Stella Li: Driving BYD’s EV story | Fast Forward episode 3 transcript  

Stella Li [SL]: Then they just learn from BYD what BYD do. They just copy. We make an announcement. They just copy. So, this style saying, I copied BYD, I can be successful. So, this gave us pressure, make us to be stronger.

Andrea Hotter [AH]: Welcome back to Fast Forward by Fast Markets. I’m Andrea Hotter and today we are hearing from someone at the center of the biggest shifts in global mobility.

It’s Stella Lee, the executive vice president at China’s BYD, one of the fastest growing electric vehicle and battery companies. Stella’s been with BYD nearly from the start, helping take the company global. She now oversees around 90 markets worldwide, giving her a front row view of how cars, batteries and hybrids are becoming intelligent tech-driven hubs.

She’s speaking to us from Paris, so when she says here, she means Europe, but let’s hear her take on what’s next. Stella Lee, welcome to Fast Forward.

[SL]: Yeah. Nice to see you again.

[AH]: Lovely to see you too. And thank you for doing this. I’m really looking forward to our conversation mostly ’cause you have reached such a unique position, not only as a woman in a very senior role in a traditionally male dominated field, but also within a major Chinese corporation, BYD.

So before we start, I’d love to hear a little bit about how your own journey unfolded.

[SL]: Yeah, so I need three days talking about the my own journey. Actually, I joined BYD when they are very small and the second year as a marketing promotion manager. So, my role is to tell BYD story to oversea, at that time, oversea business for us is a Taiwan distributor, Hong Kong distributor.

Then I took the company to Europe. Then also went to US and then built up an office in Japan, and the step by step really pushed BYD to be more international company. I still have a good memory like working with Motorola and qualify BYD as the first main Chinese battery supplier to Motorola and then Nokia. So then after that, we start to not only produce battery for them, but the whole component set, the whole phone set.

So in the end, we produce 60% of a reserve phone. We produce 60% of a Nokia phone. Then later on while in auto business. I was select to go to US, try to introduce BYD car to US. Then in the end, we build one of the largest electric buses manufacturing in California. So till today we still have 900 people working in California and then still running the electric buses.

Electric school buses over there. So, my journey in BYD is very exciting. Even for me, every day in BYD I’m learning, I’m learning something new and also will open the door for new market and the new business here. It’s a really, the big adventure for me and every day as a Warren Buffet mentioned really the dance to work. Yeah, so that’s a very short version about my journey in BYD.

[AH]: It’s fascinating. I could take those three days and speak to you, but I know you don’t have time. But it really interesting and I think also I can see your enthusiasm for the company coming through as we are speaking here as well. Now, you mentioned that growth in other areas because BYD is often described as an automaker, a car company, but structurally, as you just mentioned, you are operating across cars, batteries, and energy systems, so it’s not just cars.

How do you internally define what BYD’s becoming? Is it an automaker, is it a technology company? Is it something else?

[SL] We just name ourself is engineer company. Then it is a technology company, so we always tell everybody BYD is the company made by engineer, you know?

Well, we have 120,000 R&D engineer, and every day they are working on different innovation. The technology. We invent 52 patents per working days.

[AH] 52 a day.

[SL] Yeah. 52 patents per working days.

[AH] Wow.

[SL] So that’s the reason we say we are the engineer company. We are the green tag company globally.

[AH] That’s an incredible number.

[SL] yeah, that’s very different. So then you can see. Today you are seeing we are make the maybe one third of global smartphone, in the housing or the whole phone producer, and then we now is the leading company to deliver large scope of battery storage on the system level. And then we do home energy system.

We do the corporate use system, we do the solar panel, but then BYD is the leading player for electric buses, electric trucks, and uh, also passenger cars, of course, right? But we also do the sky rail, sky shuttle, and then, you know, during the pandemic, we need a lot of mask. Then BYD in one month would become the world largest mask producer.

So, I feel like sometimes if there’s something you need from us, BYD has a strong manufacturing capability, strong R&D engineer capability, we can produce this component in the next day. So that’s the power of BYD was technology, with a strong exclusion, strong manufacturing capability.

[AH] That vertical integration that you’re describing there and across multiple disciplines as well is really important because not only in terms of efficiency and cost, but also it creates some strategic advantages as we know.

Is there anything that, as I look in from the outside, I don’t necessarily see in terms of that unexpected, perhaps strategic advantage?

[SL] So I think even today a lot of investor, a lot of people did not realize BYD is the powerhouse. Why? Because who in the world has 120,000 R&D engineer? And who can make this fastest car within six months and then without anybody’s help, everything be done in-house with 3000 horsepower and our unit extreme become the fastest car in the world.

And then the same times they can do the lab test and the new burgeoning lab test, then you’ll need a lot of flexibility. So there’s nobody can do one car can do both. Purpose, what does this means? Means like you have one championship for driving, need a flexibility, but also championship for speeding like a 100 meters.

So this is two different scope requirement, but it’s happening in BYD. This is the power for innovation for the R&D, and then the same times BYD has a very strong integration capability. So give you very simple example during pandemic, a lot of company suffering about the cheap side shortage, but we are not, because we do all the integration in-house, then we can qualify the new vendor within two weeks.

Then we can like source different chip sets and then make a qualification within two weeks. So this is a kind of capability, can push a lot of innovation, can push a lot of industry change. And then the third capability, a lot of people’s overlooked is the manufacturing. Machinery capability. If you go to BYD facility, you’ll see huge CNC machine and very precise CNC capability during the pandemic.

When we do the mask, there’s no supplier to supply the equipment. Then we have to invent this mask production line. 98% of component were done by our sensor machine, including the small school because nobody supplied to you. A lot of facility closed down, right? So this is a kind of a strong capability is made up for BYD.

It means like one hand, we are crazy, our engineer are very crazy. Then they will do a lot of crazy innovation, but another hand we can realize this crazy dream to happen quickly. So this is the powerful BYD, but till today a lot of people did not realize BYD’s capability and the power in this area yet.

[AH] Absolutely. Well, let’s talk a little bit about the car side of things, the automotive side, for the purposes of this conversation here. Now, something that I’ve always really been fascinated by is how much legacy OEMs are struggling, and maybe it’s because they are running these two operating systems.

They’re trying to keep the traditional ICE, the internal combustion engine vehicles going, and they’re developing EV. Now you skipped the ICE part. How significant do you think that’s been as a structural advantage for the company.

[SL] I think we have two big advantages here. The first one, as you describe, because every single money, single cent we spend in R&D, we invest for future.

We invest for the EV and the PH EV tech and the autonomous driving technology here. We don’t have any burden for the history, but then compare with legacy manufacturer, they need to split money and spend some into the conventional car to keep their business running and some money, maybe half of the money to the new technology.

So. They cannot concentrate, put the old R&D into one target, one direction. Then this one make their R&D super expensive. So I think this is also the reason why there are so much behind on the technology, so much behind the current competition now. And the second is the decision-making procedure.

So in BYD, if the top leader decide to do something. In maybe half hour, this requirement will translate into the every front line and everybody working on this direction. You know, inside BYD when we meet, we always saying one word. Yes, I heard what you say. I respect your opinion. But this is the direction we decide.

So the moment you work out this meeting, zoom doesn’t matter. You agree or disagree. You need to follow, you need to do it. So we use execution like a measurement. The second for us, top leader, make a decision. It’s so simple, so easy. We don’t need to take like a one month, one week, even one year to make a decision if we found that this is correct.

We make a decision now, but we’re not always make a right decision. We make a mistake. But it’s okay. Then we’re going to make a change. We’re gonna to come back and crack our organization, so we are fast moving. This is a very high efficiency.

[AH] I’m really interested in how your international growth accelerated so quickly because you’ve been really central to that.

And I’m curious, when you look back, what have you learned about how expectations differ in all of those different regions? How different are your customer base expectations?

[SL] Very different. Yeah. I’m now in Europe, the customer here. You not only can have the beautiful, reliable car, you need to show them your plan for the after sales service and your after sales networking.

You need to really demonstrate your spare parts distribution. You are not only sell the car, you need to have a think about it in next several years, your service is the best or not. Second, then here. We’re talking about a used car, residual value, and then we need also talking about financing the residual value and also the monthly payment.

And the financial arm need to be strong. So even in LATAM in China, people just use cash or they own the car, they don’t lease the car. So here, financial, play more important role than in China and then than in LATAM country. So very different. And then you go to different country, it’s a totally different requirement, right?

And importantly, in Europe, it’s not just one market, it’s 34 countries, 34 different language, 34 different requirements. You need to really focus build markets separately.

[AH] Yeah, one by one. So, when you are looking at entering into a new market, Stella, what is the very first thing that tells you, yep, this is going to work for BYD? This will be a success for us.

[SL] So each time I go to the new market, I always have my people spend months to study what’s the market here and who are the top five, top 20 best selling model? Why? What’s the price? What’s the feature? Then what’s the charging infrastructure and what’s the gasoline price?

What’s the electricity? Price. So my background is always do the marketing research. So we need to finish this one before we jump to the market. But once we do jump in the market, we already have a very solid plan. We can be reaching our target now.

[AH] That’s the international market. Let’s talk a little bit about China because that’s a very interesting market. When you started all those years ago, obviously it was not dominated by anybody, but you really came up the ranks. There are more electric vehicle companies now developing and competition’s quite intense, I would imagine. I’m sure there’s innovation and pricing pressure.

How do you see that competitive dynamic evolving? How do you view the fundamentals of the current Chinese market?

[SL] Yeah, so Chinese market is super competitive. We call this bleeding competition here, but you need to survive. So in the past several years, BYD technology is super leading and then we run very rapidly.

Other competition, they did not catch up, and then maybe in the past two years they start to catch up. Then they just learn from BYD, what BYD to do. They just copy. We make an announcement, they just copy. So this store saying, I copied BYD can be successful. But this push us need to be much better to compete with them.

And then we need to deliver something to build up our protection waver. So this is give us pressure. Make us to be stronger. So for example, recently we just announced our fresh charging technology. We called five minutes ready, and then nine minutes is full. It’s from 10% to 97%. Just need nine minutes. Then even in cold temperature, we call the minus 30 degrees C.

Then you just need three more minutes. This means 12 minutes at the cold temperature. In Chicago, in Canada, in Norway, nobody has this technology to deliver such. Amazing performance and then this is a big game changer. This will make recharging as faster as refueling. So then this will really convince the funnel very stubborn gas customer to jump to electrification this number one.

Number two, a lot of people say, oh, how about the safety? But then we did this nail penetration. It’s not fully charged the battery with the metal needle. Penetrate the cell to see the temperature change and simulate abuse. Cross test what this happen, what’s the safety about the cell, about the car. We also did this while you do the flash charging with 1.5 megawatts like power to charging the cell.

Then we do this nail penetration. So our battery remain safe and did not change the temperature, did not catch a fire. We show this kind of result to everybody. This is really bring like a wow and uh, convince customer. This technology also delivers safety. And then we also did another, we called liability.

They saying, you do this one, you’ll lose capacity of the battery. No. We use our own money saying we offer flash charging battery to have a five to 10% more battery warranty. This is a kind of a game changer. Then our competition, they don’t have technology to catch up, to copy, because then this is a very strong protection waiver to prevent the copycat, just steal your technological copy.

They could not do that. They don’t have a capability to do that.

[AH] Absolutely. Now let’s talk about your exports internationally stellar, because I know you’ve just increased the target for overseas sales to around 1.5 million from 1.3. What kind of shift to exports internationally do you expect to see over time?

[SL] So last year, our overseas sales contribute more than 20% of the total revenue, but the profitability contribute more than 40%. I think by volume in next several years. Oversea can be 50% of total volume we’re doing now, and then we’ll maybe contribute more profitability for the whole group. So now we also, same times we’re building the local capacity.

Our manufacturing in Thailand is a store operating one year ago, and then our facility in Brazil start operating and then our Hungary facility was start operating by this Q3. We are doing the ramp up now. So everything you’ll see step by step. This one make it BYD. To not only be very strong like a electric car leader globally, but it would become more international and a more local company here.

[AH] Now you’ve also mentioned that you are open to partnerships or acquisitions, M&A. Do you think BYD could actually buy a legacy maker? What is it that would make a deal attractive or a partnership attractive to you?

[SL] We are, we’re open to talking about that. So if we will find a good chance, then we’d like to very openly evaluate the traditional legacy brand, especially the brand with history for represent this country.

We’re very interesting.

[AH] So you’d keep the brand name, in other words, you wouldn’t rebrand as BYD?

[SL] No. No, because, uh, we are Asian, we respect culture, especially for BYD. We respect culture. We want like this history. Yeah, we love the brand with culture, with history.

[AH] Now when we talk about brand, another way to build a brand, and we’ve seen a lot of car companies and engineering companies try to do this and build credibility is motor sports.

Now I have read a few things, heard a little rumor about Formula One, so can you tell me anything more about that?

[SL] So, yeah, we are lucky. Uh, we did meet with the team. We’re trying to understand all the motor sport, what they can bring the value to us, because for us, we are developing the new technology here.

We need to find a good platform to demonstrate our technology based on that platform. So we are very open to study this one. Myself, spend a lot of time to study and to understand what’s happening here.

[AH] Formula One is very fun. So I’ll watch this space. And when it comes to electrification as well, we’ve seen a lot of markets move at different speeds.

As you know, plugin hybrids, they’re often seen as a bit of a bridge between the gaps in those markets. How do you view hybrids?

[SL] Yeah, so BYD plugin, hybrid technology, we named DMI, dual mode Intelligence, actually has one strong, unique feature is a fuel saving our car. The sedan can achieve less than two liter per hundred kilometers range.

And then this is huge because this will save consumers money and this PHEV in the event mode, we can have between 50 to 200 kilometers range for our new flash charging. In China, we even have model can be one charge can run 400 kilometers. So in the daily drive, or in most of condition, it’s your electric car.

But at the same times, if you some day want to bring this car for travel to any place you want, then it’s PHEV. This one is a lower fuel consumption, PHEV. So this is a very important medium term products for the whole auto industry and the BYD in Europe now in oversea. Our PHEV is super popular because give you electric cars intelligence, and then performance and also everything you want as EV.

But the same times it solve your concern for the range and solve your concern for the flexibility. And then in the end it’s very important, saving you the money when the oil price is increasing. Now it’s save your money.

[AH] Yes. It’s very interesting. Some people think that they delay full electrification.

Some people think they help accelerate it because they make people feel more comfortable. It sounds like you think that it helps accelerate the move to PEV.

[SL] It helps a lot because we do have data in China and in Europe. The first buyer, they don’t jump to EV because they have a lot of concern, but then they jump to PHEV when they buy the new car, 60% PHEV.

Customer will jump to EV directly. So in Europe now, we’re still at the early stage, but we saw the PHEV is a very important role for attract people to really get the taste of the new energy cost.

[AH] And in terms of your volume at the moment, what is the percentage that is hybrid and that is pure electric. Do you know the breakdown?

[SL] Different regions are different. In China, two to three years ago it’s 60%. PHEV, 40% EV. Uh, even then later it’s 50 50. But since last year is 60% is electric car, 40% is. PHEV. It’s a flip over because flash charging and now we introduce flash charging. Now all the people jump to pure electric car, so maybe this will help in the future.

In China will be 70% is EV and then in Europe, most of country it’s depend on your, in South Europe and then depend on which country you are. So average is around 50 50. In LATAM countries. Same. 50 50.

[AH] Very interesting. Now, Stella, you’ve been spending a lot of time in Europe. You recently brought Denza to the international markets earlier in April as a more premium brand.

Can you tell me a little bit about what the ambition is here? What role Denza is playing in shaping your global position?

[SL] So we just had a wonderful event at the Paris Opera to official launching the Denza Z9TG to customer with green color.

So we brought the top CEO and lot of celebrity for this event. Then we want to unveiling, introduce this kind of a top leader who has inference to the market. Then our slogan for the whole market is called Technology Drives Elegance. We want to present the whole world use technology now.

As of today, we grow up with AI, with all the high tech intelligence world. Then technology going to redefine the elegance, redefine the premium, and then cause safety will redefine the premium and redefine really elegant. So with our Denza brand, we have the autonomous driving capability, and then we have flash charging capability.

Technology is a big game-changer. So our call is like Denza GT is more like a sporty sedan, and then with the EQ platform, so you can do the payroll parking head on. Then the tail glass in, and then you can do autonomous parking too. You can use your phone stand outside, then move your car to come to you.

So all this kind of technology is already there for a car. Then this also have the lid on the roof. Then you can really. Have the highest safety standard for this car. So it’s a very cool event and a very cool launching. So we receive a lot of heat and then we have an amazing global ambassador represent this car too.

So this, this make a lot of people really want to jump in the car, test drive the car, then it’s a huge success.

[AH] Well, I can tell you if there’s something that means I don’t have to parallel park my car ’cause I can do it on my phone. I’d be very happy about that. It’s the worst part of parking for me.

Stella, I know this is always a difficult topic for most people, but we can’t avoid talking a little bit about geopolitics because. The EV industry is increasingly shaped by policy and trade dynamics as well. I know you’ve previously said that some Western electric vehicle policies are a little bit shortsighted.

In general, do you think that protectionism is slowing innovation or do you think it’s just delaying inevitable competition?

[SL] So I think this kind of a policy, what delayed the adoption, but the worst things they did is bring a lot of confusing to the auto industry in the short term. You see, it’s a protect local industry, but in the long term, it’s really make the legacy brand or local brand lose competitiveness.

Because in the end, if you are not strong, if you don’t have technology, the consumer will not choose it, especially for young generation. They grow up with iPhone and high technology, and then today we’re talking about the old AI. So if the company did not have all this technology, the future consumer will abandon you.

So in the long term, I think it’s a harm for the auto industry. We’re a technology company, so I think winning consumers vote, winning consumers trust and understand consumer need, deliver to them is our focus. We made the decision. Everything is based on what’s consumer need, what’s the future, and how you can be competitive, how you solving people’s concern for the driving.

So once you focus on this, it becomes strong. And then short term. Protection and then short term policy will not bring big impact. Plus, BYD build manufacturing in Brazil, in Europe, in Turkey, in Thailand. Then we help the local economy to give the job opportunity and train their technology people. And then we also, we have R&D in Brazil.

We have R&D in Europe. So this help to train the engineer, so BYD become, be part of a local manufacturer. We become the part of a local like a company and offer the opportunity for R&D, for technology, also for a job. So then what’s the difference with others? There’s no difference

[AH] With all of that said. That’s very interesting because it makes me wonder if you look a little bit further ahead, do you think it matters most? Who builds the car? Who builds the battery? Who owns the customer relationship? What do you think is going to matter most in the future?

[SL] First who make which component doesn’t matter.

Even for BYD, we bought a lot of component from US vendor. You know, Nvidia is our partner for all the new technology here, and then Coca is our partner too. Google and Amazon is our partner. We use their cloud or then we use their median service. So. Who is the supplier? Doesn’t matter. You should have a manufacturer to choose who’s the best, and then they have freedom to choose.

Then they can produce the best quality call. Then in the end, what matter is deliver the technology and then deliver the customer a preferred the solution and understand their needs, and then give them the really true, good experience for the car. So thinking about we’re developing the car not only with autonomous driving, also the best customer experience.

You sit in the car, you can say, hello, BYD, I’m going home now. Then this will wake up your air conditioner time on, calculate the timing. You are arriving home and then you say, I’m going to eat dinner in the house. Then they will turn on the cooking machine and then have the food ready. When you are arriving home, so BYD build the car is become the technology center, your mobile office, and then with all the AI technology and the voice technology, then we link a lot of equipment together and then make it more intelligence and then make the people enjoy the technology world much easier, much more premium and the easiest way, this is our focus.

This is the most important feature in the future. Every car is no longer the transportation tool is your technology hub, your kind of control center. Then you spend more time in the car, you can enjoy the music. For example, Denza Z9GT will have 22 speaker in the car. We call this, you bring the theater. So then you can talk to AI to ask, what’s the news today?

What’s happening today? You can make a phone call without touch, anything, just sitting there. So that’s kind of a cool experience. We’ll focus on, we deliver to customer. And then who can deliver this one? Then who will be the winner in the future?

[AH] This sounds like technology and AI is really the way that car companies are going to have to go to survive going forward.

From what you are saying there as well. Stella, from your own perspective, and just before I know we’ve been talking, we’re gonna wrap up soon, but where are you personally most focused on ensuring BYD is moving in the right direction? What are you focused on getting right in this next phase of growth for the company?

[SL] So I used to spend a lot of time in Brazil. Now they’re running very good, so now don’t need the meet anymore. So now I focus on Europe. Our team is doing a fantastic job here. And then I think the next step I’m gonna to focus on more in the Middle East and the Africa region. And then to build a very strong presence over there.

And then it’s not only the car distribution, but including building the future like a R&D and also data center there and do the future manufacturing there.

[AH] Fantastic. You’re gonna be very busy by the sounds of it. So for Stella, just as a last question for you, if we were having this conversation again in five years, let’s say, what would you hope had changed the most for BYD, but also for the automotive industry?

[SL] So maybe at that time we going to have this interview in our car. Then we going to travel around the city, and then we can chat. Then it’s a driverless, the car will take us to the place. Then we can say, oh, by the way, we want some coffee in place. Then the car will listen to us and guide us. So then the call will become our comfortable place to meet people to have a conversation.

So then it’s not just the transportation, it is a meeting place and then we may together to watch some sport event inside the car. Yeah, it’s with our big screen and, uh, comfortably. So this is the kind of a totally different concept of transportation.

[AH] Stella, I think we should launch our own podcast in the car on the road with Stella and Andrea. That would be, uh, quite fun as well.

[SL] Exactly. Then nobody’s driving the car. It’s driving itself.

[AH] Exactly. I think I like the sound of that. Stella, this has been such a fascinating and fun conversation and I am so delighted. We got to chat today. You have been so open and you’ve got such an interesting story to tell.

I have really enjoyed it personally, so thank you very much.

[SL] Thank you, Andrea.

[AH] That was a fascinating discussion with Stella Lee. To dig into some of the key themes, I am joined by my colleague, friend, and resident expert, William Adams. Hi, Will. How you doing?

William Adams [WA]: Yeah, I’m great, thanks. And yourself?

[AH] Not too bad. Been traveling a little bit this month. I was in Santiago for SESCO and at the Safe Summit in Washington DC, which is wrapping up so busy times.

[WA]: Yeah, that’s good. I haven’t been traveling so much at the moment, but certainly we’ve had some very interesting markets. Yeah, a lot to be thinking about.

[AH] Yeah, and certainly a lot came out of that podcast. I mean, wow. So much information packed into a short amount of time. I don’t know about you, but the thing that stood out to me really was she wasn’t describing a car company.

She was describing something that seemed closer to an engineering platform or system. I mean, 120,000 engineers, 52 patents a day, and a business that spans batteries, vehicles and energy systems as well. I mean, that was absolutely huge.

[WA] It’s quite mind boggling really, isn’t it? I mean, you’ve got such an integrated company.

I think we all knew that it is a, a huge company and it’s grown very quickly, but they have become very integrated and looking, as you say, all the investment they’ve put in there into their green tech. It is a lot more than just an EV company. So they also look like they’ve got very big plans going forward as well.

And as I’m in the UK and you just see more and more BYD EVs on the road now. So they are definitely spreading geographically.

[AH] Yeah, that’s right. And I think when you talk about vertical integration, the first thing you think about is cost advantage, but. I think she was emphasizing speed, not just cost.

That whole idea, the example she gave of that two week chip substitution shortages and the ability to build an entire mask production line from scratch really quickly. The crazy innovation is the way she described it. That’s a fundamentally different operating model, isn’t it? How big a deal is that decision making speed that she’s describing there Will?

[WA] I mean, that was one of the mind blowing things about the masks during COVID and to be able to build all the machine and the production lines to do that all within house is just amazing. She also mentioned about sort of the decision making. Once the decision is made within hours, people are taking action on it and they obviously has a huge amount of momentum.

So yeah, they certainly seem to be a formidable force moving into this area. And again, it comes down to, I think we’re gonna see. A lot more of BYD, uh, around outside of China.

[AH] For sure that organizational ability to just deploy things faster than anybody else, not just having the technology in the first place.

[WA] And I think also just on that, I think a lot of companies, when they are building new production lines, they have to wait for those sort of critical parts, which they have to buy in from elsewhere. BYD can be making those and engineering those themselves, then that does give them a huge advantage to be able to get moving and get things into market quickly and therefore be sort of ahead of the competition.

I think that’s one of the other points she was mentioning, which was just people they see what BYD and they try to follow, but if BYD can push ahead so much faster, then they will struggle to catch up.

[AH] Yeah. She talked about. Bleeding competition, didn’t she? With competitors just basically copying them but forcing them to build a protection river, which is like a moat, I think. So it was really interesting kind of analogy, but it’s this forced innovation environment in China, which sounds almost Darwinian, doesn’t it? To a certain extent.

[WA] Yeah. I think one of the issues we’ve had outside of China in the sort of the EV area, is it, is this knowhow gap, and whether it’s talking about batteries or whether it’s talking about critical minerals or rare earth or whatever, it’s one of the biggest issues I think the West faces is it takes time to sort of build up that knowhow.

Even if we’ve had that knowhow 40 years ago, we seem to have lost it as more and more production went to China, and now to try and get back in there. It’s one of the fundamental issues I think we face. In trying to go down these sorts of electrification routes and building up our own local supply chains.

[AH] Yeah, I know. I absolutely agree. I think it was really interesting hearing her talking about the export market as well. That whole idea that 20% of their volume is 40% of their profit. I mean, that’s really striking, and it tells you that margins outside of China are just structurally higher. And it does imply, I’m not sure what you think, but less price competition, better positioning, and maybe this localization strategy.

So it’s almost like they are exporting their manufacturing model globally as well.

[WA] I think those numbers, you gave 20% of volume, but 40% of revenue, that’s to me, suggests that they also have an awful lot of room to be even more competitive, should they need to be.

But also, I think she said over the next few years, then they were expecting that on a volume basis to maybe be 50% of sales as oversea sales. So yeah, that just shows where their goals are and obviously, also providing a vehicle, which is high technology, and it looks like they’re doing an awful lot of research into working out exactly what the consumers want as well, and they’re providing that and they’re providing it quickly.

[AH] Absolutely. I thought it was really fascinating her framing of BYD’s battery and charging breakthrough. I mean, five minutes ready, nine minutes full. That’s a breakthrough. I think that literally positions electric vehicles as behaviorally equivalent to internal combustion engines, you know that you can charge it that quickly.

I just think it’s a really, really different new era that we would be entering for electric vehicles.

[WA] Yeah, I agree. And I think the speed of recharging has been one of the issues, and I think we’ve seen almost an initial, strong demand for battery only electric vehicles. And then I think as some of the sort of charging issues came, we then saw more growth in plug-in hybrid vehicles.

But if you can get that sort of growth of nine minutes to fully charge, that’s amazing. I suppose the key thing is. In markets outside of China is whether the actual infrastructure, the charging infrastructure is there. And it’ll be interesting to see whether there’s enough charging infrastructure and whether they will have to come into the market to actually provide more of that infrastructure as well.

So, I suppose that’s one of the issues that could still slow down the uptake.

[AH] Yeah. That infrastructure’s that final psychological barrier, isn’t it? What do you think, Will, about the decades of assumptions we have around battery size and chemistry? Because if you’ve got this ultra fast charging, does that reduce the need for these large battery packs and then continue to shift that energy density towards the cost, the lifecycle, the throughput aspects that the LFP type chemistries that BYD has heavily invested in are really, really dominating.

[WA] I think that’s a really interesting point. If you do have this fast charging and in time, you’ve got the infrastructure as well, then I think people won’t be so worried about having a large battery, which will then actually bring down the costs of these EVs as well to make them even more competitive against ICE vehicles.

Especially when you take all the other considerations that sort of the ongoing servicing charges and things like that are much cheaper as well. So yeah, I think. What do they call it? They call it flash charging. I think that is a key aspect to really make, uh, EVs that much more attractive and get rid of some of this range anxiety and to get rid of the relatively slow uptake of EVs in some climate in the current environment we’re in, where we’ve got rising oil prices as well.

Then I think as more people look to secure their energy supplies, so you don’t have queues at petrol stations and things. You’ve also got the advantage of that, so that’s gonna probably be another layer of demand for EVs as well.

[AH] Yeah. Incredible how one company is really shaping the commodity demand curve as well.

She was very clear that hybrids accelerate electric vehicle adoption, that data point, the 60% conversion rate from plugin hybrid to pure electric vehicle. It’s pretty hard to ignore. It definitely does suggest that hybrids, aren’t a detour slowing adoption down. Do you agree with that?

[WA] Yeah, I think the Fastmarkets, we’ve always seen the plugin hybrid as a stepping stone to full ate vehicles, so people might enter the market with a plugin because of the range anxiety and because while the charging infrastructure sort of takes time to actually get up to speed, but it’s interesting that people then they get comfortable with the EV plugin hybrid and then they sort of move on to an EV afterwards as well.

[AH] And as you mentioned before, she did basically say it doesn’t matter who builds the components, but who delivers the best experience is the one that comes out on top. That’s a really profound shift from industrial competition to systems integration and user experience. That real end game of having the car as a technology hub.

I love the sound of the car that she was talking about, that voice controlled ecosystem that’s integrated with home and your cloud and your AI. It’s like a mobile living space. Is that something that you think is gonna be important to people going forward?

[WA] Yeah. I mean, I think it will be, some people will like all that, but you know, as our habits change and as our houses change and the integration of all this tech, then yeah, I can see that happening whether we need it.

But I think it’ll just become the way of life. Um, is is the way, is the way I see it.

[AH] Yeah. It kind of aligns BYD in a way with the AIs, the Nvidia, the Amazon’s, the Googles of the world rather than the other OEMs to a certain extent as well. It’s an interesting concept.

[WA] I’m sure other OEMs are all planning that and going down those routes as well.

But again, I thought the other interesting comment was, you know, as if you are a traditional OEM and you still have to be investing in your ICE vehicles. Then you’re also investing in your electric vehicles. They then have to split their R&D and their investment, and that all makes it harder and harder for OEMs to just catch up and keep up with those who have just got an electric platform and have always just had an electric platform.

[AH] I have to admit, I’d rather like the idea of getting on the road with Stella or doing a podcast with her, but maybe we can take cars on the road in a BYD or another vehicle next time we do this.

That’d be fun. Maybe at the Formula One as well.

[WA] Yeah, the Formula One now. That would be interesting. Yeah. I mean, looking further ahead. It’s quite interesting in that if you go down that route where we just have autonomous cars, then you can think of the private ownership of electric vehicles might be thing of the past.

And it might be that we end up having car sharing more and you just order a car on your phone when you need it. It comes, picks you up, it takes you away, and then it’s free to go and do the same for somebody else in that EV event. In that if that sort of becomes the model, then we could see less cars on the road.

It could tie up less raw materials in cars and that could make the sustainability of, you know, the metals, and it would help reduce the concerns about shortages of supply as well, I think going forward. So again, that’s not gonna happen anytime soon, but it is probably something to be thinking about longer term.

[AH] It’s gonna definitely require that different industrial model that we’ve been talking about here. It’s just that broader ecosystem, the vertical integration. A lot of companies are really gonna have to step up to, to be able to compete on the same scale.

[WA] I think the other interesting point, which was the whole safety issue and how much they’ve invested in the safety, which I’m sure every EV manufacturer does as well, but I think that is, that’s a hugely important message for any EV manufacturer to be putting across there, and that will all help towards that sort of transition as well towards electric vehicle.

[AH] So I guess we have to wait and see where the real competition is headed, but I think it’s time now for this episode to come to a close. Unfortunately, my thanks to Stella Lee for a really engaging conversation and always to my colleague Will Adams for your insights. Thank you Will.

[WA] Thank you Andrea,

[AH] Thank you at home for listening.

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