Introduction: It must be admitted that without BYD's sudden rise, the Chinese automotive industry would likely have lagged behind by many years and would never have been able to shake the leading position of joint ventures from Europe, America, Japan, and South Korea in the Chinese market.

Lishi | Author: Lishi Business Review | Produced

At the 2024 China Auto Chongqing Forum held recently, many well-known entrepreneurs from China's automotive industry attended and frequently clashed with each other.

Currently, BYD has developed into an absolute leader among China's independent automotive enterprises, while before BYD, Geely Automobile had long held the position of sales champion among Chinese automotive enterprises. In recent years, Geely Automobile has been struggling to catch up.

Especially recently, BYD Automobile has newly released the Qin L and Hai Bao 06 equipped with DM-i5.0 technology, with a starting price of only RMB 99,800, further widening the product gap with competitors, which has caused quite a stir among domestic automakers. Among them, the more intense reaction came from Geely Automobile founded by Li Shufu, whose executives have repeatedly questioned BYD online, and BYD has given firm rebuttals.

And this time, Li Shufu personally brought the flavor of gunpowder to the 2024 China Auto Chongqing Forum, where he said in a public speech:

"The degree of internal competition in China's automotive industry is number one in the world, and the price war is unparalleled. This phenomenon is both good and bad. If the level of marketization is high, the law is sound, law enforcement is strict, and competition is transparent and fair, then it is a good thing; otherwise, it is a bad thing. The healthy development of any industry must be reflected in the input-output ratio. To achieve better economic benefits, endless internal competition and简单粗暴的价格战 (brutal price wars) will only result in cutting corners, fraud, and unregulated competition. For the automotive industry, healthy competition in accordance with the law is crucial. Only through healthy competition in accordance with the law can sustainable high-quality development be achieved. China's achievements in electric vehicles can be consolidated and respected."

Geely Automobile has always been a master of price wars among Chinese automakers and a major player in the mid-to-low-end market, but it has now encountered BYD, which has more cost advantages. Therefore, the "internal competition" mentioned by Li Shufu is obviously directed at BYD. However, Wang Chuanfu, the founder of BYD, has a completely different attitude towards the current "internal competition" in the automotive industry. He said:

"Competition is a kind of roll, which is the essence of a market economy. China has undergone earth-shaking changes in the past 40 years of reform and opening up, which is visible to all. What is the core of a market economy? It is competition, and competition brings prosperity. The prosperity of the motherland over the past 40 years has been accompanied by competition and market development, which has produced so many commodities, changed lives, and achieved economic takeoff. In essence, it is competition, and roll is a kind of competition. I believe that all entrepreneurs should embrace and participate in this roll, embrace this competition, stand out in the competition, contribute to the country, uphold Chinese brands, and create world-class brands."

As two of the most influential entrepreneurs in China's automotive industry, why do Li Shufu and Wang Chuanfu have such different attitudes towards the current "internal competition" situation? The underlying reason is the drastically different competitive situation between BYD and Geely Automobile.

As the absolute leader in China's automotive industry, BYD's current competitive advantage can be described as "far ahead." A large number of competitors directly target its popular models such as Qin, Han, Tang, Song, and Yuan to formulate product strategies, hoping to seize a share of the market from its hands. However, relying on its strong technology and product development capabilities, BYD continues to self-disrupt and further introduce more competitive products even when its original products are still in an absolutely leading position in the industry. This has not only failed to narrow the gap with its competitors but has instead further widened it.

For example, the best-selling model in the Chinese automotive market in 2023 was BYD's Qin PLUS Champion Edition, with a starting price of RMB 99,800. However, at the beginning of 2024, BYD dropped a bombshell by launching the higher-spec Qin PLUS Glory Edition, with a significantly reduced starting price of RMB 79,800. This prompted the Qin PLUS Glory Edition to set a new sales record. What surprised the market even more was that shortly after the launch of the Qin PLUS Glory Edition, BYD introduced the medium-sized sedan Qin L, which is a level higher than the Qin PLUS, but with a starting price of only RMB 99,800, consistent with last year's compact sedan Qin PLUS Champion Edition. This completely shocked the market. It is reported that the sales of Qin L are astonishing, 以致于 BYD's official dare not announce its order numbers for fear of causing further panic in the industry.

Geely Automobile, as a former leader in China's automotive industry, has not only lagged far behind BYD but has also lost any advantage compared to its two old rivals, Chery and Great Wall Motors. This has not satisfied Li Shufu, who has always had "lofty aspirations." However, when Geely Automobile is struggling to catch up, it suddenly realizes that not only has it not narrowed the gap with BYD, but it is likely to further widen the gap due to BYD's more competitive new products. This has led Geely Automobile to regard BYD as its biggest enemy. As a result, its executives have frequently targeted BYD, and even Li Shufu made anti-"internal competition" remarks with hidden meanings at the Chongqing Forum.

However, other Chinese automakers should not act so petty in the face of BYD's leading advantages. Before BYD's rise, although Chinese independent automotive brands had also made considerable progress, they were always firmly suppressed by joint ventures such as Volkswagen, Toyota, Honda, Nissan, General Motors, Ford, Hyundai, and Kia, and could only compete bitterly in the mid-to-low-end market. In the past three years, in the Chinese automotive market, it was almost through BYD's efforts alone that the strong barriers of joint ventures were broken down, seizing nearly 20% of the market share from them, thus leading the reversal of Chinese automotive brands against joint ventures.

Among them, one of the most noteworthy factors in achieving this reversal is BYD's breakthrough in plug-in hybrid technology, which has enabled China's automotive industry to overtake the curve in technology. It is precisely because of BYD's breakthrough in plug-in hybrid technology that it has pointed out a new direction for other Chinese automakers such as Geely, Chery, Great Wall, Changan, and GAC, and they have ultimately benefited from it. Among them, Geely Automobile has benefited the most. Among the current plug-in hybrid vehicle categories in China, Geely Automobile is the automaker with the highest sales after BYD. For example, Geely Automobile's Lynk & Co brand and Geely Galaxy have made significant progress in brand premiumization thanks to this technology. Therefore, to a certain extent, the heads of various Chinese automakers represented by Li Shufu should also thank Wang Chuanfu for leading BYD's breakthrough in plug-in hybrid technology. Without BYD, China's automotive industry would have lagged behind by many years and could never have shaken the leading position of joint ventures in the Chinese market.

In addition, from a global perspective, the rise of any automotive powerhouse is the result of the combined efforts of multiple outstanding automakers. For example, Germany has Volkswagen, BMW, and Mercedes-Benz; Japan has Toyota, Honda, and Nissan; the United States has General Motors and Ford; even South Korea has Hyundai and Kia. Each of these groups of companies is not only a competitor in the domestic market but also a helper in expanding territories in overseas markets. Therefore, I suggest that the heads of several core Chinese automakers should not be hostile to BYD because of its strength. There should be less internal strife, a broader perspective, and a longer-term vision. "Together, we are Chinese automakers," and only then can we bring about the ultimate strength of Chinese automakers.

The following is a transcript of Wang Chuanfu's speech:

I remember coming here three or four years ago, and we talked about the market share of independent brands. After a few years, it has really changed a lot. It should be said that China's new energy vehicles have undergone earth-shaking changes. Significant changes have taken place in its scale, quality, industrial chain, and cost.

As everyone can see, many foreign countries are anxious about the development of China's new energy vehicles, and some are even afraid. In fact, when we say we are good, you may not believe it. But in fact, the concern and fear of our foreign competitors prove that we have really done well. If you are not strong, others won't be afraid, especially in Europe, the birthplace of automobiles, and also in the United States, with powerful automotive industries like Ford.

We should be proud of our Chinese independent brands. In recent years, China's independent brands have made considerable progress in technology upgrading, industrial chain construction, product development, and marketing. In 2014, it was said that China's automotive industry was big but not strong, and that to transform from a big automotive country to a powerful automotive country, new energy vehicles were the way forward. Looking back on this statement after 10 years, it should be said that Chinese enterprises have produced real results and realized this strategic guidance.

As everyone knows, the development of any industry has both joys and sorrows, challenges and opportunities, and the new energy automotive industry is no exception. A few days ago, I also saw online discussions about "roll" issues, including rolling prices, rolling technology, rolling scale, and now even rolling traffic, especially the traffic of bosses. In fact, looking back in 10 or 5 years, it will be very interesting.

In fact, roll is a kind of competition, which is the essence of a market economy. After 40 years of reform and opening up, China has undergone earth-shaking changes under a market economy, which is visible to all. What is the core of a market economy? It is competition, and competition brings prosperity. The prosperity of the motherland over the past 40 years has been accompanied by competition and market development, which has produced so many commodities, changed lives, and achieved economic takeoff. In essence, it is competition, and roll is a kind of competition. I believe that all entrepreneurs should embrace and participate in this roll, embrace this competition, stand out in the competition, contribute to the country, uphold Chinese brands, and create world-class brands.

I think this is a natural law. Looking back, you can see our home appliances and mobile phones. How many brands did we originally have for mobile phones? Hundreds of brands. At that time, in Shenzhen, many husband-and-wife stores could make a mobile phone and a brand. Through a decade of survival of the fittest, only a few Chinese mobile phone brands remain, and they are all world-class. The same is true for home appliances. Through continuous survival of the fittest, only a few global home appliance companies have formed. Engineering infrastructure, as well as solar energy, especially solar energy, was once dominated by many companies. This is a natural law, and there is no need to be anxious. Only by actively embracing and participating can we truly emerge from the competition.

Today's conference will discuss new productive forces, and I believe that the core of new productive forces is innovation. Among these new productive forces, how to leverage the advantages of innovation, especially in the new energy automotive industry in which we are engaged, is crucial. New energy vehicles replacing traditional fuel vehicles is now a general trend that cannot be stopped. We have recently seen that the weekly insurance volume has exceeded 50%, which means that new energy vehicles have already surpassed fuel vehicles.

So you can see that this revolution is driven by technology, specifically the technology of new energy vehicles replacing that of traditional fuel vehicles. This technological revolution is a driving force, and the main driver of technology is innovation. Therefore, I believe that in the automotive sector, new productive forces are about how to leverage innovative technology and products to drive the development of enterprises in this competition, ultimately promoting the transformation and upgrading of the entire national industry.

In addition to innovation, talent is also crucial. Every enterprise must have a large team of engineers engaged in innovative development, especially in the field of new energy vehicles, which involves many talents in areas such as batteries, motors, electronic controls, power, and semiconductors. These talents cannot be recruited; they must be cultivated. China's automotive industry has accumulated a large number of talents in electric vehicles, from nothing to excellence. Each enterprise has many R&D talents, and I believe that BYD is no exception.

Over the past decade, we have focused on a large industrial layout around new energy vehicles. We now have approximately 100,000 engineers, whom we call the "Engineer Heavenly Legion," to reserve the talent we need in various fields required for electric vehicles, including batteries, motors, and electronic controls. Of course, China also has a natural favorable environment, with more than 10 million college graduates every year, especially top-tier students from universities like Tsinghua, Peking University, 985, and 211, providing a natural soil for us to build R&D talent. Therefore, I believe that Chinese entrepreneurs are very fortunate to have not only ordinary labor resources but also many high-level R&D personnel. It is because of these resources that Chinese enterprises can create a higher level in many fields. As long as these people are given a sufficient platform and sufficient R&D funding, over time, they will bring disruptive technologies to the enterprise. Therefore, these talents are willing to develop innovative new technologies in R&D centers, which is their life dream.

I am an engineer myself. In 1997, I was a researcher at the Beijing Nonferrous Metals Research Institute. Of course, we also have requirements for salary, but what we want more is a good R&D platform, good funding, and good projects. This allows our R&D personnel to innovate freely and develop their ideas through R&D, project funding, and platforms, ultimately achieving mass production. That is the best and greatest dream of our R&D personnel. Of course, income is also important, but a good platform is sometimes even more important than your income. I believe that talent and R&D teams need to be guaranteed, which is the foundation for an enterprise to engage in new productive forces and innovation-driven development.

Another factor is our mechanism. Because new energy vehicles are completely new, traditional fuel vehicles have a development history of 100 years, but new energy vehicles have only existed for the past decade or so. Therefore, in the process of innovation, the integration of various technologies and integrated innovation are particularly important. At BYD, we have taken the lead in establishing a highly vertically integrated platform, breaking down barriers between industries and allowing our engineers, 100,000 engineers, to innovate flexibly and freely in this highly vertically integrated environment. BYD's battery, motor, electronic control, chassis, and cloud suspension systems are all highly efficient.

In fact, looking at the hundred-year history of the automotive industry, in the early days when automobiles first emerged, companies like Benz, BMW, and Ford were also vertically integrated, doing everything themselves because they could not buy these new things. This allowed them to iterate quickly, form innovations, and establish the entire industrial chain. History is remarkably similar. One hundred years ago, when developing new energy vehicles, we have returned to the past. This high degree of vertical integration is conducive to innovation and efficiency. When making batteries, the cooperation between the entire vehicle, motor, and electronic control is highly vertical, making it faster to set many standards and improve efficiency.

Others may take five years to develop a product, but we may only need two years or even one year. If you say it takes three years, how much is three years worth? During a period of change, these three years may make an enterprise soar or collapse. If you can lead by three years, it is something that money cannot buy. In this way, you can achieve a leading position in this highly competitive revolution where new energy vehicles replace fuel vehicles.

At BYD, we obviously cooperate within this highly vertically integrated industrial system to build our industrial chain, just like Benz did in the past. However, perhaps after this industry revolution, when it returns to management-driven development, we may also dismantle and return to specialized division of labor. But at this stage, I think vertical integration still brings significant innovation, benefits, and cost advantages. This is the path that BYD has taken in recent years and has gained some valuable experience.

With talent, a highly integrated vertical integration system, strategic guidance, and the strong support of Chinese consumers, who are full of love and enthusiasm for new energy vehicles, these factors have combined to enable new energy vehicles to achieve tremendous development. Based on the theme of today's conference, our feeling is that the combination of innovation and vertical integration is some of the experiences and insights gained by BYD in recent years.

The road ahead is still long. Although new energy vehicles have already crossed a threshold in their growth, to achieve healthier growth, they still need to overcome many difficulties, including infrastructure, consumers, and how enterprises can do better. This requires our entrepreneurs to have a clearer understanding. I believe that as long as we continue to invest in innovation, we will definitely stand out in this revolution. Thank you all.

The following is a transcript of Li Shufu's speech:

Respected leaders and colleagues, everyone