BYD introduced its new Seal sedan at the IAA Mobility Munich auto show Tuesday, aimed firmly at the market-leading Tesla Model 3, and analysts expect this new Chinese competitor’s range of cars and SUVs to match the quality of its competitors at a sharply lower price.
French automotive consultancy Inovev said BYD’s price advantage across the vehicles it sells in Europe will be between €10,000 ($10,700) and €15,000 ($16,000).
“In Europe, its current range consists of the ATTO 3 (compact SUV), Han sedan (medium premium) and (upmarket) Tang large SUV, with the imminent arrival of the mid-priced Dolphin sedan to line-up alongside the Seal,” Inovev said in a report.
Investment bank UBS said the Seal has a 15% price advantage over the Tesla Model 3, and BYD has a 30% edge over European incumbents.
BYD is also about to unveil its upmarket Denza brand at the Munich show.
China’s long-promised threat to the European market was led by SAIC’s MG, and followed by Geely Automobile Holdings with its Polestar and Lynck & Co brands. BYD is a latecomer, but its attack is ominous because it not only feels able to challenge European mainstream products on price but also reckons it can mix it with the likes of BMW, Mercedes and Audi. That may prove a bridge too far.
Bernstein Research has started coverage of BYD’s stock with an “outperform” rating and has high hopes for its pick.
“China has long dreamed of having its very own national champion in the auto sector, and BYD is turning that into reality. Armed with the scale and cost advantage earned domestically, we expect BYD will rise to be among the top ranks of (manufacturers) globally,” said Bernstein analyst Eunice Lee in a report.
UBS has subjected the Seal to the indignity of a “tear-down”, where it reduces the vehicle to its basic parts and figures out costs and engineering quality.
“Our BYD Seal teardown uncovered its technological innovation and confirmed its cost competitiveness. Leveraging these two key insights, we believe the company is well positioned to enjoy two growth drivers; premiumization and overseas, despite rising competition in China’s EV market,” UBS said in a report.
“We regard Seal as BYD’s cost-competitive answer to Tesla’s Model 3,” UBS said.
Bernstein Research said it expects strong sales growth for BYD in China and in strong overseas expansion.
Does it really have a price advantage over its European and U.S. competition?
“BYD has significant cost advantage over its peers, which is primarily driven by vertical integration of batteries and key auto parts, and scale. We estimate BYD has about an 8 to 11 percentage points margin advantage over peers for a BEV with a 60-kWh battery. BYD could see margin attrition in its core mass-market brand due to rising competition, but premiumization and exports will offset and potentially bring upside,” Bernstein’s Lee said.
“We forecast BYD’s overseas sales volume (including Asia and Middle East) will grow from 50,000 in 2022 to 1.5 million by 2030,” Lee said.
UBS said the Seal has an impressive digital setup, with 5G, a big rotating screen and karaoke.
“We believe BYD Seal is not only cost-competitive compared to incumbent legacy brands, but also 15% lower compared to Tesla Model 3. We estimate BYD’s cost is 30% lower than those of western incumbents, allowing it to offer a competitive price in Europe even with tariffs, shipping costs and/or more costly local production,” UBS said.
Schmidt Automotive Research said in Western Europe’s first half of 2023, Chinese manufacturers sold 160,000 mainly battery electric vehicles. Just over 75% came from MG. BYD, just beginning its European sales campaign, accounted for 1.9%.
BYD stands for Build Your Dreams. Legendary investor Warren Buffet’s Berkshire Hathaway has been a long-term investor. BYD has come from nowhere to overtake Tesla as the world’s leading battery electric vehicle (BEV) manufacturer.
Investment researcher Evercore ISI has said China’s BEVs could account for up to 15% of the European market by 2030 and BYD could account for at least half of that or perhaps 500,000 EVs.
BYD recently launched the ATTO 3.
The European Union has been accused of forcing its citizens to buy BEVs without realizing its manufacturers were at a competitive disadvantage to China. European automakers have been left unprotected, and French manufacturers are the most exposed because they have a bigger share of the lower end of the market for BEVs. France has called for an EU inquiry to find out if China is guilty of selling BEVs priced unfairly.
At the IAA Mobility Show, BYD said there will two versions of the Seal when it arrives later this year. The base rear-wheel version will cost €42,990 after tax ($46,000) in Germany. The all-wheel version will be priced at €50,990.
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