BYD Is Beating Tesla in Europe and Losing at Home

Transcript

BYD now sells more cars in the European Union than Tesla. At home, its sales are falling, and Europe just agreed to cap Chinese hybrids. BYD’s answer, from vice president Stella Li: France is on the shortlist for a new factory. How did a 1995 battery maker get cheap enough to outsell Tesla? Sales abroad are booming, so why did its profit fall? And why does a Chinese carmaker want to be called French?

Stella Li goes further than that shortlist, AFP reports. “I want people in France to say that BYD is a French company,” she says. Then she adds: “I want them to love us.” This is China’s biggest private employer, a carmaker from Shenzhen, asking a European country for love. Keep that line in mind, because the reason behind it is where this story ends.

In Paris, France, the day before the Motor Show opens, President Emmanuel Macron walks the show. He is praising a deal: that European cap on Chinese hybrids, meant to head off a trade war. It will, he says, “better protect the European market against unfair competition.” He calls it the result of years of work to restore fair and honest competition between Europeans and non-Europeans. He also announces an imminent agreement between France and Germany to protect Europe’s car industry, but gives no details. Same city, same week: a Chinese carmaker asking to be loved, and a French president welcoming a limit on Chinese hybrids.

Then there is the money. In the first half of this year, BYD’s net profit fell by about a fifth. BYD’s own results show where its money now comes from, and we will open them.

Abroad, though, BYD is winning. It only began shipping passenger cars to Europe five years ago. Now, with fuel prices at a record, electric car sales across the European Union are climbing fast. Electric cars are a field where Europe’s own carmakers have lagged behind, AFP reports. Chinese carmakers, it adds, have used cheaper models to win big market shares from European producers. Where BYD’s low prices come from is a story that starts long before Europe.

The brands of Volkswagen and Stellantis still lead the market in the European Union. But BYD is ahead of Tesla. From January to August, it sold almost 178,000 cars there, a quarter more than Tesla. And Tesla is not shrinking: its sales there are growing again, and it is still behind.

And at home? Year on year, BYD’s China sales fell 30 percent; abroad they almost doubled.

To see how BYD got so cheap, go back to November 1994: in Buji Town, Shenzhen, China, Wang Chuanfu gathers a team of 20 people. While working as a vice supervisor at the Beijing Nonferrous Research Institute, he spotted an opening. Japanese firms were moving from nickel-cadmium batteries to newer, higher-value ones. Wang wanted the market they were leaving behind. The following February, he registers Shenzhen BYD Battery Company.

In Japan, battery making takes big money and heavy automation. Wang does the opposite: more hands on the line, and key machines built in-house. His unit costs come out around five or six times lower than his Japanese rivals’. Remember that habit of making it yourself: it is the first clue to how BYD got so cheap. By 2002, BYD has overtaken Sanyo and makes most of the world’s nickel-cadmium batteries.

Then, in January 2003, BYD buys a small carmaker, Xi’an Qinchuan Automobile, from the state-owned defence company Norinco. Shareholders are not pleased: the prospectus for BYD’s stock market listing never mentioned it. The aim is battery-powered cars. Yet the first car BYD develops itself, the F3, runs on petrol, and it wins buyers the way the batteries did: with a low price.

In September 2008, Warren Buffett’s Berkshire Hathaway buys in. It pays about 230 million dollars for its stake. Buffett gives the credit to Berkshire’s vice chairman, Charlie Munger, who saw what BYD could become.

When Berkshire sells the last of those shares, seventeen years later, every dollar it put in has turned into almost 40 dollars. But first, the cars stall.

For eleven years, BYD’s car sales barely move, while other Chinese carmakers grow. Then profits slide: by 2019, net profit is down to 1.6 billion yuan. Wang calls it the “darkest moment”. The company has one goal left: to survive.

And yet Wang insists on spending 8.4 billion yuan on research and development. That is more than five times what BYD earned in 2019. In 2020, BYD unveils the Blade, a lithium iron phosphate battery for electric cars. Many battery makers are turning away from that chemistry, worried it stores too little energy for its size. BYD pitches the Blade as the safer choice. Once again, it is betting on a battery others are leaving behind.

Sales take off, helped in part by China’s boom in cars that plug in. Two years later, BYD stops making cars that run on fuel alone. From the next year on, it is China’s biggest carmaker by annual sales. Could a battery maker from Shenzhen now take the crown from Tesla?

The answer arrives in 2025, and the evidence comes from Tesla itself. Its own report to investors shows deliveries falling for the year, to 1.6 million vehicles. For the second year in a row, Tesla sells fewer cars. And this fall is the steepest in the company’s history.

In Europe, it is worse. Tesla’s sales there drop 28 percent. In Germany they almost halve. The news site Electrek calls Tesla’s full-year figures for Europe “a total bloodbath.”

Now, the challenger. That same year, BYD delivers 2.26 million electric cars, more than 600,000 ahead of Tesla. The crown changes hands: Rest of World names BYD the world’s largest seller of electric cars for that year.

That year in Europe, where Tesla is bleeding, BYD’s sales nearly quadruple, to almost 188,000 cars. And that is not even the most surprising number in this story. So what does BYD have that Tesla does not?

It comes down to price. In China, BYD’s entry-level models start at around 10,000 dollars. Tesla has long promised a car for under 25,000 dollars, and it keeps being pushed back. Without a cheaper model, Tesla struggles wherever buyers count every dollar.

Tesla’s sales in China, squeezed by local carmakers, sink to a three-year low that October. Tu Le, founder of the consulting firm Sino Auto Insights, tells CNBC that reality is catching up with Tesla there. Tesla, he says, has leaned on price cuts to keep selling cars that are now four and five years old. Against faster rivals like BYD, that no longer works.

Tesla’s answer is not a cheaper car but robotaxis; Wall Street backed Elon Musk’s bet through 2025, but by October this year, Tesla’s stock was down 21 percent. Meanwhile, the two rivals have become mirror images. At home in the United States, Tesla holds over half of the electric car market. BYD cannot sell its cars there: 100 percent tariffs block Chinese passenger cars.

Beyond that wall, BYD is the one winning: in 2025, its sales outside China pass one million cars. But how can BYD sell this cheaply and still make money? The answer lies inside its cars, and one team of analysts took a BYD apart to find it. Yet in the same year it takes the crown, BYD’s quarterly profit falls for the first time in more than three years, as it begins to lose ground at home.

At home, the ground was already moving: Reuters reported that the Chinese government’s campaign against price wars had helped slow BYD’s sales. Then came 2026, and two new blows. First, at the start of the year, China partly withdrew a national tax break. Electric and plug-in hybrid cars, which China calls new energy vehicles, had been exempt from purchase tax. Every car BYD makes is one of them. Second, the price fight at home grew fiercer.

The next document is BYD’s own report on the first three months of the year. Net profit for its shareholders: about 4.1 billion yuan. Revenue is down almost an eighth from a year earlier. Profit is down by more than half.

To see where it hurts, count the cars. Insurance registrations, which count new cars as they are insured, do just that, and China EV DataTracker tracks them. In the first half of the year, registrations of the BYD brand in China fell 45.9 percent. Nearly half, gone in a single year. That is the kind of drop Tesla suffered in Germany last year. BYD’s other brands did better. But CarNewsChina, which reported the figures, says that was far from enough to make up the loss.

CarNewsChina traces the weakness at home to plug-in hybrids. BYD’s plug-in hybrid sales started sliding the year before, and this year the slide deepened. Keep those plug-in hybrids in mind: they matter again in Europe.

The pressure is not BYD’s alone. In July, China’s retail car sales fell 21.1 percent, according to the China Passenger Car Association. It was the tenth monthly fall in a row. And this is the world’s biggest car market. Over 100 car brands are still fighting for its buyers. CarNewsChina’s verdict: at home, BYD is in “a game of survival”, waiting for rivals to start “losing wheels” and drop out.

One car tells the story. BYD developed the Sealion 7, an electric SUV, with Tesla’s Model Y as its benchmark. It went on sale in China in the spring of 2024. That October, at the Paris Motor Show, the same show where this story began, BYD presented it to Europe.

In 2026, BYD took it off its line-up in China. Abroad, BYD kept adding new versions over the summer, in Malaysia, Thailand and India. The car news site Drive put it in a headline: BYD’s Model Y rival was being “axed in its native China”. So if its home market is shrinking this fast, where is BYD’s money coming from?

The answer is in BYD’s own half-year results, published in August. More than half of its revenue now comes from outside China. In six months, it took in about 27 billion dollars abroad. That is roughly 150 million dollars a day, every day. Which makes that fall in profit even stranger.

In China, BYD’s revenue fell by almost a third. Abroad, it grew by slightly more. That should cancel out. It does not. A year earlier, China was by far the bigger slice. For every three yuan BYD lost at home, it won back less than two abroad. So total revenue still slipped, and profit fell even faster.

Abroad also pays better. There, about 22 percent of each sale is left once the cost of making it is paid. Company-wide, it is under 19 percent, so at home it must be lower still. BYD itself says growth abroad was the main reason its margin went up.

Remember those analysts who took a BYD apart? They were from UBS, back in 2023, and the car was a BYD Seal, priced under 30,000 dollars. Against the mass-market electric cars of traditional carmakers, they judged it better, and much cheaper. They put BYD’s cost advantage over those carmakers at about 25 percent. And they expected it to last, even with trade barriers growing.

The reason goes back to Wang’s battery days. BYD still makes much of the car itself: battery cells, powertrain, electronics. In the electric cars of typical traditional carmakers, UBS estimates, less than a third is made in-house. BYD’s battery arm, FinDreams, even supplies its rivals. One of them is Tesla.

Sales abroad are now pulling BYD out of its slump. September was its best month of the year so far. Nearly four in ten of those sales were outside China, more than double the share a year before. At its biggest production base, in Xi’an, China, BYD went looking for more than 8,000 new workers.

And BYD wants far more. Deutsche Bank, citing BYD’s management, reported a higher target: close to two million vehicles abroad this year. Next year, more than two and a half million. UBS called Europe the biggest prize for China’s carmakers, and the EU has just agreed to a ceiling on Chinese hybrids that price cuts can never get around.

The same day Macron walks the show, a senior EU official gives that ceiling its number. From 2027, hybrids from China will be capped at 350,000 in the first year, with the limit rising six percent a year after that. This year, the EU expects up to 800,000 of them. The cap cuts that by more than half.

In its first year, the cap is under a thousand hybrids a day, from the whole of China. It will last four years. The week before, Beijing had agreed to “moderate” its exports of hybrids and plug-in hybrids to the EU.

Europe has a lot to protect. The EU buys about 13 million cars a year, the one big market where every major carmaker competes. Its car industry has already been rocked by job cuts. Since 2024, Chinese electric cars have faced extra EU tariffs. The EU alleges they are helped by unfair state subsidies.

This is where those plug-in hybrids come back. Hybrids are among the most popular electrified cars with European buyers. In Germany, about six in ten new BYDs registered this year are plug-in hybrids. Worldwide, the share is under half. So the deal covers the kind of car BYD sells most in Germany.

Stella Li says she has no details of the deal yet. But she speaks of a long-term commitment: “We are going to invest massively in Europe.” The plan is to build inside the wall.

But building in Europe is slower than building in China. BYD’s first car factory in Europe, in Szeged, Hungary, was meant to be making a compact electric car, the Dolphin Surf, by the end of last year. Earlier this year, BYD was still installing equipment there; assembly now starts late this year, about a year behind plan. And in Turkey, a 1 billion dollar plant is on hold while BYD concentrates on Europe; Li has confirmed that construction has not started.

For a second European factory, BYD has been in talks with Stellantis and other carmakers about taking over idle plants, EVwire reports. Li wants a third as well, and France is on the shortlist for one of the two. From January to June, it registered nearly 14,000 new cars in France, more than double a year earlier, the company says.

So why does a Chinese carmaker want the French to call it French? The EU’s tariffs and its cap aim at cars made in China, not in France. And Li has said what BYD intends. “To become a local company in every region of the world.”

In Paris, Macron spoke of protecting Europe’s car industry. BYD’s answer is to join it. Far from Europe, that plan is already running: BYD builds cars in Brazil, Indonesia, Thailand and Uzbekistan.

At home, BYD’s slump has eased but not ended: in September, its sales there were still 13 percent below a year earlier. In Europe, the first test comes late this year, when the line in Szeged starts. The EU is raising its wall. BYD is building on the inside.