Readers of CleanTechnica are likely familiar with two of the first companies to build sustainable new energy businesses around the combined opportunity of electric vehicles, energy storage, and solar — BYD and Tesla.
The two companies have, from opposite ends of the planet, built up their businesses playing in the same broad segments, but from two completely different starting points, and they continue to head into different market segments. It is a fascinating comparison to dig into to see how the two companies have evolved over the last 10 years. A new video from YouTuber Kevin Rooke unpacks some of that history for us.
Let’s unpack the details he shared along with a bit of extra context to see how similar and yet different each of their company strategies have been to get them to where they are today. BYD first hit the radar for many folks in the western world when serial investor Warren Buffett bought 25% stake in BYD for $232 million. This was 2 years before Tesla went public and seems like such a magical bet. Today, his stake in the company has increased in value 5x, making it his largest publicly held holding of a non-US company.
In the early years, BYD applied its mastery of iron-phosphate batteries to electric vehicles in a push to get them into the hands of consumers. As the company refined its focus, three primary areas emerged as the focus areas: commercial vehicles, plug-in hybrids, and fully electric vehicles, in that order. BYD’s founder and CEO, Wang Chuanfu, told me in an interview last year that the company moved into commercial vehicles to improve air quality.
“The volume of commercial vehicles is not high, but the oil consumption and pollution they cause is significant. Even though there are more personal vehicles on roads, they are used fewer hours per day, so they use less petrol and generate less pollution. This is why we focus our efforts on commercial vehicles. For example, the emissions and petrol consumption of a bus in a single day is the same as that of 30 personal vehicles. That’s why we started with commercial vehicles like buses, taxis, and trucks and developed BYD’s ‘Electrification of Public Transportation’ strategy.”
In China, BYD’s strategy to build larger battery electric vehicles required larger batteries in the vehicles, but took advantage of the already higher purchase prices of transit buses. Fleet managers could also see the payout over the life of the vehicle and only needed enough vision for their fleets to get past the higher upfront cost of the vehicles to make the leap.
Meanwhile, in North America, Tesla pursued the higher-end luxury market with the Roadster. They built the vehicle with sufficient performance cred to compete with other vehicles in the roadster and supercar segments. Behind the curtain, the higher margins that came with luxury vehicles allowed Tesla to absorb the massive expense of the batteries required to power each Roadster. As volumes grew, Tesla saw and seized the opportunity to build a higher volume full-sized luxury sedan that would come to be known as the Model S.
The divergent strategies enabled both companies to grow, increasing their cumulative battery cell production, and driving costs down as a result. BYD also moved into the fully electric passenger vehicle market with its e6, which found itself quite at home in taxi fleets. Tesla continued to push forward in the private vehicle market with increasingly more affordable luxury electric vehicles.
BYD cut its teeth in the EV market with its DM line of vehicles, which stands for Dual Mode, according to Rooke. These vehicles operate like plug-in hybrid vehicles, but with a focus on performance. When visiting BYD last year, a dealership representative took us on a hair-raising ride in one of BYD’s Dual Mode Tang SUVs around the streets of suburban Shenzhen. They have the potential to reduce emissions, but clearly don’t deliver the full emissions reductions of a fully electric vehicle like a Nissan LEAF or Tesla Model S.
The two companies went in different directions with their EV strategies, but both with the clear goal of reducing emissions through the implementation of battery electric powertrains in vehicles. Early on in 2014, Rooke noted that Tesla had sold more electric vehicles than BYD as the Roadster went into production and BYD was still mapping out its strategy for electric vehicle sales, but that didn’t last long.
In 2016, BYD surpassed Tesla in cumulative EV sales as BYD ramped up operations in China, according to Rooke. Battery volumes told a different story, as each of Tesla’s fully electric vehicles required more batteries than BYD’s Dual Mode vehicles in these early years. Both companies were true masters of batteries as their core competency, with BYD having grown up as a company developing new battery chemistries for consumer electronics companies around the world and Tesla in-housing more and more of the work. Tesla continued to push on the potential of lithium-ion battery cells, with its eyes set on a new form factor that would propel its vehicles to new heights.
The new 2170 battery cell increased the energy density of the cells and packs while cutting costs along the way. Tesla knew it needed scale to get where it wanted to be and built its $5 billion Gigafactory outside Sparks, Nevada, in the Western United States on that premise. The first Tesla to use the new cells was the Tesla Model 3, and while Tesla struggled to produce it initially, the Model 3 was able to dial in the manufacturing after a few months and really started cranking out the cars in 2019.
Rooke related that it was really when Tesla pushed outside the US, first into Europe in February of 2018 and later into China, that its sales really took off. In 2019, Tesla finally surpassed BYD in annual sales. Not only that, but the success of the Model 3 around the world has now propelled it to take the top spot for cumulative EV sales.