Recently, the news that BYD plans to establish its second factory in Europe has attracted much attention from netizens. BYD announced that it is preparing to invest billions of euros in Europe to build factories and distribution networks.
BYD also announced that it aims to surpass Volkswagen and Tesla by 2030 to become the leading electric vehicle seller in Europe.
As we all know, the European market is not only one of the main automotive consumer markets but also the birthplace of many old fuel car brands, such as Mercedes-Benz, BMW, and Volkswagen.
This time, BYD's announcement of building two factories in Europe to some extent represents that China's new energy vehicles have entered a new stage of development and have begun to counterattack the old nest of fuel cars!
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What does BYD's heavy investment in Europe mean?
BYD's overseas journey
BYD's overseas journey has been steady and fast. According to statistical data, BYD's export volume was only 55,000 vehicles in 2022. The growth in 2023 is astonishing, with BYD exporting 216,000 new energy vehicles from January to November, a year-on-year increase of 360%.
Based on public information, BYD's overseas expansion is rapid, and its overseas layout is blooming in many places:
Factories in Thailand, Uzbekistan, Brazil, Morocco, and Vietnam are under construction, with expected production capacities of 150,000, 80,000, 150,000, 100,000, and 80,000 vehicles, respectively.Indian factories have begun operations, with an estimated annual production of 200,000 vehicles.
The first factory planned for Europe will be established in Hungary, with an expected capacity of 150,000 vehicles.
With the commissioning of these factories, BYD's global annual production is expected to reach a scale of one million vehicles.
Overseas investment in factory construction is an inevitable path.
Looking back at the development of the global automotive industry, traditional automotive powerhouses such as the United States, Germany, and Japan have transitioned from direct whole-vehicle trade exports to overseas investment in factory construction.
For example, in Japan, the combined sales of the domestic automotive market and trade exports amount to only 8 million vehicles. However, Japanese automakers such as Toyota, Honda, and Suzuki achieve a total annual sales volume of 24 million vehicles, with 16 million being produced and sold by overseas factories locally.
As of 2021, Japanese automakers have established a vast production network overseas, involving 179 vehicle and parts bases.
The benefits of direct overseas investment in factory construction are apparent:
Firstly, most directly, it can save the transportation costs associated with long distances, eliminating the need to purchase ships and worry about export routes and port congestion of vehicles.
Secondly, and most importantly, it can bypass trade and tariff barriers set by importing countries, facilitating more convenient integration into the local economy.Some time ago, the Beautiful Country was again clamoring to impose additional tariffs on our country's electric vehicles, and Europe also initiated anti-subsidy investigations against electric vehicles from China.
If we directly establish factories overseas, it would be beneficial for local tax revenues and job creation. Everyone can share in the profits, which can greatly reduce trade frictions and confrontations.
Another important reason for BYD's overseas expansion is that the domestic demand for electric vehicles is limited and cannot absorb the increasing production capacity year by year.
According to the forecast data released by the China Association of Automobile Manufacturers, the domestic sales of new energy vehicles in 2024 are expected to be 11.5 million units, an increase of about 2 million units compared to last year, with a year-on-year growth of 20%.
The growth rate in 2023 compared to 2022 was 36%, and the growth rate has clearly slowed down.
On the supply side, the production capacity of new energy vehicles from various car companies increases every year. In 2024, 20 mainstream car companies will compete for only an additional 2 million units, and the competition will be very fierce. The round after round of price wars that have continued from last year to this year have explained everything.
The domestic market for car companies is already a bloody battle.
BYD's sales volume in 2023 reached 3 million units, a nearly 70% increase compared to 2022. If the entire domestic market only has a 20% increase in 2024, it is clear that if a high growth rate is to be maintained, this increase can only be sought from the overseas market.
Under the current premise that Chinese new energy vehicles cannot enter the Beautiful Country, BYD's attention naturally turns to Europe.
Europe not only has strong purchasing power, but also the penetration rate of new energy vehicles is much higher than other regions, reaching about 25%. It is predicted that by 2030, 3 out of every 5 cars in Europe will be new energy vehicles.Why Hungary?
BYD has chosen Szeged, Hungary, as the location for its first European factory, which is expected to create thousands of jobs for the local area. Here's why:
1. Hungary is our long-standing ally in Europe. It was the first European country to join China's "Belt and Road" initiative, and we have a comprehensive strategic partnership with Hungary. Hungary is also the first country to establish a renminbi settlement with us economically, helping to promote the internationalization of the renminbi.
2. The automotive industry is a pillar of Hungary's economy with a complete supply chain. In 2019, Hungary's automotive manufacturing industry had a year-on-year growth rate close to 10%, accounting for nearly 30% of its manufacturing output value. 70% of the world's top 20 tier-one automotive suppliers have settled in Hungary and continue to expand their production scale. Half of the world's top 100 automotive parts suppliers have factories in Hungary, with thousands of indirect service providers. Currently, several Chinese battery manufacturers, including CATL, Sunwoda, and EVE Energy, have announced plans to invest and build factories in Hungary. Hungary's power battery production capacity is already ranked fourth and will soon rise to the second position, just behind China.
3. Hungary's geographical location is unique. It is situated in the heart of the European continent and serves as an important transportation hub. Finished cars can be conveniently transported to various European countries, and there is no tariff on the movement of goods among EU member states.For BYD's plan to establish its second automotive assembly plant in Europe, France has extended an olive branch. The French Finance Minister has stated that if BYD decides to open a factory in France, the country would be very welcoming.
In conclusion:
As the pacesetter of China's new energy vehicle (NEV) overseas investment and factory construction, BYD's counter-offensive to the traditional fuel vehicle's homeland signifies that China's NEV overseas strategy is enhancing in quality and accelerating in pace.
Many Chinese automakers are also actively planning their European layout. Chery has announced a $400 million investment to build a factory in Argentina, while Great Wall and SAIC Motors have also successively declared their intentions to establish factories in Europe.
China's new energy vehicle industry is seeking a more long-term global layout.