BYD — Leading In Electric Vehicles More Than You Think

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I didn’t know what to expect when I wrote “Our Stance On Covering Tesla,” but I had realized that I really needed a post to explain that there are different people covering Tesla with different opinions and also that some Tesla news is positive while some Tesla news is negative. One thing I definitely didn’t expect, though, was a couple of superb comments from one of our readers on BYD’s leadership. It’s a compelling, interesting comment that I decided should be published as a Letter to the Editor to give BYD more props and attention for what it has done (especially since we haven’t given BYD nearly enough attention for some of these things). Read on (some edits made for formatting). —Zach 

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By Larry Evans

BYD has a higher overall gross margin (i.e., cost of goods sold vs. what you sell them for) and much higher when just looking at automotive gross margin, excluding regulatory credits. BYD invests more in R&D and employs by far the most R&D engineers of any automaker. BYD has more clean tech IP. BYD is more vertically integrated. BYD makes all of its own batteries and supplies most of the materials within them. BYD has a larger business beyond automotive with a larger electronics, ESS, and solar presence (although these are lower-margin segments). BYD has a much larger commercial vehicle presence. And BYD is selling most of their vehicles below the $30,000 price point that Elon has been promising for over a decade but has never delivered upon.

BYD’s sales are growing while Tesla’s sales are stagnating. BYD has been capacity constrained and has multiple new factories under construction or ramping up. BYD has fresher product and more new product on the way. BYD has an 18 month full product development cycle, using a comprehensive digital twin. That is a shorter period than the average Tesla product launch delay. Combined with very flexible factories (U8 and Seagull are made in the same factory), they have the agility to rapidly shift to meet market needs.

However, BYD’s net margin tends to be lower because of their R&D spending and receiving quantifiably less in subsidies/credits.

[…]

It is not just batteries. BYD makes their own electronics, including the screens, capacitors, circuit boards, and most of the chips made on Si wafers they produce from Si ingots they forge. (They also make the iPad and most of the components within it for Apple, so they know how to make electronics.) They also forge their own SiC ingots and make their own integrated SiC power electronics. They also operate mines and refineries to provide much of the materials. They make their own steering racks, shocks, brakes, etc. They also make their own seats, interiors, airbags … everything but tires and glass. It is truly far beyond what Tesla does. Being far more advanced and vertically integrated on batteries is just a part of it.

Not only do they have 110,000+ R&D engineers, but they work in a comprehensive digital twin system where even a minor change to a component almost instantly updates every other aspect, from aerodynamic, mechanical, and electrical loads to manufacturing tooling. Because they make almost all of the vehicle, the integration with the digital twin is seamless and lets them develop and optimize vehicles and the systems within them in a fraction of the time. If you are actually aware of everything BYD is doing, it is almost impossible not to be impressed.

The problem with too much Tesla coverage is that people have blinders on to how much faster progress is actually happening elsewhere.