BYD: In the EV fast lane
Back in 2011, Elon Musk laughed out loud when asked whether he thought BYD would ever pose a threat to Tesla. “Have you seen their car?” he asked to general derision, and at the time he had a point, but the chuckles are coming right back at him with the news that BYD outsold Tesla in the fourth quarter of 2023 to claim the mantle of the world’s biggest producer of electric vehicles (EVs). BYD sold 526,000 EVs to Tesla’s 484,000 in a quarter that will push many a legacy manufacturer into a cold sweat.
Backed by Berkshire Hathaway in a stellar investment that saw the old men of Omaha grab a 10% stake for a mere $230m in 2008, the company was originally one of the world’s largest manufacturers of batteries for cellphones before it dipped a toe into the nascent EV market in 2003. BYD’s aggressive approach to costs is based on vertical integration throughout the supply chain, even to the extent of mining its own lithium to stick in the batteries.
Sales in China exploded during the pandemic when the country’s borders were shut, and now the company is looking to boost its export sales to a target market share of 10% in overseas markets in the long term. Much will depend on whether it manages to crack the US and European markets, where regulators are scrambling to protect local manufacturers against a potential deluge of relatively inexpensive Chinese imports. Consumers may feel an initial reluctance to have Xi Jinping monitoring their trip to Walmart, but that may soon fade if the price is right.
Li-Ning: HQ up, product down
2023 was a tough year for the leading Chinese sportswear brand founded by former Olympic gymnast Li Ning back in 1989. The company has the distinction of being the worst-performing blue-chip stock on the Hong Kong Stock Exchange last year, tanking by 70% to leave it a long way from its peak 2021 valuation of about $30bn.
Things were not helped by the announcement last month that it had shelled out $282m on a fancy 25-storey office block in Hong Kong to serve as its corporate HQ, a move that resulted in 11% being wiped off the share price in a single day.
Back in the heady days of 2021 Li-Ning was tucking in to a trend called guochao, or “national tide”, that saw consumers favour domestic brands, particularly when pesky foreigners had the temerity to ask questions about the use of forced labour to produce cotton in Xinjiang. Nike and adidas saw their market share tumble, and Li-Ning bumped its prices up, but this backfired when consumer demand started faltering and shoppers switched to cheaper local brands.
Inventory has gone through the roof, and even with a strong performance at New York Fashion Week, it has struggled to gain traction outside China despite sponsorship deals with the likes of Shaquille O’Neal. Clearly as an entry to the European market there is a dream deal to be done with a certain Tower in Pisa, but for the time being the company remains dependent on a creaking domestic market. Stuck in the middle between aspirational global brands and less expensive local options, Li-Ning is struggling to compete.