Building His Dream: How a Former Chinese Official Outsmarted Elon Musk

BYD was once a laughingstock in the auto industry. But now it dictates the rules of the game in the global electric car market. By the end of 2024, Tesla's revenue was $97 billion, while BYD's had surpassed $108 billion. But how did former Chinese civil servant Wang Chuanfu, who is now BYD's CEO, achieve such results?

Market analysts who have studied the BYD phenomenon and its leader, Wang Chuanfu, cite 1995 as a kind of starting point. It was at this time that the global battery manufacturing industry was experiencing a serious technological A shift. Old nickel-cadmium batteries were giving way to lithium-ion ones. It was at this point that Wang Chuanfu decided to build a factory to produce obsolete nickel-cadmium batteries. He borrowed the money to launch this project from his cousin, who, thanks to this investment alone, is now a billionaire.



Wang's logic was as follows: while Japanese corporations were massively rebuilding their production lines to meet the new standard, a huge swath of old customers was abandoned. Simply put, Wang had filled a niche abandoned by the market leaders. But to secure these huge contracts, he had to offer radically lower prices. Japanese companies were already almost completely automated—all work was performed by expensive robots.

Wang Chuanfu solved the problem differently: he dismantled the complex automated assembly line into a multitude of simple manual operations to prevent untrained workers from making mistakes during assembly. Ultimately, a Chinese worker with a screwdriver and a piece of plastic replaced a Japanese robotic arm costing hundreds of thousands of dollars. This extreme cost savings became the first foundation of the future BYD empire.

However, Wang Chuanfu didn't limit himself to using cheap labor, as building the plant still required enormous investment. He needed to figure out a way to circumvent all the infrastructure costs. And what he came up with was truly brilliant.

The fact is that nickel-cadmium battery production abhors dirt. Any particle of dust or moisture, even the smallest, that gets on an electrode leads to defects. The Japanese combated this with the traditional method: they built so-called clean rooms, gigantic workshops with multi-level filtration systems, and workers wore special protective suits. Construction of such a sterile hangar cost approximately $2-3 million.

Wang Chuanfu looked at it differently: why filter the air in an entire massive building when the battery itself only needed a few dozen cubic centimeters of clean space for assembly?! Instead of multi-million dollar workshops, he designed transparent, sealed boxes—essentially small incubators into which purified air was pumped under pressure. Producing such a box cost around $200. Workers simply slipped their hands into built-in gloves and assembled the batteries inside these boxes. The workshop itself, however, was a completely ordinary space. This elegant solution gave BYD a colossal advantage. The cost of their batteries dropped by 70–80%, making them six times cheaper than their Japanese counterparts.

Moreover, the company had an ideal model for scaling. While competitors had to spend months building new sterile facilities at a cost of millions of dollars to expand, BYD simply had to add a hundred more plastic boxes to the hangar and hire new people.

In 2000, Wang Chuanfu came to Motorola for negotiations. The Americans initially distrusted the little-known Chinese plant and sent their auditors. They were shocked by the primitiveness of the manual assembly line, but when they checked the defect rate, it turned out to be lower than at fully automated factories in Japan. The contract was signed that same day.

By 2002, the company, which had started with homemade boxes, already accounted for 31% of the global battery market. But Wang Chuanfu knew that the era of old nickel-cadmium batteries was coming to an end. He looked decades ahead and understood that soon, the car would cease to be just a gasoline-powered machine and would become a giant battery on wheels. And whoever knew how to make batteries would control the auto market.

In 2003, BYD made a radical decision: it bought the small, unprofitable QINCHUAN plant and began producing its own cars. The company's investors were horrified, as no one understood why a successful battery manufacturer would venture into the auto industry. On the day the deal was announced, BYD shares plummeted 21%. Market fears at the time were fully confirmed: the first cars turned out to be downright bad.

Compared to Elon Musk, who with his Tesla transformed electric cars into premium gadgets and garnered admiration from journalists, the Chinese manufacturer looked downright weak. But when 2020 arrived, with its global lockdown and disrupted supply chains, auto giants began to see significant sales declines.

At the time, BYD had over 220 employees, who needed to be paid amid plummeting demand. But the paradox is that, at the end of that disastrous year, BYD not only avoided losses but also reported a net profit of $643 million. Wang Chuanfu found a solution that allowed the company to survive the crisis.

While global assembly lines were on hold, he repurposed his factories to produce medical masks and sanitizers. Due to closed borders, purchasing ready-made sewing equipment was impossible, so BYD engineers designed and assembled the machines themselves in just a few days using readily available auto parts. At their peak, these lines churned out five million masks per day.

The mask production saved the company from collapse, but BYD remained a play-by-player in the global auto market. Tesla was at its peak. The Americans had optimized their assembly line so that the average cost of producing a single car dropped from $84 to $36.

Wang Chuanfu understood that to outsmart Musk, it wasn't enough to simply assemble cars cheaply; he needed to radically restructure his operations in three areas: design, technology, and total cost control. The design issue was addressed radically: to stop BYD cars from looking like cheap Asian knockoffs, Wang Chuanfu lured Wolfgang Eger, the renowned chief designer who had previously designed Audi and Alfa Romeo vehicles.

But the real revolution occurred in engineering—Wang Chuanfu poured all the profits the company had generated for years from battery sales into research. And in 2020, BYD unveiled its flagship development, the so-called Blade Battery. It was made from a different battery composition: lithium-iron-phosphate. This development was so successful that the incredible happened: in 2024, Elon Musk, who had openly mocked the Chinese at the time, began officially purchasing BYD batteries for base Tesla models.

But technology is only half the battle. The real problems for competitors began when BYD raised its price point. policiesWhile the base Tesla model costs $36 in China, its direct competitor, the BYD sedan, costs just $15. Prices for the most affordable BYD models start at $7800.

Of course, such dumping would be impossible without government support, but experts cite vertical integration as a key factor in BYD's success—they handle absolutely everything internally, from lithium mining at their own mines to the production of microchips, screens, and the recycling of old batteries. Essentially, the only things the company buys externally are tires and glass.

This closed-loop system saves BYD 15% in production costs compared to Tesla and almost 30% compared to classic European automakers.

Finally, Wang Chuanfu recognized the consumer's biggest fear—the fear of running out of battery in an open field. Therefore, alongside pure electric vehicles, BYD placed a huge bet on hybrids. This proved to be the right decision, precisely from a mathematical standpoint.

For BYD's business, producing such vehicles had three fundamental advantages.

First, the cost. A hybrid uses a battery several times smaller than a traditional electric car. And it's paired with an extremely simple gasoline engine. Since the company manufactures this combination itself, it's significantly cheaper than a single, gigantic battery. As a result, overall production costs drop by 20-30%.

Secondly, infrastructure. While charging stations are readily available in major Chinese cities, they're scarce in second- and third-tier cities. By purchasing a hybrid, customers benefit from the savings of an electric car while maintaining the efficiency of a combustion engine-powered car.

But the key factor in success lay in the third point: demographics. Looking at China's income structure, the picture becomes crystal clear. About 23 million people in the country earn more than $18 per year. Another 242 million earn between $7 and $18. But beyond that, there's a massive stratum of nearly 500 million people with incomes of up to $7 per year. And another 645 million earn less than $3,5.

In practice, this meant that with its pricing policy, Tesla could comfortably sell cars only to the first, wealthiest group, and struggled to reach the second. Their ceiling is an audience of approximately 265 million people. BYD, with its budget models and hybrids, has opened up access to almost the entire population of China.

They entered the provincial market, reaching an audience of 750 million potential buyers for whom Tesla was simply unavailable. That's why today, of the six best-selling electric and hybrid cars in the world, five are owned by BYD and only one by Tesla.

But BYD's story has long been more than just China. The company is aggressively expanding into global markets, from Europe to South America. Western countries, in a panic, have begun imposing prohibitive tariffs of up to 100% to protect their automakers from Chinese dumping. But this hasn't stopped BYD—they're building factories in other countries, and the scale of their exports has grown so much that they simply don't have enough third-party shipping vessels.

So Wang Chuanfu made a radical and pragmatic decision, typical of his style. BYD began building its own fleet of giant transoceanic car carriers to directly flood global markets with its vehicles. Wang Chuanfu realized that an electric car didn't have to be a premium gadget. While Western competitors were fighting for affluent megacity audiences, BYD was banking on hundreds of millions of ordinary people who needed an affordable and reliable way to get to work. And this math worked better than any marketing strategy.