BYD is entering Korea, encouraging the competition in the electric vehicle market.
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Build Your Dreams (BYD), China's best-selling auto brand, is becoming one of the biggest makers of electric vehicles, surpassing Tesla and threatening the Korean market. Government subsidies also drive a rapid shift to electric vehicles, leading to increased diversity in the market and heightened competition among automakers. BYD has delivered 526,409 vehicles over the final quarter of 2023 while Tesla sold 484,507 cars. The firm now focuses on increasing its sales volume outside China, reaching one in 10 of its vehicles sold overseas during the quarter of 2023.
There is another reason for BYD’s plan to enter the Korean market: piercing through the trade barriers that the world built against China. Massive import tariffs and other hurdles prevent Chinese carmakers from selling in the U.S. For example, the U.S. Congress argued that more tariffs should be applied to Chinese electric vehicles. The European Union (EU) is moving closer to imposing additional tariffs on Chinese electric cars entering the bloc to protect their markets. It aims to construct a facility in Korea so that China can export to the U.S. and E.U. using a free trade agreement (FTA).
Professor Rod Rothwell from the School of Business at George Mason University Korea mentioned that FTAs protect their businesses and provide people with various choices by reducing tariffs and opening access. A car produced in Korea using Chinese technology will be legally a Chinese-brand car labeled with a 'made in Korea' tag. Additionally, BYD intended to invest $1 billion in an Indian automobile plant, but it was canceled due to diplomatic and political issues with China. However, with Korea working on a Comprehensive Economic Partnership Agreement (CEPA) with India, eliminating tariffs could offer similar benefits without setting up a factory directly in India.
Dr. Rothwell explained that companies utilize vertical integration to conduct business with outside customers because each business has different skill sets. For example, Hyundai operates as a conglomerate with separate entities like Hyundai Motor Company, Hyundai Mobis, Hyundai Steel, and Hyundai Engineering & Construction. They maintain independence to engage with different partners and maximize profits. This separation enables dealings with competitors like Ford through entities such as Hyundai Mobis.
BYD also owns its battery supply chain, helping margins even as the cost of materials needed to make its cars has increased. More than 80% of E.V. battery cells are supplied by Chinese producers backed by a supply chain that is increasingly putting the mining and processing of component minerals such as lithium, cobalt, manganese, and rare earth metals in the country's hands. The cost of batteries in China has dropped to $126 per kilowatt hour on a volume-weighted average basis, while packs are priced 11% higher in the U.S. and 20% higher in Europe.
Written by Seungjun Lee | Staff Writer
Revised by Seohyun Kim | Managing Editor
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