Global BYD

Tariffs are typically used at one of two key junctures in the development of a national economy: either at the time of industrial infancy, when they are trying to cultivate fledgling national champions, or at the time of financial senility, when a country’s elites are hoping to forestall impending decline. Donald Trump’s chaotically managed trade war is a clear example of the latter. Amid the intensifying retreat of American hegemony, however, an alternative geo-economic and geopolitical arrangement is coming into view: a battery-powered globalization with Chinese characteristics. In this reordering, China is poised to be the leading actor, with green technology the driver. Its most evident manifestation is the massive international expansion of its electric vehicles (EV) industry. 

The excellence of Chinese EVs, which were until recently derided by the likes of Elon Musk, is now incontrovertible. What is more, China’s tech supremacy is quickly translating into market dominance, so much so that it is now threatening to overtake other leaders not only in the EV market, but in the automotive industry as a whole. This bears seismic consequences for international economic geography. 

The most significant example of this international expansion is provided by the flagship firm BYD. After surprising analysts with its global rise in sales at the end of 2023, BYD has now raced ahead of Tesla—until recently the undisputed front-runner in EVs. As stock value and sales at Musk’s firm dropped last year, BYD has moved from success to success. In 2024, it sold a record of 4.3 million cars, with a 41 percent increase in sales. It now stands comfortably ahead of Tesla in the general category of new energy vehicles (NEVs), which comprises both Battery-Electric Vehicles (BEVs) and Plugin Hybrid Electric Vehicles (PHEVs). According to the latest reports, it is now neck and neck with Tesla on BEV sales; 1,790,000 for Tesla and, just behind, 1,764,000 for BYD—a 12 percent increase from the previous year. With its current rates of year-on-year growth exceeding 50 percent, and with abundant untapped potential still remaining in the EV industry, it is reasonable to expect BYD overtaking Toyota as the world-leading car firm within the next decade. 

BYD is already behaving like a firm which seeks world dominance in its sector. Until recently, the Chinese automotive and EV sector was largely a domestic phenomenon, with the bulk of vehicles sold at home. Now, Chinese EV firms are expanding their production around the world, at an unprecedented scale and speed. Chinese electric vehicles factories —some of which are able to produce more than 200,000 vehicles a year—have sprung up in Indonesia, Thailand, Pakistan, Turkey, Hungary, and Brazil to satisfy increasing demand for Chinese EVs which, besides their high quality, are also around 20 percent cheaper than their Western counterparts. 

A key factor in BYD’s expansion is an effort to mitigate against the risk of tariffs and other trade barriers in an increasingly protectionist climate. By assembling their cars in factories abroad, Chinese firms hope to skirt the import duties which would make their merchandise uncompetitive. Setting up overseas plants, however, remains a delicate operation, bound up not only with the company’s complex calculations about future prospects, but also with geopolitics and diplomacy. In charting the international expansion of a firm like BYD, one can also gain important insights about China’s international relations strategy.

From Shenzhen to the world

BYD’s official headquarters and the company’s beating industrial heart are located in the now famous city of Shenzhen in the Pearl River Delta, adjoining Hong Kong and Canton—an area of the world bound to be the new Palo Alto. Created in 1979 from swampy fishing village, Shenzhen became China’s first Special Economic Zone, designated by Deng Xiaoping as part of the “Reform and Opening-up” (改革开放, Gaige Kaifeng) policies. The city quickly turned into a global manufacturing center for consumer electronics, with many OEM manufacturers like Foxconn producing for various international brands: Apple, Sony, and Dell among them. Chinese companies—Huawei, Xiaomi, Hisense, and Oppo—also set up manufacturing in the new SEZ, as well as new internet companies like Tencent. 

BYD opened its first large industrial park in the Kuichong district of Shenzhen in 2000. At the time it was not an automotive firm, but a producer of consumer electronics batteries for Motorola and Nokia. The company was founded by Wang Chuanfu, a scientist-cum-entrepreneur with a PhD in battery chemistry and a current net worth of $23 billion. BYD’s remarkable transformation from a battery company into a car company was in part facilitated by its acquisition of the formerly state-owned Tianjin Qinchuan Auto Manufacturing. The first car produced by BYD was the F3, a traditional compact sedan with an internal combustion engine, which was manufactured in the Changsha plant in Hunan, with lower labor and land costs compared to Shenzhen and easier, cheaper delivery access to the north of the country. Shenzhen remained, however, the real center for electric vehicle production, both in terms of battery manufacturing and in terms of actual assembly. 

Today BYD counts five different plants in Shenzhen, some of them clustered around “BYD Road” in the Pinghsan district. More than 500,000 cars— BYD Tang, Qin, and Dolphin models—are assembled here every year. Beyond Shenzhen and Changsha, there are major factories in Qinzhou, in Guangxi (producing approximately 100,000 vehicles per year), in Fuzhou in Fujian (150,000 vehicles), in Shanghai (at least 150,000 cars) and in Tianjin (200,000). Together, these Chinese factories are responsible for most of the nearly 2 million electric vehicles produced annually in China.

Until the early 2020s, BYD’s EV production was largely focused on this Chinese market, while its overseas operations dealt with buses and trucks, which are still the BYD vehicles most readily seen in many countries outside China. As late as 2024, 87 percent of BYD’s New Energy Vehicles were sold in China. The success of BYD is in large part due not only to the size of the Chinese market, but to the ways in which the company has strategically concentrated all of its critical operations—such as research and development, component manufacturing (including batteries and semiconductors), vehicle assembly, and supply-chain logistics—in China. BYD has developed enormous economies of scale through vertical integration. 

China’s high degree of domestic technological diversification and sophistication has been facilitated by state-directed industrial policies—such as those pursued under the auspices of Made in China 2025—with the use of subsidies, investment in research and other inducements aimed at accelerating the country’s technological development. China’s dynamic, innovation-hungry market, where now 50 percent of new vehicle purchases are electric, serves as a powerful launchpad for firms such as BYD, Xiaomi, and Geely, which are now seeking worldwide dominance. Their overseas sales of NEVs grew by 77 percent in 2023, a staggering increase. The resulting enthusiasm has, however, been tempered by 2024 growth rate of just 6.7 percent compared to the previous year. There is a risk that sales may begin to stagnate in 2025. Without a substantial share of overseas sales, these firms risk becoming economically unsustainable. 

The EV race in South and Southeast Asia

In addition to the continental “Silk Road” of the Belt and Road Initiative, which cuts across Central Asia, China has also been developing what government officials describe as a “Maritime Silk Road,” which would connect Chinese ports—Shanghai, Fuzhou, Guangzhou, and Shenzhen—to harbors and logistical infrastructure in the Indian subcontinent. From there, access to the Middle East, the Mediterranean, and to European ports like Piraeus and Trieste, Rotterdam and Hamburg is assured.

This coastal corridor has long been recognized as an important vector of geopolitical power. For China, it is a trade lane that has become all the more vital in the aftermath of the war in Ukraine, which has disrupted many continental trade routes and has led to some Belt and Road projects being delayed or scaled down. The trade axis which goes from the Malacca Strait to the Western Mediterranean and extends from Indonesia, Thailand, India, Pakistan to the Middle East and Northern Africa and the European Union, extends over an area that encompasses almost half the world population, and which will in due course also account for a significant share of the EV market. It is not surprising, therefore, that it is precisely along this corridor—punctuated by some of the most important harbours controlled by Chinese firms like COSCO—that some of the most important Chinese EV production plants are currently being built.

To China’s Southern border, BYD is increasing its footprint in Cambodia where it is chasing competitors Ford, Hyundai, and Toyota, and in Vietnam, where it is building a $250 million plant in the Phu Ha industrial park. The latter is due to produce 150,000 vehicles a year, with the possibility of a second plant to be built to further exploit the country’s low labor costs. In neighboring Thailand—the second-largest car market in Southeast Asia— BYD is investing $500 million in a plant in Rayong’s Eastern Economic Corridor, with an expected annual capacity of 150,000 vehicles. Across the Java Sea, BYD has invested $1 billion in a new plant in Subang, West Java. Operations are set to begin in 2026 with a production target of 150,000 vehicles per year, mainly targeted at the country’s enormous domestic market: 285 million consumers, expected to purchase 2 million EVs a year by 2030. BYD and other Chinese automotive firms are not only investing in assembly plants but also in the supply chain and in logistics. Meanwhile, the Chinese government is spending on regional infrastructure, fostering economic cooperation and promoting cultural diplomacy. These activities highlight that the Chinese government is well aware of the strategic importance of this region at China’s “southern periphery,” which it would like to see become a reliable hub for “friendshoring” and long-term partnerships.

India is another story. Currently a massive importer of Chinese products, it intends to develop its own technological capability, including an EV industry. To this end, India has already begun to restrict Chinese investments; one significant consequence of this is that BYD currently has only a single factory in all of India. Located in Tamil Nadu, it produces barely 10,000 vehicles a year. In response to India’s aversion to Chinese influence, BYD and its siblings have set their sites on Pakistan, which has enthusiastically opened its doors to Chinese EV investments to become a global EV export hub. BYD plans to build a plant in Karachi in collaboration with the Pakistani firm Mega Motors. The plant, already in construction and due to open in 2026, will initially produce 50,000 cars a year for the Pakistani market, whose car sales are expected to be 50 percent electric by 2030; capacity may soon be expanded. In Pakistan, BYD is already marketing three models—the Atto 3, Seal, and Sealion. Furthermore, it has partnered with HubCo, the country’s largest private utility, to build a network of fast-charging stations. This is testament to BYD’s long-term and infrastructural vision, one very different from the attitude of its Western competitors, both corporate and governmental, which to their detriment tend to focus on a much shorter time frame. 

The industrial and charm offensive on Europe

If Chinese EV firms are setting their sights on the expanding markets of Southeast Asia and South Asia, it is the rich car markets of Europe that are the ultimate prize. Europe—comprising the EU and the UK—is the third largest market for automotives and the second largest for EVs after China, with 1.5 million vehicles registered in 2024 (a slight decline compared to the previous year, in part due to the end of German subsidies). China would like to increase sales in Europe, but it would also like to have closer relations with a region which it considers as a possible partner in the development of a multipolar order. EU tariffs on EVs from China, however, make that task more difficult. 

At the end of 2023, the EU raised tariffs against Chinese EVs. BYD was hit with a 17 percent tariff in addition to the standard 10 percent import duty already in place; other Chinese firms faced higher tariffs: 18.8 percent for Geely and 35 percent for SAIC—a result of the state aid or subsidies deemed to be unfair by Brussels. Perhaps an unintended consequence, these protectionist policies are creating great incentives for Chinese EV firms to open plants in Europe in an effort to circumvent those tariffs. One common tactic already used by car companies is to ship “knock-down kits” to a particular country for assembling and selling domestically. Knock-down kits are classified as components and usually pay a lower tariff than finished goods. This is also more efficient from a supply chain perspective, as it is easier to ship a car disassembled. Yet, local authorities may see this as a circumvention tactic and may demand that to qualify as local a car needs to bring greater value addition and local content. Responding to these issues, BYD and other Chinese EV firms have developed a strategy of engagement and long-term investment, developing research and development centers on the continent, and establishing long-term partnerships with suppliers. Further, BYD is also playing the soft power card, with sponsorship of events and a communication campaign aiming at endearing itself to the European citizens. 

To date the most significant investment for BYD in Europe is in Hungary, a country known for its robust automotive supply chain and its close relationship with China. A staggering 44 percent of all Chinese foreign direct investment in the European Union goes to Hungary and BYD is completing construction of a large plant in Szeged, close to the border with Serbia and Romania. The billion dollar investment is expected to produce—not simply assemble—between 150,000 and 200,000 cars annually and is set to begin production by the middle of this year. To secure the local value chain, BYD has established a partnership with French firm Forvia, the world’s seventh largest automotive technology supplier, to supply components to the Szeged factory. But this factory is now subject to an EU probe for unfair state aid, which could force the firm to reduce capacity or force it to sell some of its assets. 

If such probes reveal a degree of vulnerability, they do not restrict BYD’s ambitious plans for expansion. BYD has already begun construction of a second factory intended to increase European production. A new plant in Manisa near Izmir is scheduled to open in mid-2026, and will have an annual capacity of 150,000 cars. Turkey’s position on the edge of Europe is key here. Though it is not part of the EU single market, it is crucially part of its customs area. This means that a car assembled in Turkey is spared hefty tariffs. The “strategic cooperation” enjoyed by Turkey and China, most explicitly in Turkey’s recent participation in the Belt and Road initiative, makes it a natural choice for BYD’s European expansion.

A third European plant is also under contention. Italy was rumored as a possible location, given its government’s interest in diversifying manufacturers to make up for the decline in production of Stellantis (Fiat’s parent company). Initial meetings with BYD, however, came to little avail, though there are reports that Chery is interested in investing in Italy. More recent reports have indicated that Germany will be the likely site of a third European plant. Volkswagen and other German car factories that are due to close may well be the most attractive site for Chinese firms to invest in. Gaining access to Germany’s productive infrastructure, as well as its position at the heart of the European market, would be a boon for any Chinese company seeking to expand. 

BYD is not simply looking to build a couple of factories in Europe, but to position BYD as a friendly European partner. BYD executives have often affirmed that the company wants to “become European.” This in practice means investing in comprehensive production (not just assembly), setting up research and development centers, such as the one slated for the UK, and fostering a robust local supply chain in Europe. The meeting earlier this year between BYD representatives and 300 Italian auto component manufacturers in Turin is testament to the way in which BYD engages with local economic actors to present itself as a reliable partner interested in long-term investment.

The final frontier: Africa and Latin America

Africa and Latin America may not be the core priority of BYD’s expansion, but they remain a growth area to target. Chinese investment in Asia and Latin America, particularly in ports, logistics infrastructure, and extractive industries, is growing. The EV wave offers China the opportunity to build on the economic and diplomatic relationships already established and build a vast industrial and logistical presence, which could have important geopolitical implications in terms of bringing these regions yet further into the Chinese orbit and yet further away from Washington’s. 

Plans are still in a nascent phase. So far, the only large manufacturing plant currently mulled by BYD is in South Africa, though it is still stuck in negotiations. BYD has also had exploratory discussions about the construction of manufacturing plants in Egypt and Morocco. An obstacle to the introduction of EVs in Africa is the limited charging and maintenance infrastructure in place, as well as the lack of a supportive regulatory framework and EV incentives from governments. Things are slowly changing, however. The African middle classes in countries like Rwanda and Nigeria have already developed a taste for electric vehicles, while Ethiopia has banned the import of gas-fuelled cars. New car factories are expected to open in the next decade. 

BYD’s plans are at a more advanced stage in the Americas. Having decided to avoid the US and Canadian markets where Biden and Trudeau already imposed 100 percent tariffs, BYD and other Chinese EV firms are gaining a foothold in Central and South America. In Brazil, BYD has acquired a former Ford plant in Camaçari, Bahia and has invested $1 billion to transform it into a state-of-the-art EV facility—although the construction of the factory has been halted after an investigation revealed that 163 Chinese workers were living in slavery-like conditions. Great Wall Motors and Chery are also establishing plants in Brazil, which is a hub for car production and distribution in South America. Further, BYD is currently in discussion about a new plant in Mexico. The initiative has, unsurprisingly, already raised alarm among US elites who are warning that Mexico is liable to fall victim to Chinese technological supremacy. 

With plants in Mexico, Chinese manufacturers intending to sell to the US could jump the punitive tariffs placed on Chinese-made goods, and be entitled to the lower 25 percent tariff applied to Mexican cars, thereby increasing competitiveness. The risk however is that a factory so close to the US border could result in a technology leak to China’s greatest strategic adversary. The risk is considered so serious that now Chinese EV firms are reportedly considering delaying their investment plans in Latin America in a reminder that in this region as elsewhere, the automotive sector presents a key battlefield in the geopolitical tug of war between the world’s great powers. 

A battery-powered globalization with Chinese characteristics

BYD and its siblings are engaging in one of the largest waves of international expansion in automotive history. Should China overtake the US as the leader in globalization, one can expect that it will do so in line with the Chinese government. For one, it will likely be more concerned with issues of order and long-term stability than Washington has shown itself to be in recent years. BYD’s major plants are located in countries like Pakistan, Indonesia, Turkey, and Brazil—all of which are involved in the Belt and Road Initiative or the BRICS. Under Chinese aegis, economic cooperation goes hand-in-hand with state-to-state partnership, even in spite of major ideological differences. 

This variety of globalization is driven by a recuperation of “vertical integration” against the system of “flexible production” which dominated the late twentieth century. Greater emphasis is also placed on long-term stability and the forging of consensus in the countries involved. The “localization” practices pursued by firms like BYD position it as a benign actor focused on creating jobs and advancing the green transition. 

The reality, of course, is more complex. Reports on the condition of workers of the Camaçari plant in Brazil highlight exploitative labor practices that aim to bypass the influence of trade unions on industrial production. While emboldened by its impressive technological leadership in many fields, Chinese CEOs and politicians remain concerned about further protectionist pushbacks amid the growing global trade war and the risk of reverse tech transfers from countries like India and Mexico. For countries receiving Chinese investments, these concerns also provide a useful lesson: demanding that Chinese firms interested in their markets enter in partnership with local companies is the best means to turn foreign investment into a lever for autonomy rather than dependency.