In Depth: Tesla’s Chinese Rival Hits Accelerator on Smart Driving

BYD Co. Ltd. has emerged as a significant competitor to Tesla Inc. in the global electric vehicle (EV) market. Founded in 1995 in Shenzhen, China, as a handset and laptop battery manufacturer, BYD transitioned into car manufacturing in 2003 after acquiring a small automaker from Xi'an and ventured into new-energy vehicles (NEVs) five years later with the launch of the plug-in hybrid F3DM [para. 1][para. 3]. Despite the initial struggle to attract consumers, the company achieved a major breakthrough in 2021 when its NEV sales outpaced gas-powered vehicles, selling 603,783 NEVs that year. This success led BYD to cease gasoline vehicle production in the following year [para. 4][para. 5].

A fundamental aspect of BYD's success is its expertise in battery development. This has allowed the company to control its supply chain and outperform competitors on price. The ability to design and produce its own batteries has facilitated periodic price-cutting campaigns, putting pressure on rivals who rely on external battery suppliers [para. 10]. The introduction of BYD's "blade battery," a lithium iron phosphate (LFP) battery, marked a significant technological milestone. These batteries are deemed safer and cheaper as they don't use costly cobalt [para. 12]. Consequently, other battery manufacturers, like CATL, have raced to launch their own LFP batteries [para. 11][para. 13].

Data from the China Automotive Battery Innovation Alliance (CABIA) indicates that LFP batteries constituted 69.3% of total power batteries sold in China in the first half of this year, equating to around 141 gigawatt-hours [para. 14]. BYD ranked as the second-largest manufacturer in this segment with a market share of 35.8%, trailing closely behind CATL’s 37.2% [para. 15].

Despite its achievements in the EV market, BYD now faces the challenge of catching up with Tesla in smart driving technology. Initially dismissive of autonomous driving, BYD's Chairman and CEO Wang Chuanfu has since acknowledged its importance and disclosed that the company is heavily investing in smart driving technologies, employing a team of approximately 4,000 people dedicated to advanced driving assistance [para. 17][para. 18]. BYD’s strategy revolves around its smart car architecture, Xuanji, which allows vehicles to adjust their status based on processed data [para. 19]. This initiative also includes an AI-powered model specifically for smart cars, but industry analysts remain skeptical, suggesting BYD lags behind companies like Tesla, Huawei Technologies, and XPeng Inc. in this technological area [para. 20].

Tesla's Full Self-Driving (FSD) system has received a license from Shanghai’s government for potential testing, which could provide Tesla with a competitive edge in China despite falling sales amidst a price war [para. 22]. In contrast, BYD’s shipments have significantly increased, with a comparison showing a 35.2% rise to 340,211 units in June, compared to Tesla's 24.2% decline to 71,007 units [para. 23][para. 24].

XPeng's CEO, He Xiaopeng, has ambitious plans for achieving Level 4 autonomous driving by 2025 and intends to hire 4,000 professionals to develop self-driving technology [para. 26]. The Chinese government's six-level categorization of autonomous driving technology highlights the progression from manual (Level 0) through to fully autonomous (Level 5). Currently, BYD claims to have the most cars equipped with Level 2 assisted driving technology in China [para. 29].

In summary, BYD has positioned itself as a formidable player in the global EV market, capitalizing on its battery technology. However, it must advance its smart driving capabilities to fully compete with industry leaders like Tesla and XPeng [para. 3][para. 5][para. 10][para. 12][para. 17][para. 19][para. 20][para. 22][para. 23].