China’s electric vehicle giant BYD (002594. SZ) has been on a tear in Southeast Asia, shooting past rivals, including Tesla Inc (TSLA.O), to take over a quarter of the share of EVs sold in the region. The Shenzhen-based carmaker has built its sales network in several ASEAN nations by investing in local businesses and establishing regional manufacturing plants. BYD, which also produces batteries for EVs, expects 2022 net profit to be more than five times the amount it booked a year earlier.
The company’s early success is based on a pattern of distribution partnerships with large, local conglomerates that have allowed it to expand its reach, test consumer preferences, and navigate complex government regulations in the region. In Indonesia, for example, it works with Bakari & Brothers unit VKTR to sell a range of BYD EVs, including the entry-level e1 and mid-size e2 sedans and the Tang seven-seat SUV. In Singapore, BYD partners with Sime Darby Motors to operate showrooms that double as white-tablecloth restaurants.
As the demand for EVs continues to grow, analysts say these partnerships will help drive a surge in regional sales. However, the strategy will only work if BYD can keep its prices competitive. Rising raw material costs and capital spending have eroded the margins of Chinese carmakers as they expand overseas production. The same is true of BYD, which has invested in a factory in Thailand and plans to build an additional facility in 2024 that will produce 150,000 EVs per year for export to Europe and Southeast Asia.
In the third quarter, the company sold 19,573 of its Seal EVs in Southeast Asia, outselling the Tesla Model 3 sedan by almost three-to-one, according to research firm Counterpoint. That’s partly because BYD offers a more affordable model. Its cheapest EV, the Song, sells for about $28,000. By contrast, Tesla’s cheapest Model 3 starts at about $57,000.
The low price of the Seal and the other BYD models is helping to overcome a lingering problem in the EV market — a lack of public charging stations. Currently, the region’s emerging markets require an estimated 95,000 AC and 40,000 DC charging points to support forecast numbers of EVs on the roads by 2030. That’s nearly ten times more than the current number and will be critical for consumer confidence in driving EVs and overcoming “range anxiety.” Despite the challenges, the region’s booming economy makes it an attractive destination for investors. BYD, which stopped producing combustion-engine cars last April, will continue to dominate the EV market. The Shenzhen-based manufacturer is the world’s biggest seller of electric vehicles and has a global presence that includes operations in the United States, France, Germany, and Japan. The company also has the most advanced battery manufacturing plant in China. It employs 9,000 people and specializes in developing long-range electric vehicles and batteries for commercial use. Its newest product, an all-electric SUV called the T3, will go on sale next spring.