China’s top electric vehicle (EV) maker, BYD, has been charging significantly higher prices for its vehicles in foreign markets compared to domestic prices. This strategy allows the automaker to generate larger profit margins abroad and offset the intense competition and price war in China’s domestic market. While it is common for automakers to have slight price differences for exported vehicles, BYD’s upcharges in foreign markets are unusually high. For example, the BYD Atto 3 crossover sells for $19,283 in China but is priced at $42,789 in Germany.
The higher export prices also highlight the cost advantages that Chinese EV manufacturers have over their foreign competitors. China’s EV industry has managed to reduce costs at every stage of production, from raw materials to batteries, land, and labor. Additionally, the Chinese government offers substantial subsidies to both domestic and foreign brands selling EVs in China. This cost edge has made foreign automakers nervous, leading some to call for higher tariffs on Chinese EVs.
BYD’s focus on exporting its vehicles allows the company to secure larger profit margins per vehicle. This gives the automaker flexibility to lower prices if necessary to gain market share in foreign markets. Despite concerns of undercutting the European market, Chinese automakers like BYD are primarily looking to make profits rather than compete solely on price.
Furthermore, Chinese automakers are investing in building global reputations and shedding the stigma of cheap Chinese products. They are focusing on maintaining strong resale values and developing their brands. BYD’s dominance in the Chinese EV market and its significant investments in growing sales worldwide, including expanding into Europe, indicate the company’s commitment to becoming a global player in the EV industry.
BYD’s vertically integrated supply chain, where it manufactures most components in-house, gives it an advantage over legacy automakers. The company has focused on reducing the cost of batteries, which are the most expensive component of an EV. BYD and other Chinese automakers have secured access to critical battery minerals, allowing them to drive down battery prices.
Chinese automakers also benefit from factors such as affordable land, cheaper electricity, and labor, and a faster approval process for building plants. These advantages result in lower capital investments per vehicle, leading to higher profitability compared to Western automakers.
Overall, BYD’s higher export prices reflect its strategy of maximizing profits in foreign markets. The significant price differences between domestic and export prices highlight the cost advantages of China’s EV industry and the intense competition within its domestic market. As Chinese automakers expand globally, they are focusing on building their brands and maintaining strong resale values to counter the perception of cheap Chinese products.