EV Rise Helps BYD Overtake Geely to Become China’s Car King

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EV Rise Helps BYD Overtake Geely to Become China’s Car King

By Linda Lew | Bloomberg Business Week | April 3, 2024 

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Few outside of China had heard of any of the country’s domestic carmakers until Geely broke through in the 2010s. Domestically, cars from Zhejiang Geely Holding Group Co. were among the nation’s bestselling. And globally, the empire of Geely and its billionaire founder, Li Shufu, spanned stakes in Sweden’s Volvo, Germany’s Mercedes-Benz and Malaysia’s Proton, as well as a partnership with France’s Renault. Geely is best known for the acquisition of Volvo Cars in 2010 and its remarkable turnaround. This success showed for the first time that a Chinese manufacturer could run an international brand as well as its European or American peers.

But in only two short years, by 2023 the automaker was eclipsed by BYD Co., the upstart that zoomed past Geely to become the world’s largest seller of electrified vehicles—and the largest car brand in China. BYD wasn’t even among the top 10 largest producers by shipments in the country as recently as 2021, when state-owned manufacturers’ joint ventures with Volkswagen AG and General Motors Co. topped the list, followed by Geely, data from the China Passenger Car Association showed. Then the country’s embrace of EVs changed everything.

Geely is now racing to catch up to BYD in battery-powered vehicles and to maintain its lead in exports beyond China. Whether it can succeed is far from certain. But its story can be a lesson for other legacy automakers trying to adapt to a world moving toward zero-emissions cars.

Geely is introducing more EVs. It’s also investing heavily in connected car technologies, auto semiconductors and satellites. It’s spent more than 200 billion yuan ($27.7 billion) on research and development in the past 10 years.

The ascent of BYD, which started as a battery maker, came after years of research in EV and plug-in hybrid technology. For most of the past 10 years, its R&D spending exceeded profits. In 2019 it posted 1.6 billion yuan in net income but invested more than 8 billion into R&D. Government support played a part in sustaining BYD through its early years, but China’s national EV subsidies were phased out in 2022.

BYD has been working on its flagship DM-i hybrids platform for almost 20 years. The fourth generation of the technology—which allows a vehicle to run on electric batteries until they’re depleted, at which point a gasoline engine kicks in, helping to overcome anxiety over driving range—became a smash hit after its introduction in 2021.  When BYD’s DM-i plug-in hybrid came out a few years ago, it blew the competition.

Geely Auto in 2015 set a goal of having electrified vehicles make up 90% of its sales by 2020, but it failed: Only 5.2% of its 2020 sales were EVs and plug-in hybrids. A lot of Geely’s growth has come through a combination of acquisitions of foreign brands and the introduction of newer nameplates in the Chinese market. As a result, it’s created a portfolio of brands that have a fair amount of overlap, which seems more complicated to manage.  On top of that, Geely seemed to miss out on the investment frenzy that took the EV sector by storm about five to six years ago, which leaves them with a portfolio of newish brands that need significant investment but little capital to feed them.  Geely should dump internal combustion engine cars in China as soon as possible, reconcile its portfolio of brands and continue to invest in R&D, and launch new products to keep up with and outlast the other players.

Geely management doesn’t consider its broad portfolio to be a problem.  Geely aims to be the Volkswagen of the EV era—referring to the German auto group whose brands range from VW and Seat to Porsche and Bentley.  As both Geely and BYD aggressively target expansion in global markets, Geely may have an advantage because of the foreign brands it owns.  Meanwhile, parts of Geely’s empire are faltering.

3 key takeaways from the article

1. Few outside of China had heard of any of the country’s domestic carmakers until Geely broke through in the 2010s. This success showed for the first time that a Chinese manufacturer could run an international brand as well as its European or American peers. But in only two short years, by 2023 the automaker was eclipsed by BYD Co., the upstart that zoomed past Geely to become the world’s largest seller of electrified vehicles—and the largest car brand in China. 
2. Geely created a portfolio of brands that have a fair amount of overlap, which seems more complicated to manage.  On top of that, Geely seemed to miss out on the investment frenzy that took the EV sector by storm about five to six years ago, which leaves them with a portfolio of newish brands that need significant investment but little capital to feed them. 
3. Geely management doesn’t consider its broad portfolio to be a problem.  Geely aims to be the Volkswagen of the EV era.

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Topics:  Strategy, Electric Vehicles, China, BYD, Geely