• Affordable Chinese electric vehicles are flooding into global markets — but not the US.
• Tesla rivals BYD and Xpeng are bringing their ultra-smart EVs to a host of new countries.
• High tariffs have locked them out of the US, meaning American drivers may be cut off from cheap EVs.

Tesla's China headache might be about to become a global one.

Elon Musk's automaker has come under increasing pressure in the world's largest car market from local EV giant BYD and its rivals, who are now competitive with the Model Y manufacturer on both price and technology.

In January, BYD sold nearly double the number of EVs as Tesla, with the US carmaker's sales slumping by 11% from the previous year.

BYD increased the heat last week with its announcement that "God's Eye" self-driving tech would be offered in nearly all its vehicles, including the $9,500 Seagull. Tesla is still waiting for regulatory approval for its rival FSD system in China.

The most concerning thing about BYD's sales for Tesla — and other Western automakers — is where they're coming from.

BYD sold 66,000 vehicles outside China in January, a record figure that suggests the company's efforts to become a global powerhouse are bearing fruit.

The EV maker, which once received backing from Warren Buffett, beat Toyota to become Singapore's top-selling car brand last month, and overtook Tesla's sales in the UK for the first time.

With BYD's affordable electric and hybrid offerings gaining traction overseas, other Chinese EV players are beginning to follow their lead — a move that analysts and industry execs fear could export the so-called "hypercompetition" of China's home market globally.

European offensive

The debut of Chinese EV startup Xpeng in the UK was no ordinary car launch.

Tech executives and delegates from the Chinese embassy swanned through a grand hall within sight of Tower Bridge that was once a historic fish market, munching canapes and mingling around Xpeng's X2 flying car on display alongside its electric sedans and SUVs.

It's a sign of the tech company ethos that Xpeng's executives were keen to highlight as they announced the company's first UK launch: the G6 SUV, priced about £6,000 ($7,500) less than Tesla's Model Y.

The UK is Xpeng's newest market. It has also launched in France, Germany, and Italy in recent months. President Brian Gu said the company plans to expand its presence to more than 60 countries and regions in 2025.

"Our ambition is to be the No. 1 Chinese premium electric vehicle brand overseas," said Gu, adding that he defined "premium" EVs as costing more than $41,000.

For brands like Xpeng, which still records big losses and lags well behind BYD in China's highly competitive EV market, international expansion may be a necessity rather than a luxury.

"The China market is ultra-competitive, so it's going to be really difficult for them to carve out huge market share gains in the short-term because of the price war," Tu Le, managing director of Sino Auto Insights, told Business Insider.

While the UK has not imposed tariffs on Chinese electric vehicles, making it a tempting target for expansion, the European Union followed the US last year in imposing import taxes of up to 35% on EVs made in China.

That has not stopped brands like Nio and Leapmotor, which has a partnership with Jeep-owner Stellantis, from joining BYD and Xpeng in moving into the continent.

Their expansion has put local automakers on notice. Volvo Cars CEO Jim Rowan told BI that he doesn't believe EU tariffs will stop Chinese EV companies from becoming major players in Europe.

The boss of the Swedish carmaker said the influx of Chinese vehicles into Europe, alongside brutal competition in China, will force local automakers to up their game.

"As the non-Chinese brands lose market share in China, they're going to have to find market share somewhere else. That means they're going to become more competitive in their home markets and global markets around the world," Rowan said.

US risks being left behind

One market that China's EV champions are unlikely to target anytime soon is the US, thanks to 100% tariffs on imported Chinese vehicles introduced by the Biden administration.

These import levies mean the US has had to watch as other regions like Europe get access to affordable electric models like the $32,000 BYD Dolphin, and local brands like Renault launch their own mass-market EVs to compete.

The absence of this trend has helped keep US electric vehicle prices high, with customers paying around $8,000 more on average for an EV compared to Europe. This raises fears that US consumers could be cut off from accessing affordable electric models.

"On the current trajectory, the US is going to get cut off. There are 95 countries outside China where you can buy BYD cars, and we can't," said Tu Le.

Legacy US automakers have been slow to shift to electric vehicles, with companies like Ford and General Motors rolling back ambitious EV strategies over the past year.

President Donald Trump has also vowed to remove emissions targets and scrap federal support for electric vehicles, a move that will likely slow the transition to electric vehicles.

Tu Le warned that a lackluster EV industry in the US risked making the American auto industry less globally competitive, hurting the ability of the likes of Ford and General Motors to compete with their Chinese rivals overseas.

"I'm hopeful we can change the culture and bring products to market that are competitive globally, not just in the United States. As things are, it feels like the Detroit two are effectively on their way to becoming single-market companies," he said.

• DeepSeek has shaken the global tech industry and sparked an outpouring of national AI pride in China.
• Now, the country's EV giants are jumping on the DeepSeek bandwagon.
• EV firms BYD, Geely, and Great Wall have all announced plans to put DeepSeek's AI models into cars.

DeepSeek has sparked an outpouring of national AI pride in China, and now the country's EV giants are racing to add it to their vehicles.

Tesla rivals BYD, Geely, and Great Wall have all said they will integrate DeepSeek's AI model into their in-car software in recent weeks as they look for an edge in China's tech-obsessed electric vehicle market.

DeepSeek caused upheaval in the global financial markets and shaved nearly $600 billion off the value of chipmaker Nvidia when it released its R1 reasoning model last month.

The Chinese hedge fund-turned-AI lab's model matches the performance of equivalent AI systems released by US tech firms like OpenAI, despite claims it was trained at a fraction of the cost.

Its success has seen China's EV companies — which also have a track record of upsetting their Western rivals with low-cost offerings — pile in on the buzzy AI model.

At an event announcing a new advanced autonomous driving system on Monday, Tesla nemesis BYD said it would incorporate DeepSeek's AI into its Xuanji vehicle software and assisted driving tech to improve its vehicles' AI capabilities.

BYD rival Geely, which owns the EV brands Zeekr and Polestar, is integrating R1 into its Xinrui AI model, according to local media reports.

Automaker Great Wall confirmed to Reuters last week that it had incorporated DeepSeek's AI model into its "Coffee Intelligence" connected vehicle system. Legacy brand Dongfeng has also said vehicles made by its joint venture with Nissan would feature DeepSeek's models.

DeepSeek's rapid ascent has turned the company into a poster child for China's AI efforts, with local media hailing CEO Liang Wenfeng as the "AI hero of Guangdong."

Adding the latest AI models is motivated by more than national pride for these automakers, however. Chinese customers are increasingly demanding so-called "EIVs" packed with AI technology, self-driving tech, and advanced in-car software.

Geely, Great Wall, and Dongfeng did not respond to requests for comment from Business Insider, sent outside normal working hours.

Chinese electric vehicle maker BYD unveiled “God’s Eye,” an advanced driver assistance system that will be install on its entire model lineup, including its $9,600 Seagull hatchback.  BYD founder Wang Chuanfu said at a live streamed event Monday that “we’re entering an era where autonomous driving is for everyone,” according to The Financial Times.  God’s […]

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• BYD is going all-in on autonomous driving as it looks to take Tesla's EV crown.
• The Chinese automaker shared a major expansion of its "God's Eye" intelligent driving system on Monday.
• The $9,500 Seagull EV will also get "high-level" intelligent driving features, a BYD exec said.

BYD is battling Tesla for the title of the world's largest EV company — and now the Chinese upstart is coming for Elon Musk's self-driving crown.

The electric vehicle giant unveiled a massive expansion of its intelligent driving system on Monday as it seeks to fight off brutal competition in the world's most competitive car market with a new lineup of high-tech vehicles.

BYD said it would include its "God's Eye" self-driving tech, which enables features such as remote parking and autonomous overtaking, on its entire model lineup.

The company's shares on the Hong Kong Stock Exchange hit an all-time high after the announcement, rising 4% on Tuesday morning.

Prior to the event, BYD executive Zhang Zhuo said the company would release 11 models with BYD's "God's Eye" self-driving tech across its Ocean brand.

The ultra-cheap BYD Seagull, which currently starts at 69,800 yuan (around $9,550) in China, will also get "high-level" intelligent driving features, Zhuo wrote in a post on the Chinese social media site Weibo.

BYD general manager Lu Tian, meanwhile, said that the company's six main brands — named after Chinese imperial dynasties — would be fully upgraded with the new technology.

The automaker also said it would integrate home-grown AI models built by Deepseek into its vehicles, joining several of its local rivals in partnering with the Chinese AI phenomenon.

BYD's move into autonomous driving comes as Chinese carmakers increasingly shift toward "EIVs," or electric intelligent vehicles, outfitting their cars with increasingly advanced technology as they fight for a slice of China's hypercompetitive EV market.

Smartphone maker Xiaomi's SU7, which starts at around $30,000 and comes with intelligent driving assist and voice control technology, has smashed sales targets since it launched last year.

Other manufacturers, such as startup Xpeng, have rolled out "AI-defined" vehicles, while Zeekr, Great Wall, and Dongfeng have already incorporated Deepseek's AI into their cars.

Not to be outdone, BYD has pledged to spend at least $14 billion on building "intelligent" vehicles.

Its "God's Eye" driving assistance tech will face competition from Xpeng and fellow EV startup Nio, which have their own autonomous driving systems.

BYD will also face off against Tesla, with the US automaker saying it is working to begin selling its Full Self-Driving tech in China this year.

The EV giant's sales have been booming even before it unveiled its self-driving push. BYD sold 296,446 EV and hybrid vehicles in January, up 47% from the same period in 2024.

BYD's impressive performance comes as warning signs appear that China's crowded EV market may be about to face a period of consolidation.

Chinese state-owned carmakers Dongfeng and Changan both announced restructuring moves on Sunday, with the two companies seeing their share prices soar as investors speculated they may be about to merge.

• Porsche and BMW are the latest automakers to report sliding sales in China.
• The rapid rise of domestic EV makers such as BYD has put the squeeze on foreign competitors.
• Volkswagen, Toyota, and Honda have suffered, and GM took a $5 billion hit on its Chinese business.

Porsche and BMW have become the latest European carmakers to report sliding sales in China.

The two German automakers on Monday said their respective sales in the world's largest auto market fell by 28% and 13.4% in 2024 compared with the previous year, with Porsche blaming a "continuing challenging economic situation" in China for the slump.

The hit in China was so large that it caused Porsche's global deliveries to fall by 3% despite growth in every other market.

Porsche and BMW aren't the only automakers that have witnessed alarming plunges in their Chinese sales in recent months.

Volkswagen, Porsche's parent company, posted an 8.3% decline in sales in China, its largest market, in 2024. Mercedes reported a 7% annual decline, while their Japanese rivals Toyota and Honda also suffered sizable declines in deliveries.

Once dominant in China, foreign automakers are being increasingly squeezed by local competitors, with the likes of BYD and Xiaomi offering high-tech electric options at low prices.

Known for affordable EVs such as the $10,000 BYD Seagull and the $30,000 Xiaomi SU7, many of these companies are now expanding into the luxury market, putting them in direct competition with European manufacturers such as Porsche and BMW.

BYD has released several luxury models under its Yangwang line, including the pothole-hopping U9 sports car and the drone-carrying U8 SUV, while Xiaomi launched a $114,000 luxury version of its best-selling SU7 sedan in October.

That has put foreign manufacturers like Porsche and BMW, each of which counted China as its second-largest market in 2023, in a bind. Many are now rolling back their investments in the country and tearing up their strategies as a result.

General Motors said in December it would take a hit of more than $5 billion on its business in China, with the Detroit automaker closing factories and cutting costs at its joint venture with China's SAIC Motor after it lost $347 million in the first nine months of 2024.

Other brands have fostered closer ties with Chinese companies. Volkswagen announced last week it would partner with the electric-vehicle maker Xpeng to build a network of superfast charging stations in China.

Porsche and BMW did not immediately respond to requests for comment.

• BYD released a video of its $233,000 electric supercar leaping over potholes and road spikes.
• The Yangwang U9 comes with intelligent suspension that allows it to "jump" up to six meters forward.
• The U9 is part of BYD's efforts to diversify into luxury EVs as it looks to take on Tesla.

BYD's most expensive EV has a novel way of dealing with potholes.

The Chinese Tesla rival launched its first supercar, the $233,400 Yangwang U9, last year and has now shown off the luxury EV's ability to "jump" over potholes and road spikes in a new video.

In the video, released on BYD's Weibo account on Monday, an autonomously-driven U9 accelerates to 120 km/h before using its suspension to launch itself up to six meters forward over a pothole, a set of road spikes, and a chalk flag.

BYD is known for its ultra-cheap electric vehicles, such as the $10,000 Seagull, but like other Chinese automakers, it is now expanding into higher-end luxury vehicles.

The company began selling the U9, which has a top speed of 192 mph and can sprint from 0 to 62 km/h in just 2.36 seconds in February 2024.

The luxury EV can charge from 30-80% in just 10 minutes and is packed with futuristic features.

Its DiSus-X intelligent suspension allows the U9 to leap over small holes, "dance" to music, and drive with only three wheels, as the company showed off at the vehicle's launch last year.

BYD's Yangwang brand offers its most high-end models. The Yangwang U8 hybrid SUV, which BYD began selling in April 2023, comes with an onboard drone and can even float on water for short periods.

While the Tesla rival's luxury offerings frequently turn heads, BYD's in-demand affordable EVs and hybrids have turned the company into arguably Elon Musk's most potent challenger.

The Chinese automaker announced record annual sales earlier this month and is expanding into a host of new markets. BYD announced on Tuesday that it was sending nearly 5,000 electric vehicles to Europe aboard its third purpose-built container ship.

• Tesla annual sales declined for the first time in over a decade.
• The US EV giant sold 1.79 million cars in 2024, a 1% drop from the 1.81 million sold in 2023.
• Tesla is still the world's largest EV maker but Chinese rivals like BYD are closing in on it.

Chinese auto companies like BYD are giving Tesla a run for its money this week.

On Thursday, Tesla announced that it had delivered 1.79 million vehicles last year, a 1% drop from the 1.81 million vehicles it delivered in 2023. This is the first time Tesla's annual sales have declined in over a decade.

Tesla shares fell by as much as 8% on the same day, trading as low as $373.40 before paring losses.

Tesla's Chinese rivals, on the other hand, saw a rise in sales at the end of 2024.

BYD said on Wednesday that it had sold 1.76 million battery electric cars in 2024, a 12% increase from the 1.57 million cars it sold in 2023.

Smaller EV makers like Nio and Xpeng saw similar improvements in their sales figures as well.

Nio said in a statement on Wednesday that it had delivered 221,970 vehicles in 2024, a 38.7% increase from the 160,038 cars it delivered in 2023.

Xpeng delivered 190,068 vehicles last year, a 34% increase from the 141,601 vehicles delivered in 2023, per a filing made on Wednesday.

To be sure, Tesla is still the world's largest EV maker. The company played a pioneering role in popularizing EVs when it first burst into the scene with the Roadster in 2008.

But the Elon Musk-led EV giant had to engage in a price war in the past year to fend off its rivals.

Besides slashing prices for its vehicles in China, Tesla also doled out incentives like three months of free Supercharging and its Full Self Driving (Supervised) beta software to entice US customers.

Back in January 2024, Musk told investors in an earnings call that Chinese automakers are the "most competitive car companies in the world."

"If there are no trade barriers established, they will pretty much demolish most other car companies in the world," Musk said.

Tesla, BYD, Nio, and Xpeng did not respond to requests for comment from Business Insider.

• BYD posted its best-ever sales for Q4, turning up the heat on Tesla.
• The Chinese carmaker is competing with Tesla to be the world's biggest maker of EVs.
• Tesla is reporting its own figures this week, which will determine which company is on top.

BYD has reported record annual sales as it challenges Elon Musk's Tesla for the status of the world's top electric-vehicle maker.

BYD sold 1.76 million battery electric cars in 2024, per figures released Wednesday.

That figure puts it within range of pipping Tesla's annual sales.

That total was part of a large haul of 4.25 million cars sales by BYD, which includes its hybrid vehicles as well as pure-electric.

BYD has been on a red-hot run in recent months, buoyed by aggressive discounts and the booming popularity of its hybrids.

The company, known for affordable cars like the $10,000 Seagull hatchback, sold nearly 510,000 EVs and hybrids in December, the new figures say — a monthly record.

BYD, which in late 2023 recorded higher quarterly sales than Tesla for the first time, is now trying to top the US automaker's annual sales total.

Tesla is due to report fourth-quarter sales figures later this week, which will show whether BYD managed to outpace it.

Elon Musk's automaker, which does not sell hybrids, sold around 1.29 million EVs in the first three quarters of 2024.

That means it needed at least 467,000 sales in the fourth quarter to beat BYD's 1.76 million total for 2024.

Like its Chinese rival, Tesla ended 2024 with a spree of discounts and deals in an attempt to boost sales. The EV maker was also trying to meet its target of selling more cars than it did in 2023.

BYD has grown in recent years to be the greatest threat to Elon Musk's EV dominance.

The upstart automaker, founded by Wang Chuanfu in 1995 as a battery manufacturer, has rapidly taken market share in China and is expanding internationally.

Like other Chinese EV giants, BYD has been shut out of the US market by tough tariffs. Despite this, the company is building factories in Brazil and southeast Asia, and is aggressively expanding in Europe, where Tesla is also seeking buyers.

BYD did not respond to a request for comment, sent outside regular working hours.

• EV sales in China are set to overtake traditional car sales for the first time next year.
• EV sales are set to grow 20% next year to over 12 million vehicles, a Financial Times report said.
• The key turning point for the world's largest car market contrasts slowing sales in the West.

Electric vehicle sales in China are set to eclipse the sale of traditional vehicles for the first time next year, putting the country ahead of the West in a critical part of the clean energy transition, according to a new report.

Domestic EV sales in China are projected to grow 20% year over year to more than 12 million cars in 2025, according to the latest figures shared with the Financial Times by investment banks UBS, HSBC, and other research groups.

The projections, which include sales for both pure EVs and plug-in hybrids, offer a stark contrast to the outlook for internal combustion engine vehicle sales, which are expected to fall by over 10% to less than 11 million cars in the coming year, the report said.

The figures mark a key turning point in the world's largest car market and signal how much faster the clean energy vehicle transition is taking shape in China versus the West. In Europe and the US, consumer interest in EVs has been mixed in the face of high interest rates and inflation.

EV sales in China have benefited from a mix of government subsidies and domestic competition pushing prices down.

EV sales in China this year have been boosted by a Beijing-led program that offers a subsidy of over $2,800 to any consumer who trades in their internal combustion engine vehicle for an EV or hybrid.

Competitive domestic manufacturers such as the Warren Buffett-backed giant BYD have engaged in aggressive price-cutting strategies to incentivize consumer purchases.

In March, BYD added a 5% discount to its smallest EV the Seagull, making it less than $10,000. Similar moves have been made by others across China's EV industry, such as Nio, as carmakers battle to win over consumers on price.

Elon Musk's Tesla also cut vehicle prices in several countries, including China, earlier this year to combat aggressive pricing strategies from domestic EV firms.

Though Tesla's revenue declined 3.1% year-on-year to $46.8 billion in the first six months of 2024, its China arm announced a total sale of 21,900 EVs in China in the first week of this month, its highest weekly sales in the fourth quarter, per figures first reported by Reuters.

Chinese EV makers have sought to replicate their domestic growth stories overseas, but are hitting a wall against tough Western tariffs.

In October, the EU decidedto proceed with raising tariffs on Chinese EVs up to 45% over a five-year period following concerns that carmakers in the country were receiving excessive support from Beijing.

The US government raised tariffs on Chinese EVs to 100% back in May. It's still unclear whether these headwinds will impact what looks like a bumper year for Chinese EVs.

• BYD is chasing down Tesla on EV sales, but the Chinese giant is much more than just a car company.
• As well as cheap EVs, BYD also makes batteries, buses, trains and even some iPhones and iPads.
• BYD is following in the footsteps of Elon Musk's company, which also has lucrative side hustles.

BYD has fast become one of the world's biggest electric-vehicle makers — but the Chinese giant is much more than just a car company.

Like its rival Tesla, BYD, which was founded in 1995 as a battery manufacturer, makes and sells a variety of products alongside its car business, from solar panels to buses.

The EV giant's manufacturing expertise allows it to make nearly all of the components of its vehicles in-house, cutting down costs and enabling BYD to sell EVs for as little as $10,000.

That versatility has proven a crucial advantage, helping BYD to expand rapidly in China's cut-throat EV industry and even briefly overtake Elon Musk's automaker and become world's largest producer of EVs by sales last year.

Here are all of BYD's side hustles.

iPads and iPhones

Apple has long turned to China to assemble its tablets and smartphones, and it is reportedly increasingly relying on BYD.

The EV maker's manufacturing arm, BYD Electronic, now assembles more than 30% of Apple's iPad tablets and is part of the supply chain for the iPhone, according to industry executives and analysts cited by The Wall Street Journal earlier this month.

Apple CEO Tim Cook praised its partnership with BYD during a visit to China in March, and Apple isn't the only company that relies on BYD Electronic.

EV rivals Xiaomi as well as other smartphone manufacturers Huawei and Samsung are also customers.

Batteries

China dominates the global battery industry, and BYD is one of its biggest success stories.

The automaker is the world's second-largest battery producer, behind fellow Chinese firm CATL, per data released in September by Korean market research SNE Research.

In 2020, BYD rolled out its Blade battery, which the company said had "maximum safety, while offering outstanding strength, range, longevity and power."

The Blade battery is now incorporated into all BYD vehicles, and the automaker also sells it to rivals such as Toyota, which uses BYD's batteries in its cars sold in China.

In October, Bloomberg reported Apple had worked with BYD on designing long-range batteries for its project to build its own car, which it ultimately scrapped.

Energy storage

Just like its rival Tesla, BYD has been able to turn its battery know-how into a lucrative side hustle in energy storage.

Tesla's energy business includes solar panels and its megapack and powerwall batteries, which provide a backup power supply for homes and businesses.

BYD also sells solar panels and its battery-box system — a stack of Lithium Iron Phosphate (LFP) batteries that the company markets for home and commercial usage.

BYD's energy storage business has grown rapidly in recent years, but the automaker may be about to face more competition from Musk with Tesla set to begin megapack production at its factory in Shanghai early next year.

Buses

BYD may not sell its cars in the US market thanks to tariffs — but the company has been making buses and commercial vehicles in its Lancaster, California factory since 2013.

BYD's commercial vehicle business, which makes everything from school buses to forklifts, has often entered new markets before the company's automotive arm.

BYD has also been contracted to provide London's famous red double-decker buses and has struck a deal to provide Mexico City with a fleet of electric buses.

The company's November figures showed it had sold around 16,400 commercial vehicles, including around 4,200 buses, in 2024 so far.

Monorails

In addition to buses, BYD has also branched out into mass transit with its "Skyrail" monorail.

The company unveiled its first single-track electric train in the Chinese city of Yinchuan in 2017. The company said the Skyrail is cheaper and easier to build than traditional subway systems.

BYD has a contract to build a Metro system in the Brazilian city of São Paulo, and it is also part of a consortium developing a proposal for a monorail system in Los Angeles.

• Andy Palmer, the "godfather of EVs," explains how China took the lead in the electric-car race.
• Palmer got the moniker after developing the Nissan Leaf, the world's first mass-market EV.
• He said Chinese EVs offered "remarkable" value for money and better battery tech than Western rivals.

The man often known as the "godfather of EVs" has a warning for automakers thinking of ditching electric vehicles for hybrids.

Andy Palmer, a former Aston Martin CEO and Nissan exec, told Business Insider that delaying transitioning to EVs in favor of selling hybrids was a "fool's errand" and warned that automakers doing so risked falling even further behind Chinese EV companies.

Palmer's moniker comes from his time as chief operating officer at Nissan.

He led the development of the Nissan Leaf, the world's first mass-market electric car, which has sold more than half a million units since it launched in 2010.

"I wish I could say that it was driven by a motivation to better the world. But actually, it was driven by the Toyota Prius kicking our ass," Palmer told BI.

Rather than copying the success of the hybrid Prius, Palmer said, he pushed Nissan to build a fully electric vehicle, eventually securing the support of the CEO at the time, Carlos Ghosn.

Over a decade later, he's skeptical of automakers — including Aston Martin, the company Palmer ran as CEO from 2014 to 2020 — who have taken the opposite path and turned to hybrids as EV adoption has slowed.

"Hybrids are a road to hell. They are a transition strategy, and the longer you stay on that transition, the less quickly you ramp up into the new world," Palmer said.

"If you just delay transitioning to EVs by diluting it with hybrids then you are more uncompetitive for longer, and you allow the Chinese to continue to develop their market and their leadership. I honestly think it's a fool's errand," he added.

China races ahead

Over the past few years, the auto industry has been shaken by the booming growth of Chinese brands such as BYD, which have conquered their home market with a range of affordable and high-tech EVs and hybrids and are now rapidly expanding abroad.

"The Chinese cars are bloody good. The Chinese vehicles offer remarkable value for money for what they deliver," Palmer said.

"Their battery technology's class-leading, and they've concentrated very much on their software," he said.

Palmer told BI that the success of China's EV industry was down to the country's long-running industrial strategy.

One study found that the Chinese government had spent at least $230 billion on subsidies for EV makers since 2009.

Palmer, who previously served on the board of Dongfeng Motor Company, a joint venture between Nissan and the Chinese state-owned automaker Dongfeng, said he saw firsthand how aggressive China's EV strategy was.

"The edict [from the Chinese government] was to move to new energy vehicles," he said.

"It starts with an industrial strategy. That's the big thing to learn. For the best part of 14 years, we have not had an industrial strategy," Palmer added.

Both the US and Europe have responded to the rise of Chinese automakers by imposing tariffs aimed at protecting their own auto industries, but Palmer said tariffs would only harm Western companies' ability to compete with their Chinese rivals.

"My experience with tariffs is it just makes your indigenous industry lazy. The gap becomes even bigger," he said.

Instead, he argued that automakers should prepare for a "survival of the fittest" battle with Chinese automakers, especially in Europe, where the likes of BYD and Xpeng have ambitious expansion plans.

"I think the Chinese firms will learn from competing in Europe, because that's the toughest market in the world. If they can do that, then they're going to be unbeatable," Palmer said.

Japanese carmakers stumble

The surging growth of China's EV giants has put Palmer's former employer Nissan and its Japanese rivals Toyota and Honda under severe pressure.

Nissan announced it would lay off 9,000 workers in November, while both Toyota and Honda are facing declining sales in China and slumping profits. In December, it was reported that Nissan and Honda were in merger talks.

Palmer said that while Toyota's decision to focus on hybrids paid off initially, it had left it and other Japanese automakers exposed as key markets such as China transition quickly to EVs.

"Toyota took the Japanese industry down a cul-de-sac, which it is going to struggle to recover from," he said.

The former Nissan executive said his old company, meanwhile, had "shot itself in the foot" and squandered a promising lineup of electric vehicles and a 10-year lead in EV tech.

"My last board meeting in July 2014, I was under enormous attack from the bean counters who were saying; these things don't make money, we are going too fast. I managed to win the day in that meeting, but I left the company," Palmer said.

"Nissan finds itself now with a very poor lineup of products and without obvious leadership in EVs, and that's the direct result of poor management," he said.

How to get EVs moving again

The past year has been tough for electric vehicles. While sales are still growing, the pace of adoption has been slower than expected, causing automakers across the globe to roll back investments.

For Palmer, the reason some consumers have proven reluctant to go electric is simple: EVs are too expensive.

"Prices have got to align to those of internal combustion engines. And to make that happen, you've got to be able to offer cars with smaller batteries," Palmer said.

The average price of an electric vehicle in the US in October was $56,902, according to Kelley Blue Book, compared with $48,623 for gas-powered vehicles.

Palmer said selling cheaper vehicles with smaller batteries and less range would require governments to incentivize the rollout of charging networks to alleviate range anxiety.

He added that the West could learn from China's approach to industrial strategy — especially when it comes to batteries, an industry that China dominates.

"If the West wants to catch up, I would advocate copying the Chinese," Palmer said.

"The alternative is everything is Chinese at the moment — even if you were building your own battery cells, you've still got to get all the minerals from China," he said. "The whole supply chain is stuck."

• China's EV companies are turning to hybrids, which are becoming increasingly popular with drivers.
• Tesla rivals such as Zeekr plan to launch their first hybrid models.
• Hybrids could help them avoid European tariffs on Chinese EVs.

China's Tesla rivals have a new trick up their sleeve: hybrids.

China is the world's largest electric vehicle market in terms of sales. But many of its battery-powered pioneers are now turning to hybrids and extended-range vehicles as they vie for a slice of a highly competitive market and expand overseas.

Xpeng, which rivals Tesla in EVs and humanoid robots, recently unveiled its Kunpeng Super Electric System, a new powertrain system that Xpeng says will allow future vehicles to travel 1,400 kilometers (870 miles) without stopping to charge or refuel. It's unclear when it will launch new models with this technology, though its first hybrid model could arrive early next year.

Rival Zeekr also plans to release its first hybrid, an SUV, in the second half of 2025.

There's a reason these companies are abandoning their all-electric strategy: hybrids and extended-range vehicles are becoming increasingly popular in China — and could make it easier for Chinese EV makers to dodge tariffs overseas.

Hybrids are having a moment

BYD, China's largest EV maker, has reported booming growth in recent months, largely due to its hybrid lineup.

Its hybrid sales jumped were almost 70% higher in November compared with the same month last year. BYD says its latest hybrids can go up to 1,250 miles without stopping for gas or charging.

Tu Le, managing director of consultancy Sino Auto Insights, told Business Insider that China was now "well past the first movers" when it comes to battery electric vehicles.

That has led EV companies to increasingly target customers with limited access to charging infrastructure who may be more skeptical of pure battery-powered vehicles. "There's a huge market for those people," Le said.

He added that diversifying into hybrids made financial sense for EV startups still searching for profits, as hybrids and extended-range vehicles are generally cheaper to produce than battery electric equivalents due to their smaller batteries.

Despite delivering record numbers of cars in recent months, Xpeng, Zeekr, and Nio continue to rack up heavy losses amid a bruising price war in China's cut-throat EV market.

Above all, Le said the likes of Xpeng and Zeekr did not want to miss out on the booming popularity of hybrids.

"They've seen the success BYD has had. BYD basically gives you a full menu — they have offerings at $10,000, $15,000, $30,000 on battery electric or hybrid. That's a compelling reason to buy a BYD," he said.

Overseas ambitions

There are other advantages to selling hybrids, especially for Chinese manufacturers with one eye on overseas expansion.

BYD, Xpeng, Nio, and Zeekr are all seeking to grow beyond the pressure cooker of China's brutally competitive EV market by selling new models and setting up factories in foreign markets.

This expansion push has increasingly encountered hurdles as Western nations have imposed trade protections to protect their auto industries from a wave of cheap Chinese EVs.

The European Union followed in the footsteps of the US by finalizing steep tariffs on imported Chinese electric vehicles in October, with some manufacturers facing a maximum tariff of 35.3% on top of an existing 10% levy.

The new EU tariffs, however, do not apply to hybrids, giving China's EV upstarts a crucial opening.

BYD is already looking to take advantage, with president Stella Li telling Autocar the company was planning to launch three hybrid models in Europe next year alongside three battery EVs.

Fellow EV maker Nio, meanwhile, is reportedly developing its first hybrid model exclusively for the overseas market.

Auto experts have said that European tariffs could ultimately boost imports of plug-in hybrids. S&P Global Mobility analyst Ian Fletcher recently wrote that Chinese automakers are likely to replace some pure EVs in Europe with more hybrids and petrol vehicles.

"I think BYD is going to go to town on the lack of a higher tariff on plug-in hybrids in Europe," said Le. "And the Europeans are going to eat up plug-in hybrids, full stop."

BYD, Zeekr, and Nio did not respond to requests for comment from Business Insider.

• BYD just smashed its annual delivery target a month ahead of schedule.
• The automaker has thrown down a gauntlet for Tesla, which faces a battle to beat 2023's record sales.
• Tesla and its Chinese rival are locked in a battle to become the world's largest EV company.

BYD and Tesla are locked in a fierce battle to become the world's biggest EV company — and the Chinese automaker has just landed a major blow.

BYD has surpassed its annual sales target a month ahead of schedule, throwing down a gauntlet for Tesla as Elon Musk's company scrambles to meet its own annual goal.

The Chinese EV giant delivered 504,000 passenger vehicles in November, according to figures released on Sunday.

BYD has now sold over 3.7 million cars this year, meaning it has smashed its annual target of 3.6 million sales with a month to go.

Its sales have taken off in recent months, with the automaker selling half a million cars in October and November.

The company has benefited from the booming popularity of its hybrid vehicles.

Sales of plug-in hybrids have risen nearly 70% this year from 2023, with BYD releasing new technology over the summer that it says allows its latest hybrids to go up to 1,250 miles without stopping for gas or charging.

BYD's success has heaped the pressure on Tesla, which has been fighting the Chinese company for the title of the world's largest EV producer.

CEO Elon Musk has said he expects Tesla to sell more than the record 1.8 million vehicles it sold last year in 2024.

However, the US carmaker will need a record quarter in Q4 to do that. Tesla has sold 1.29 million cars so far this year.

Tesla is fighting hard to meet that lofty goal, offering a string of end-of-year deals, including free Supercharging and Full Self-Driving trials to US customers.

Tesla's sales in China have struggled in recent months, however. The company is facing brutal competition not just from BYD but also from EV startups such as Zeekr and Nio, which both registered record deliveries in Q3.

While Tesla, which doesn't sell hybrids, has no chance of matching BYD's total vehicle sales, the race to sell the most EVs is still on. BYD has sold 1.56 million battery-electric vehicles this year so far.

• China's brutal EV battle shows no signs of letting up.
• BYD is asking suppliers to cut prices and Tesla is rolling out more discounts.
• The price war is putting some smaller Chinese players under financial pressure.

BYD and Tesla have been playing a game of how-low-can-you-go on EV prices in China for the past year, and they don't seem to be slowing down anytime soon.

The rivals are asking suppliers to cut prices and rolling out discounts as they prepare for another round in an ongoing EV battle.

After Bloomberg reported on a leaked email that appeared to be asking an unnamed supplier to cut prices by 10% from January, a BYD executive said it was asking suppliers about price reductions.

"Annual price negotiations with suppliers are a common practice in the automotive industry," wrote BYD public relations and branding general manager Li Yunfei in a post on Chinese social media site Weibo.

"Based on large-scale purchases, we set price reduction targets for suppliers. This is not a mandatory requirement and we can negotiate and move forward."

The move is the latest sign that China's price war, which has seen the price of new vehicles plummet as local and foreign automakers vie for a bigger slice of the country's EV and hybrid markets, is set to enter a new phase.

Tesla, which is battling BYD for the crown of the world's largest EV producer, cut the price of its bestselling Model Y EV in China by 10,000 yuan ($1,400) on Monday.

Elon Musk's automaker kicked off China's EV price war last April, and is attempting to boost sales as it seeks to deliver a record number of cars this year.

Tesla's sales in China have suffered recently, with shipments from the company's Shanghai factory falling 23% in October from September.

Tesla is coming under pressure from smaller rivals such as Zeekr and Xpeng, which have both launched rivals for the Model 3 and Y this year, as well as its lack of hybrids that have proven increasingly popular in China.

BYD reported record monthly deliveries for October and recently announced quarterly earnings that outstripped Tesla for the first time.

Analysts previously told Business Insider BYD was cashing in on its strong hybrids lineup, with hybrid sales rising by 62% year-on-year.

The race to the bottom on price, which has seen some Chinese automakers offer EVs for as little as $10,000, has strained the finances of some smaller EV startups.

Xpeng, Nio, and Zeekr all reported sizeable net losses in their most recent quarterly earnings despite booming sales, with Nio attributing a decline in revenue from vehicle sales to lower sticker prices.

BYD and Tesla did not immediately respond to requests for comment from Business Insider.

• China's Tesla rivals are booming, with BYD, Nio, and Zeekr all breaking sales records.
• Despite their success, many Chinese automakers continue to lose money.
• Nio reported a widening net loss in its latest earnings, as the CEO of Xpeng warns many EV firms face a fight to survive.

China's Tesla rivals might be booming, but they're still losing money.

Nio, Zeekr, Xiaomi, and Xpeng have all broken personal sales records in recent months. Xpeng delivered 24,000 vehicles last month, and Xiaomi sold over 100,000 of its SU7 EV this year alone.

However, the booming sales come as many Chinese EV makers continue to report heavy losses, as they grapple with a brutal price war and intense pressure to quickly launch new affordable models amid a crowded field of battery-electric vehicles.

EV startup Nio, known for its battery-swapping stations and run by CEO William Li, sometimes dubbed "the Elon Musk of China," reported widening losses in its Q3 earnings on Wednesday.

The company reported a net loss of 5.06 billion yuan ($700 million), up 11% from the third quarter of 2023.

Shares plunged nearly 7% in the hours after the announcement, despite Nio delivering 61,800 vehicles in the past three months, a new quarterly record for the company.

The company has been hit hard by the price war that has gripped the Chinese market for much of the past year. Nio said vehicle sales had fallen despite record deliveries due to lower average selling prices.

Nio's rivals reported a similar blend of booming deliveries and painfully high losses.

Zeekr delivered a record 55,000 vehicles in the third quarter, up over 50% from last year, while fellow EV startup Xpeng recorded record sales of its electric vehicles in October.

Both companies narrowed their net losses year-over-year, but they remained sizable at 1.81 billion yuan ($250 million) for Xpeng and 1.14 billion yuan ($157 million) for Zeekr, respectively.

Xpeng's shares fell amid concern that the company's upcoming affordable models may dilute selling prices and margins.

Smartphone maker Xiaomi, which has pivoted into EVs and received acclaim from Ford CEO Jim Farley, announced it was upping its sales target for its high-tech SU7 electric vehicle after selling over 100,000 this year.

Despite this, the tech giant continues to lose money on its EV venture.

A fight to survive

Xpeng CEO He Xiaopeng told Singaporean newspaper The Straits Times that the competitive pressure means most Chinese carmakers will not survive the next decade.

"From 300 start-ups, only 100 of them survived. Today, there are fewer than 50 companies that still exist, and only 40 of them are actually selling cars every year," he said.

"I personally think that there will only be seven major car companies that will exist in the coming 10 years," Xiaopeng added.

One company that is not having the same problems is Tesla's nemesis BYD.

The automaker posted bumper revenues in its Q3 earnings last month, outstripping Elon Musk's company in quarterly sales for the first time, and recorded a profit.

BYD's net profit rose 11.5% from the previous quarter to 11.6 billion yuan ($1.6 billion), and it also sold a record number of vehicles in the third quarter. It's its success comes as Tesla's sales in China slip, with the company's October deliveries down 5.3% from the same month last year.

Analysts previously told Business Insider that BYD was reaping the benefits of its strong hybrid lineup and that its manufacturing approach of making almost every component in-house enabled the company to keep costs low.

"BYD's high degree of vertical integration — making rather than buying many key strategic components — means it can control production of batteries and chips and can do so at very low cost," David Bailey, a professor of business economics at the University of Birmingham, told BI.