Why a small China-made EV has global auto execs and politicians on edge

LIVONIA,
Mich.
–
A
small
electric
vehicle
is
having
a
big
impact
on
the
global
automotive
industry.

It’s
not
the
EV
itself
that’s
making
waves
but
its
price
—
and
its
potential
to
disrupt
domestic
auto
industries
around
the
world.

The
China-built


BYD
Seagull,
a
small
all-electric
hatchback,
starts
at
just
69,800
yuan
(or
less
than
$10,000),
and
reportedly
banks
a
profit
for
the
increasingly
influential
Chinese
automaker.

That
latter
point
—
EV
profits
where
U.S.
automakers
have
mostly
failed
to
turn
any
—
combined
with
the
expansion
of
Chinese
automakers
into
Europe,
Latin
America
and
elsewhere
has
automotive
executives
and
politicians,
from
Detroit
and
Texas
to
Germany
and
Japan,
on
edge.

The
Seagull
could
be
a
“clarion
call
for
the
rest
of
the
auto
industry,”
said
Terry
Woychowski,
a
former


General
Motors
executive
who
now
serves
as
president
of
automotive
at
engineering
consulting
firm
Caresoft
Global.
“It’s
a
significant
event.”

Though
the
Seagull
isn’t
yet
sold
on
U.S.
soil,
BYD
is
expanding
its
vehicles
globally,
and
some
believe
it’s
only
a
matter
of
time
before
more
China-made
vehicles
arrive
in
the
U.S.

There’s
fear
among
global
automakers
that
Chinese
rivals
like
the

Warren
Buffett-backed
BYD
could
flood
their
markets,
undercutting
domestic
production
and
vehicle
prices
to
the
detriment
of
their
own
auto
industries.

“The
introduction
of
cheap
Chinese
autos
—
which
are
so
inexpensive
because
they
are
backed
with
the
power
and
funding
of
the
Chinese
government
—
to
the
American
market
could
end
up
being
an
extinction-level
event
for
the
U.S.
auto
sector,”
the
Alliance
for
American
Manufacturing,
a
U.S.
manufacturing
advocacy
group,
said

in
a
report
last
month.

BYD
sold
1.57
million
battery
EVs
last
year,
up
from
just
130,970
all-electric
vehicles
in
2020.
That
sales
growth
was
enough
to
surpass
Tesla
to
become
the
world’s
largest
producer
of
electric
vehicles
in
late
2023.

The
rise
of
BYD
and
other
Chinese
automakers
led


Tesla
CEO

Elon
Musk
in
January
to
warn
that
Chinese
automakers

will
“demolish”
global
rivals
without
trade
barriers.

Bernstein
reports
BYD’s
growth,
including
sales
of
non-EVs,
has
come
by
shipping
more
vehicles
outside
China:
Overseas
markets
accounted
for
about
10%
of

BYD’s
more
than
3
million
sales
last
year,
doubling
that
share
from
the
beginning
of
the
year.

BYD
did
not
respond
for
a
request
for
comment.

Driving
the
Seagull
is
no
different
than
driving
the
Chevrolet
Bolt,
Nissan
Leaf
or
BMW
i3.
It
accelerates
quickly.
It’s
quiet.
It
has
nice-looking
screens
and
a
mix
of
plastic
and
soft
touch
points,
including
sporty
and
comfortable
seats.

The
Seagull,
also
known
as
the
BYD
Dolphin
Mini
in
Latin
America,
is
slightly
smaller
than
GM’s

now-discontinued
Chevrolet
Bolt
EV.

Its
reported
range
of
up
to
roughly
190
miles
on
a
single
charge
(or
250
miles
for
certain
models),
is
below
that
of
many
EVs
on
sale
today
in
the
U.S.
but
in
line
with
many
first-generation
all-electric
vehicles.
The
vehicle’s
top
speed
of
about
80
mph
and
just
74
horsepower
dwindle
in
comparison
with
most
EVs
currently
on
sale
in
the
U.S.

But
its
primary
differences
come
in
the
construction,
batteries
and
sourcing
of
parts,
according
to
Caresoft.

The
consulting
firm
tore
apart
the
BYD
Seagull
piece
by
piece
to
benchmark
the
small
EV
against
vehicles
from
other
startups
and
traditional
automakers.
The
Livonia,
Michigan-based
company,
with
several
offices
across
the
globe,
has
torn
down
and
benchmarked
more
than
30
China-built
EVs
from
the
likes
of
BYD,


Nio,
XPENG
and
others.

Caresoft
digitally
and
physically
analyzes
every
part
of
a
vehicle,
from
bolts
and
latches
to
seats,
motors
and
battery
casings.
It
then
determines
how
its
clients
–
mainly
automakers
and
suppliers
–
can
improve
efficiencies
and
cut
costs
in
their
products.

Its
initial
study
of
the
BYD
Seagull
found
it
to
be
efficiently
and
simplistically
designed,
engineered
and
executed,
but
with
unexpected
quality
and
anticipated
reliability.

“What
they
did
do
is
done
very
well,”
Woychowski
said.
“It’s
efficiently
done.”

For
the
price
it’s
a
well-equipped
vehicle.
(BYD
even
lowered
the
starting
price
of
the
vehicle
by
5%
earlier
this
month,
down
from
a
roughly
$11,000
price
earlier
this
year.)

Despite
the
cheap
price,
the
company
still
makes
“some
money”
on
the
Seagull
or
at
a
minimum
breaks
even,
Caresoft
CEO
Mathew
Vachaparampil
said
during

an
automotive
conference
hosted
by
the
Chicago
Federal
Reserve
in
January.

For
BYD
to
sell
the
Seagull
in
the
U.S.,
it
would
have
to
meet
U.S.
federal
vehicle
requirements
that
would
add
additional
costs
to
the
car.
But
the
EV
could
likely
still
arrive
on
U.S.
shores
for
tens
of
thousands
of
dollars
cheaper
than
the
current
average
price
of
an
EV
in
the
U.S.,
which

Cox
Automotive
reports
is
more
than
$52,000.

BYD
last
month
announced
it

would
begin
selling
the
Seagull/Dolphin
Mini
EV
in
Mexico
for
358,800
pesos
(or
about
$20,990).

BYD
has
found
success
in
its
battery
technology;
internal
sourcing,
also
known
as
vertical
integration;
and
production
of
parts,
according
to
Caresoft.
Most
notable
is
BYD’s
development
of
lower-cost
battery
technologies
that
are
far
cheaper
to
manufacture
than
lithium-ion
batteries
commonly
used
in
U.S.
EVs.

BYD,
which
stands
for
Build
Your
Dreams,
first
pioneered
its
“Blade”

battery
technologies
in
smartphones
and
has
since
grown
into
one
of
China’s
most
well-known
automakers.

Its
focus
on
vehicle
efficiencies
is
reminiscent
of
U.S.
EV
leader
Tesla,
which
has
likewise
been
able
to
drive
down
the
cost
of
its
vehicles
over
the
years.

Traditional
automakers
are
only
now
attempting
to
emulate
some
of
Tesla’s
processes
such
as
its
gigacasting
manufacturing
process
and
vertical
integration
of
crucial
parts
such
as
motors,
batteries
and
other
components.
Tesla
is
also
quick
to
adapt.

The
Tesla
Model
3,
for
example,
no
longer
has
a
floor.
Instead,
the
car’s
highly
protected
battery
case
takes
the
place
of
a
traditional
vehicle
body
at
the
base.
That
type
of
change,
enacted
at
Tesla
over
the
last
several
years,
wouldn’t
typically
take
place
at
a
traditional
automaker
until
a
full
redesign
of
a
vehicle.

BYD
is
similarly
quick
to
adapt.
The
company
has
quickly
rolled
out
new
and
updated
products.
It’s
also
rapidly
established
manufacturing,
as
it
has
its
eyes
set
on
factories
in
Thailand,
Brazil,
Indonesia,
Hungary,
Uzbekistan
and,

potentially,
Mexico.

Add
in
other
advantages
such
as
government
support,
lower
labor
costs
and
rising
production
capacity,
and
the
company
poses
a
growing
threat
to
global
counterparts.

BYD’s
rise
comes
at
a
precarious
time
for
global
auto
industry
dynamics.

While
China’s
automakers
expand,
America’s
traditional
automakers
have
shrunk
in
both
their
domestic
market
and
China.

Their
decline
in
the
U.S.
has
come
with
the
arrival
of
Japanese
automakers
such
as
Toyota
Motor,
Nissan
Motor
and
Honda
Motor,
as
well
as,
more
recently,
South
Korean
auto
giant
Hyundai
Motor
and
its
Kia
unit.

The
so-called
Big
Three
U.S.
automakers
—
GM,


Ford
and
Chrysler,
now
owned
by


Stellantis
—
have
watched
their
U.S.
market
share
deteriorate
from
75%
in
1984
to
about
40%
in
2023,
according
to
industry
data.

Politicians
in
the
U.S.,
concerned
about
their
local
auto
industries,
have
taken
aim
at
Chinese
imports
and
lawmakers
in
Europe

have
launched
a
probe
into
the
rise
of
China-made
EVs.

“We
are
very
concerned
about
China
bigfooting
our
industry
in
the
United
States
even
as
we
are
building
up
now
this
incredible
backbone
of
manufacturing,”
Energy
Secretary
Jennifer
Granholm
said
March
6
during
a

discussion
panel
at
an
Axios
event.

Republican
Sen.
Marco
Rubio
of
Florida
has
proposed
sharply
boosting
tariffs
on
Chinese
vehicle
imports
by
$20,000
per
vehicle
to
stop
the
country
“from
flooding
U.S.
auto
markets.”

Currently,
Chinese-built
EVs
are
subject
to
a
27.5%
tariff
when
imported
into
the
U.S.
That
includes
a
2.5%
tariff
that
generally
applies
to
imported
cars
plus
an
additional
25%
tariff
introduced
by
the
Trump
administration
in
2018
on
China-made
vehicles.

Chinese
automakers
could
still
build
in
Mexico,
though,
and
import
vehicles
to
the
U.S.
from

there
through
the
USMCA,
formerly
the
North
American
Free
Trade
Agreement,
or
NAFTA.

However,
former
President

Donald
Trump
–
the
front-runner
among
Republicans
in
the
2024
presidential
race
–
on
Saturday
suggested
instituting
a
100%
tariff
on
cars
made
in
Mexico by
Chinese
companies, should
he
be
elected
to
a
second
term.

“What
we’ve
seen
over
time
is
automotive
manufacturers
eventually
enter
all
the
markets
that
matter
…
Ultimately
the
Chinese
will
come
to
the
U.S.,”
said
Marin
Gjaja,
chief
operating
officer
for
Ford’s
EV
unit,
during
a

recent
interview
with
CNBC.

Gjaja
said
while
Ford
can’t
control
regulations
or
Chinese
expansion,
it
can
“get
really,
really
competitive
on
the
technologies
that
customers
want”
and
get
more
efficient
to
win
customers.

To
compete
with
Chinese
brands
such
as
BYD,
Woychowski
contends
traditional
automakers
must
learn,
unlearn
and
change
quickly.

He
said
companies
such
as
the
Detroit
automakers
each
have
a
century
of
procedures,
standards
and
other
workflows
that
they
must
rethink
to
better
compete
against
Chinese
automakers
before
vehicles
such
as
the
BYD
Seagull
land
on
U.S.
shores.

“You
have
to
learn.
You
have
to
unlearn
and
you
have
to
do
it
quickly,”
he
said.
“Because
you’ve
been
doing
something
for
100
years,
doesn’t
mean
you
should
keep
doing
it.
It’s
no
longer
appropriate.”

–
CNBC’s


Evelyn
Cheng

and


Dylan
Butts

contributed
to
this
report.