Hybrids snag precarious pole position at BYD
The author is a Reuters Breakingviews columnist. The opinions expressed are her own. Refiles to remove hyperlink in seventh paragraph.
By Katrina Hamlin
HONG KONG, Oct 3 (Reuters Breakingviews) -Hybrids are moving into pole position at BYD 002594.SZ, 1211.HK. The $122 billion auto- and battery maker is on track to sell more models powered by both a battery and an old-school motor than pure electric vehicles this year. Exports could turbocharge the trend, but competition, climate goals and protectionism complicate efforts to ride a global hybrids boom.
From January to September, BYD sold 1.6 million hybrids and 1.2 million purely battery-powered cars; a year earlier, more than half of its sales were in the latter category. China drives the change, but the next growth spurt is coming from overseas. Although BYD exported a negligible number of these products last year, in the first half they represented about 40% of shipments, CLSA estimates.
This is part of something bigger. Exports of China-made hybrids have roughly doubled every year since 2020, per the International Trade Centre, rising over 200,000 last year. China's combined exports of all-electric powertrains totalled around 1.5 million in 2023.
BYD is well-placed to benefit. Supersized China sales make it the world’s largest seller of plug-in hybrids, allowing unrivalled economies of scale and pricing power. As the second-largest maker of batteries, it sources the most valuable component at a lower cost, too.
However, the rise of Chinese vehicles is sparking a broad backlash. Policymakers fret over their dominance in pure electric powertrains: the U.S. quadrupled import tariffs on these to over 100%, and the European Union is set to vote on additional tariffs on Friday.
Some already think similarly about Made-in-China hybrids: Turkey restricted imports earlier this month. Brazil, the largest importer in 2023, will increase levies to 35%.
Focusing on hybrids carries other risks, too. The use of an internal combustion engine calls into question their role in a green transition, exposing this category to regulatory changes as economies cut emissions.
There are also mature competitors, fiercer than the rivals BYD faces in the nascent electric-car space. Mercedes MBGn.DE and BMW BMWG.DE are among the leaders in Europe. Toyota Motor 7203.T, which engineered the world’s first mass-produced hybrid, the Prius, dominates emerging markets. These formidable incumbents boast established local production and brands.
For now, BYD’s new bestsellers keep it in the fast lane even as EV demand weakens. Its Hong Kong-listed shares are outperforming the benchmark this year, and are priced at 19 times forward earnings, versus 12 for the sector, per LSEG. But there may be potholes ahead.
Follow @KatrinaHamlin on X
CONTEXT NEWS
Turkey's trade ministry has imposed strict conditions on the import of plug-in hybrid vehicles from some countries, including China, according to a notice published in the Official Gazette on Sept. 20. The notice says an importer must meet conditions including having 20 authorised service shops in seven different regions of Turkey, in order to import chargeable hybrid vehicles not produced in the European Union or in countries with which Turkey has a free trade agreement. Analysts say no importers meet the conditions.
China exported 299,242 hybrid cars globally in the first seven months of the year, according to the International Trade Centre’s Trade Map data. That is more than the 217,320 hybrid models it exported last year. China’s exports of hybrids have risen by 95% or more every year since 2020.
Hybrid cars combine a battery with a traditional fuel-powered engine, and can include both plug-in models and mild hybrids, which do not require charging.
Graphic: BYD is selling more hybrids than pure electric cars in 2024 https://reut.rs/47POqPw
Graphic: China's hybrid exports are moving fast https://reut.rs/47TAxzH
Editing by Antony Currie and Aditya Srivastav
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