Germans take huge pride in their automotive industry, and have never been eager to abandon their Audis, BMWs or Mercedes-Benzes for foreign makes. But with a goal to change that, a Chinese automaker that sells the most electric cars in the world has begun offering three of its models in Germany.
BYD, founded in 1995 under the name Build Your Dreams, has become a behemoth in China, the world’s largest auto market, by focusing on electric vehicles. Last year it sold 1.86 million battery-powered cars, including plug-in hybrids, which have both an electric motor and a gas-powered engine.
That topped Tesla’s sales total of 1.3 million cars in 2022, all of them battery-powered.
So far, the vast majority of BYD cars are sold in China. But the company, based in Shenzhen, is looking to expand in other parts of the world, including Europe and, in particular, Germany.
Buoyed by the surging demand for electric vehicles, coupled with the supply chain struggles still troubling European automakers, BYD introduced three models in Germany at the start of the year: the Atto-3, a compact sport utility vehicle; the Han, a sedan; and the Tang, a full-size SUV. In the coming months, the company plans to introduce several more. There have been reports that it is considering opening an assembly plant in Germany, which has Europe’s largest economy.
BYD is willing to take its time to become competitive in Germany, said Jan Grindemann, chief operating officer for Hedin Mobility Group, a Swedish company that is handling BYD’s imports into the country.
“I don’t think that it will happen overnight,” Grindemann said. “We need to build BYD up as a brand, and the way that we will convince people is through quality.”
It may not be easy. Germany has a crowded market – domestic automakers already produce 90 electric models and are racing to expand and improve their offerings. At the end of last year, a special government subsidy for electric vehicles came to an end. Then there’s the fact that BYD is largely unknown among car buyers outside China.
But the company is not unknown among investors. In 2008, Warren Buffett paid about $230 million for a nearly 10% stake in BYD, which started as a maker of rechargeable batteries. Last week, Charlie Munger, the vice chair of Buffett’s Berkshire Hathaway, said that investment was now worth “about $8 billion,” CNBC reported.
The company already has made inroads in Europe with one kind of vehicle: electric buses. BYD has sold more than 3,000 battery-powered buses throughout the continent, and last year delivered its first five buses to Deutsche Bahn, Germany’s leading public transportation company, which plans to fully electrify its fleet by 2040.
BYD’s move into Germany’s auto dealerships was preceded by launches in Scandinavia. In late 2021, it started offering cars in Norway, which has Europe’s highest percentage of battery-powered vehicles. A year later, it moved into Sweden, where its compact SUV became the fifth-most sold battery-powered vehicle the month that it debuted.
In both countries BYD teamed up with an established distributor to help navigate the market, as it is doing in Germany. But Grindemann refused to draw comparisons between the experiences, pointing out that Scandinavia’s automobile market is dwarfed by the nearly 2.7 million cars registered last year in Germany.
As part of efforts to get more of its vehicles into circulation in Germany, BYD struck a six-year deal in October to sell about 100,000 cars to the country’s largest rental company, Sixt.
BYD’s cars “are well suited to the expectations and needs of European customers with a quality feel,” Sixt said when announcing the deal.
For manufacturers, the chance to let rental drivers try out electric vehicles may lead to more sales. “We know that renting an electric vehicle can help people to overcome any reservations they may have, leading them to decide to go electric when they buy their next car,” said Vinzenz Pflanz, chief business officer at Sixt.
Such subtle promotion fits with the overall strategy of how BYD plans to make inroads in the German market, Grindemann said.
“I always had the feeling that there are a lot of reservations about Chinese brands,” he said. “But when you get someone into the car and they are sitting in it, they are immediately convinced.”
Still, in a country where automobiles and their production are woven into the history and society, brand loyalty can span generations.
U.S. brands have struggled over the years to gain a foothold in Germany. General Motors lost money for more than a decade with its Opel unit before finally selling the division in 2017. (Opel is now part of Stellantis.) Ford Motor is winding down production of its gas- and diesel-powered cars and plans to sell a factory in southwest Germany, and BYD is one of a dozen companies that have been in talks about potentially taking it over. Although Ford’s sales in Germany grew in 2022, they amounted to only about one-quarter of vehicles sold by Volkswagen, the country’s leading automaker.
“People in Germany buy cars based on the brand,” said Helena Wisbert, a professor of automobile economics and director of the CAR Center Automotive Research, in Duisburg. “The brand is decisive.”
One exception is Tesla, which entered the German market a decade ago and was able to lure some Germans hungry for an electric vehicle and enamoured of the entrepreneurial, Silicon Valley vibe of the cars and their company’s CEO, Elon Musk. Last year, as Tesla opened its first major factory in Europe, outside Berlin, Tesla’s Model Y became Europe’s most popular electric vehicle, eclipsing models from Volkswagen, Fiat and Peugeot. In January, every fifth new car registered in Germany was a Tesla.
That surge by an outsider has put Europe’s car makers on edge, said Matthias Schmidt, an analyst who publishes a monthly report on the electric car market. In addition to BYD, several other Chinese brands, including SAIC Motor and Nio, have entered the German market in recent years – almost exclusively with electric vehicles.
“Incumbents are far more sensitive to the threat of new manufacturers entering the region,” Schmitt said of the threat posed by competitors in the electric vehicle sector.
Volkswagen, the overall sales leader in Germany thanks to the persistent popularity of its internal-combustion motor vehicles, recently announced a five-year plan to quicken its shift to electric vehicles by focusing on software, platforms and updates at its plants.
For all of its ambitions, BYD is entering the German market at a challenging time. A government subsidy for electric vehicles ran out in December, leading registrations of new electric cars to plunge in the first month of 2023, the German Association of the Automotive Industry said. Although sales of battery-powered cars are projected to increase 8% to around 510,000 units this year, several factors have heightened uncertainties among consumers.
The price for electricity in Germany is more than double that in the United States. A lack of charging stations, especially in cities, is also an obstacle – across the country, there are 23 electric vehicles for every spot to recharge. Finally, authorities have expressed concern about the stability of the country’s power grid, given the increase in electric-powered heating systems and vehicles.
Tesla’s swift expansion of its own charging infrastructure across Germany helped it to gain a competitive edge. In the coming years, BYD is considering offering complete packages to consumers, including solar panels for generating electricity and batteries that can be installed in a private garage for storing and charging – options that are possible because BYD’s roots are in battery production.
Aytac Cicek, who sells BYDs for the Torpedo Group in Frankfurt, said that customers had been impressed with the quality of the vehicles, especially their fast software and high safety ratings. But one of the biggest selling points so far is delivery times that are half of what most German makers can currently meet.
“Delivery times are a big issue in the German market,” Cicek said. “When you order a BYD, they can deliver it in three to four months, the standard time – or what the standard time was before the pandemic.”
This content appears as provided to The Globe by the originating wire service. It has not been edited by Globe staff.