Elon Musk is too arrogant: He believes that Tesla is firmly on the ‘king’ without knowing a fledgling company is about to take the throne, also known as the ‘Toyota of electric cars’

Elon Musk claimed to be unable to see the second-placed competitor after Tesla using a telescope, but it seems he was wrong.

Toyota CEO Toyoda Akio announced on January 26 that he would step down and hand the “keys” at the world’s largest car manufacturer to Sato Koji – his close aide. To understand the reason for this move, people probably need to review a video from 2021. In that video, these two men drove Toyota’s first electric Lexus and Toyoda Akio was at the wheel.

First of all, it is clear that Toyoda is quite skeptical about electric vehicles (EVs): He says that he feels that electric cars are quite heavy to drive. Then he put his feet on the floor and when the speed of the car increased, he began to cheer, as excited as a pilot in the blockbuster Top Gun. This is remarkable – but appropriate. In the eyes of many people, Toyota is a laggard in the field of electric vehicles. In announcing his decision to hand over the CEO job to Sato, who is 13 years younger than him, Toyoda made it clear that it was time to hand over to a new generation to bring Toyota up to speed into the electric vehicle era.

Many of the articles surrounding Toyoda’s decision suggest that it is a move in response to competition from Tesla. Tesla may be the largest electric vehicle manufacturer in the world, and according to its CEO Elon Musk, Tesla is in a position to see the No. 2 competitor with a telescope. However, it seems that Elon Musk has ignore a fledgling company emerging in China.

TOYOTA OF ELECTRIC VEHICLES

That fledgling company is BYD – an electric car company that this year is likely to overtake Tesla as the world’s largest net seller of electric vehicles. BYD is both Toyota’s electric vehicle partner in China and an emerging global competitor. More importantly, BYD is proving to have many of the characteristics that have made Toyota for decades the most successful auto company on the planet.

The Economist points out that both BYD and Toyota have many similarities. They don’t have to have roots in the auto industry. Toyota started out as a textile company. Meanwhile, BYD’s early products were batteries and cell phones. From the beginning, they were so far behind their global auto competitors that they were forced to think of a completely different path. There is a period, Toyota intends to test replacing gasoline with … charcoal.

Meanwhile, BYD is using its battery experience to focus on electric and plug-in vehicles, which are known in China as new energy vehicles. Both have honed their skills well locally, and when it comes to global, they start in relatively underdeveloped car markets first.

However, the attempt to make cars quickly grew into their own empire. During the six-year period from 1955 to 1961, Toyota’s exports grew more than 40-fold and they have not looked back since.

Meanwhile, BYD says it took 13 years to produce the first 1 million electric vehicles. But it only took 1 year to reach the 2nd 1 million and 6 months to reach the 3 million mark. They have operations in 12 countries and say they have production facilities in many locations from Brazil to Hungary, India… They also make electric buses in California. Currently, BYD is the world’s 2nd largest manufacturer of lithium-ion batteries, after CATL. This creates an advantage for global expansion. Tu Le – an expert from consulting firm Sino Auto Insights does not hesitate to call BYD the “new Toyota”.

In fact, Toyota has been a manufacturing giant in the industry for decades. “The Toyota Way” is a combination of relentless innovation, lean manufacturing and unparalleled supply chain management. BYD is doing things differently. They are one of the most vertically integrated companies in the world, making everything from batteries to semiconductors by hand. But like Toyota, they have an efficient model. Le uses a popular Silicon Valley term “GSD” (Get Shit Done) to describe BYD’s manufacturing anomaly. GSD means “Doing anything must be focused, no matter how bad it is, it must be completed”.

Taylor Ogan, the owner of the investment firm Snow Bull Capital, who also holds a stake in BYD, said he was amazed at the level of automation the electric car company has achieved. “The only human presence you see in BYD factories is in end-of-line inspection or robot repair. BYD is automating exactly what “Toyota did”. Warren Buffett – investment legend and fan of this company – he is a major shareholder of BYD.

Efficiency is the power source of profitability for BYD. The company provides very little updates on its operations. However, on January 30, they released a preliminary forecast of net profit in 2022. Accordingly, the number is around $2.4-2.5 billion – which is 5 times larger than with 2021. Based on this, Ogan says that his calculations show that last quarter, gross profit margin in BYD’s auto business surpassed Tesla, which is still an automaker until now. best profit bowl in the world.

Ogan believes this reflects the fact that BYD, which started out as a tea-belt plug-in car maker, is gradually increasing sales of high-margin, premium electric vehicles. But unlike Tesla, they have a variety of models and designs and release new models regularly.

The big unknown is the US, where BYD is not currently available. This is not the first foreign automaker to fear a backlash in the US market. Toyota, like other Japanese automakers, fell victim to the US-Japan trade war in the 1980s. With the Sino-US competition intensifying, the geopolitical pressures BYD put on BYD face is enormous.

They were expected to make a big splash at the consumer electronics show in Las Vegas this January, but that didn’t happen. One major obstacle to entering the US, Ogan said, are tariffs, dating back to Donald Trump’s presidency, on Chinese-made EV components, such as batteries.

But in the end, the US launch of BYD could be unavoidable. Despite all the geopolitical strife, American carmakers still depend on vehicle sales in China – the world’s largest auto market. What’s more, BYD can offer electric vehicles for less than $40,000 – suitable for mass production. And even if it fails, BYD may seek Toyota’s help to break into the US market, especially if its joint venture in China takes off.

For now, it’s safe to say that Toyota has identified many of the challenges posed by BYD. Like Toyota, BYD doesn’t brag about power and only silently proves it with numbers. That’s another huge difference between BYD and Tesla!

Source: The Economist