Tesla & BYD Search For New European Factories

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A few years ago, the news about electric cars was filled with new startups in China, all of which were potential rivals to Tesla — NIO, XPeng, Li Auto, Faraday Future, and a dozen or so more. Their stock prices exploded, and some early investors made spectacular profits, but then they all fell back to Earth as the realities of the marketplace soured most of their dreams.

But now a new leader has emerged from the pack. All at once, BYD is everywhere. It is in Asia, Australia, New Zealand, South America, and Europe. It has a range of models, most of them at the lower end of the market where people are looking for value more than pizzazz.

Tesla Eyes Second European Factory

Now it appears that both Tesla and BYD have their eyes on new European factories — the second for Tesla and the first for BYD. And both are at least thinking about building their new factories in France. Elon Musk has met recently with French president Emmanuel Macron, who would dearly love to see more battery factories and electric car factories in his country. Macron has been an outspoken supporter of new EU investment rules to counter the Inflation Reduction Act that went into effect last August and is driving many new investments in America.

Let’s work together ! #ChooseFrance 🇫🇷 pic.twitter.com/6R01XT44rw

— Emmanuel Macron (@EmmanuelMacron) June 16, 2023

According to Car and Driver, this is Musk’s second journey to France this month. This time in addition to meeting with Macron, he put in an appearance at the Viva Tech summit last Friday. He has also been talking with Italian prime minister Giorgia Meloni, and there are also rumors that Spain could be on Musk’s radar. That country has recently agreed to several economic incentives to attract further investment in auto manufacturing by Volkswagen Group.

“It will be great to have a Tesla factory in France. There has been a lot of effort and energy to make sure this is possible, and this can happen,” France’s digital minister, Jean-Noël Barrot, told CNBC. “We have also invested in an . . . entire sector of electric batteries, so we will try to convince him that France is the best possible place in Europe to establish the next Tesla factory.”

There is a fine irony in the fact that those words are from the minister in charge of digital technology in France, since there is a brouhaha brewing in Europe about how Twitter is operating since it was purchased by Musk last year. The EU Digital Services Act that goes into effect in 2024 will require digital platforms like Twitter to hire more people to fact check content and prevent disinformation and illegal content from being published. Meanwhile, French regulators are considering banning Twitter until it complies with the terms of the Digital Services Act.

“Today, France is more attractive than ever,” French industry minister Roland Lescure said during a radio interview this week. “But the competition with other countries is extremely fierce, so we’re bringing out all of our strengths.” France’s competitive advantages include inexpensive reneable electricity that is available for building new factories, he added.

BYD Also Wants A European Factory

Tesla isn’t the only EV company France would like to see set up shop in-country. France has been talking to Chinese automaker BYD, which announced earlier this month that it would start selling five EVs in France by the end of 2023. According to Automotive News Europe, BYD is considering France, Spain, or Germany for its first European factory. BYD hopes to start producing EVs in Europe in 2025.

BYD executive vice president Stella Li told Bloomberg in February that the company wants to build cars in Europe and is carrying out feasibility studies. According to French newspaper Les Echos, BYD is talking to the French government about building a factory in the country. Germany and Spain are other potential locations, according to Chinese media reports. The UK is not a contender because of Brexit, those reports said. Congratulations to Brexit Boris, who singlehandedly turned the UK into one of the worst places on Earth for corporate investment.

Automotive News Europe says BYD is more likely to build its own factory rather than acquire an existing factory, like Ford’s Saarlouis factory in Germany that will be decommissioned after production of the Focus ends next year. The company plans to select a location for a new factory before the end of the year, and expects to begin production in 2025.

ANE says BYD began its expansion into Europe last year with three battery-electric models — the Atto 3 compact crossover, the Tang large SUV, and the Han large sedan. The Dolphin small hatchback will arrive at European dealerships next month and the Seal sedan will go on sale in Europe in September. BYD’s European markets now include Germany, France, the UK, Spain, and the Scandinavian countries, with more to follow. The company has an electric bus factory in Hungary, which opened in 2016.

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There is perhaps a message for Tesla in there. BYD is following what has become common practice in the auto industry by offering many different models to address a variety of market segments. Tesla, to date, relies heavily on the Model Y. While it is the bestselling electric car in the world — and is the bestselling car period in some markets — it is one model and it’s not exactly inexpensive. BYD makes some high end cars, but its focus is on the mass market. It is also introducing new models on a regular basis, something Tesla has declined to do.

Tesla is more inclined to introduce one model every few years and then constantly improve it over time while maintaining its original appearance more or less intact. That flies in the face of conventional wisdom in the car business, where constant changes in appearance are considered the key to encouraging customers to buy a new car every two to three years.

This suggests a titanic battle is shaping up between Tesla and BYD, two companies that are totally committed to manufacturing electric cars (and trucks and buses in the case of BYD) but which have quite different business philosophies. BYD’s is more traditional, while Tesla’s is more disruptive. Both may be needed to make the EV revolution a reality.