When China’s BYD recently overtook Elon Musk’s Tesla as the global leader in sales of electric vehicles, casual observers of the auto industry might have been surprised.
But what’s caught other carmakers around the world off-guard is something else about BYD, which is backed by Warren Buffett’s Berkshire Hathaway: its low prices.
“No one can match BYD on price. Period,” Michael Dunne, CEO of Asia-focused car consultancy Dunne Insights, told the Financial Times. “Boardrooms in America, Europe, Korea and Japan are in a state of shock.”
BYD can keeps its costs low in part because it owns the entire supply chain of its EV batteries, from the raw materials to the finished battery packs. That matters because a battery accounts for about 40% of a new electric vehicle’s price.
In my own experience trying the waters for a business importing and selling LED Light Bulbs from China, they’re a mix of little crappy companies and large more well established ones and the larger ones are perfectly capable of designing and making good products but due to the market pressure for “make it as cheap as possible” end up mainly cutting down on component quality and using cheaper designs to make it cheaper.
Sure, the tiny companies are generally crap and the local culture (at least in Electronics, and at the time which was a decade ago) was to expect things to be cheap and break down often, but the larger companies are professional and can actually make quality products, its just that they generally are very weak in branding so can’t really get people to pay them for quality, hence end up either mainly competing on price or working as suppliers for non-Chinese companies which are little more than Brand-management outfits (which is pretty what all big name Brands in the West are nowadays - managers of one or more famous brands, not creators of superior products).
I’ve heard the exact same thing before: Chinese manufacturers will build to whatever quality you pay for, but almost everyone just asks for the absolute cheapest. The profit margins on the absolute cheapest quality are better than competing with other countries who can also produce higher quality goods.