In Depth: How BYD Lowered the Bar for Buying a Smart Car in China

In early 2023, BYD Co. Ltd. Chairman and CEO Wang Chuanfu expressed skepticism toward autonomous driving, labeling it as "hokum." This perception underwent a shift on February 10, when BYD, a prominent Chinese automaker, unveiled 21 budget models featuring the God’s Eye intelligent driving system. The price range for these vehicles is from 70,000 yuan ($9,650) to 200,000 yuan, making them more accessible to middle-income consumers interested in smart car technology. This move has lowered the cost of entry into the smart car market in China, a significant point in the midst of an ongoing price war among automakers. [para. 1][para. 2][para. 3]

BYD’s strategic advantage lies in its high degree of vertical integration, allowing it considerable control over its supply chain. This approach has been pivotal in enabling BYD to surpass SAIC Motor Corp., making it the leader in car sales by 2024. Data revealed BYD held a 34.1% share of China’s new-energy passenger vehicle (NEV) market by the end of the previous year, driven by sales surpassing 3.7 million cars. Predictions indicate NEVs will constitute approximately 60% of new car sales in China this year, rising from 47.6% in 2024. To maintain its competitive edge, BYD has implemented cost-control strategies, like requesting a 10% discount from suppliers starting in 2025. This self-sufficiency strengthens its negotiating leverage in supply agreements. [para. 4][para. 5][para. 6]

On the technological front, BYD's God’s Eye system houses three versions: DiPilot 600, 300, and 100. The DiPilot 600, designed for luxury brand Yangwang, and DiPilot 300, for high-end Denza and some BYD models, feature navigation-assisted capabilities usually seen in Level 2 assisted-driving systems. DiPilot 100 caters to most BYD-branded cars, offering features like smart parking and navigation-assisted driving using a cost-effective sensor suite. Plans to add a commute feature to DiPilot 100 by the end of 2025 intend to enhance usability for urban commutes. This advancement pressures competitors to match the availability of such features at a comparable price point. [para. 10][para. 11][para. 12]

Despite advancements, challenges persist. BYD’s expanding venture into autonomous driving is met with formidable domestic and international rivals like Tesla, XPeng, and Huawei. Tesla is introducing its Full Self-Driving (FSD) beta, advancing toward Level 3 autonomous technology. Meanwhile, Huawei’s Advanced Driving System (ADS) continues to evolve, and XPeng is set to launch new smart driving features similar to Level 3 technology. These developments illustrate the intensely competitive environment in China’s smart car sector. [para. 18][para. 19][para. 21]

Financial pressures are another obstacle. For instance, Huawei offers financial incentives to bolster sales, highlighting the ongoing price competition within the market. BYD faces constraints due to its high liability-to-asset ratio, standing at 77.9% by the third quarter of 2024, which exceeds that of other traditional and emerging automakers. This situation results from heavy investments to expand production capacity. Observers suggest that while leveraging debt is typical for growth, BYD’s supply chain financing system may obscure true debt levels, urging a rethink to mitigate risk. [para. 28][para. 29][para. 31]