Last week, BYD became the world’s third-biggest automaker by market capitalization.  The Chinese automaker also announced plans to supply batteries to Tesla.

BYD was founded in 2003 and has grown to become one of China’s national champions in terms of new energy vehicles (NEVs).  The company produces a wide variety of passenger and commercial vehicles as well as automotive components.  Two years ago, the company spun out its EV battery and automotive parts units into its FinDreams subsidiary.  

Last week saw BYD overtake Volkswagen to become the world’s third-largest automotive player by market cap (US$129Bn).  The company now only lags second-place Toyota (US$228Bn) and first-place Tesla (US$743Bn).  BYD made sales of 507,314 vehicles for the first five months of 2022, up 348% y-on-y.  These figures point to its increasing market position and reputation as an international firm: an estimated 40% of its revenue comes from the international market. 

Through FinDreams, BYD has a ~10% share of the global EV battery market as of Q1 2022.  In 2020, BYD launched its “Blade” lithium-iron-phosphate (LFP) battery.  Recent reports (originating from BYD’s executive vice president Liang Yubo) suggest that Blade batteries will soon be supplied to Tesla. Tesla’s deal with BYD would reduce its reliance on its current suppliers.  CATL is currently Tesla’s key LFP supplier, which nickel-based cathodes are mostly sourced from Panasonic and LG Energy Solutions. 

BYD’s successes serve to reinforce three important automotive trends:

The first is the rise of NEVs which continue to gain market share.  Last month's data was positive, with retail sales of passenger EVs in China up 26.9% m-on-m in May after strict COVID-19 lockdowns impacted the sector in April.  Sales were 91% up year-on-year to 360,000 units, according to figures published by the China Passenger Car Association on Thursday. 

The second is the continued rise of China's automotive OEMs.  While BYD sold far more vehicles than its rivals with 114,183 units, it wasn't alone in having a successful May.  Nio, Xpeng and Li Auto also saw strong results.

The third is the importance of vertical integration in the EV space.  BYD is often credited as being the world’s first vertically integrated EV maker, with the capability to manufacture battery cells and IGBT transistors, two of the most expensive components in an EV.  This trend (and BYDs ability to absorb higher battery materials costs) partially explains its outperformance of many of its peers in 2022.  The company appears set on doubling down on this competitive advantage.  In early June, reports suggested that BYD intends to buy six lithium mines in Africa.