshakes,” he added.