Podcast: TP Huang

I spoke with ⁠analyst TP Huang⁠ about BYD, exploring his writing and analysis of the company, electrification and China's new industrial revolution.

If you are interested in these topics, I highly recommend you read TP's Substack (link). He excels in explaining the engineering and technical aspects which make electrification and BYD's rapid progress possible. TP also posts regularly on X (@tphuang).

You can read the transcript below or listen to our conversation on Apple Podcasts (link), Spotify (link) or wherever you get your podcasts.

The following transcript has been lightly edited for clarity:

Hi, this is Graham Rhodes. Welcome to the Longriver Podcast. I'm delighted to be speaking today with TP Huang, author of the eponymous Substack, who I think is one of the most thoughtful and insightful writers on BYD, the electric vehicle industry in China, and many other fascinating developments within China's industrial space.

TP, thank you very much for agreeing to this podcast, and welcome to the show.

Thanks, Graham. I'm glad to talk about BYD, EVs, and everything in between.

Cool. Before we get too far into it, I have to give a little disclaimer: nothing you hear today is financial advice. We're not recommending anyone go out and buy or sell any securities. Are we, TP?

No.

Okay, cool. If you can, TP, why don’t you give us a little bit of background about yourself?

Yeah. I live in America, and I’m basically a Chinese American who has been following BYD since 2008. My current profession is in artificial intelligence, but I worked for quite a long time in the finance industry before this. So the numbers and technology side of things really fascinates me.

I’ve always been very interested in the tech scene in China. And more recently, ever since I bought my Tesla a few years ago, I’ve been really interested in EVs. BYD is a very interesting company, so that’s why I’ve been following them pretty closely lately.

And you’ve actually been writing publicly for quite a while—you had a blog going back as far as 2006, right?

Yeah, I did. Back then, I was writing more about Chinese military topics. Then I paused for a while, just due to life stuff.

More recently, I started a Substack a couple of years ago that's more focused on technology and EVs. That’s also what my Twitter account—sorry, I guess I should call it X now—is mostly about.

Okay. And why do you like to write publicly?

That’s probably an inherited trait—my mother really enjoyed writing and expressing her thoughts. Personally, I’m really interested in learning how things work, and then writing helps me organize and share my thoughts afterward.

I think everyone should do what makes them happy in life.

I think BYD is such a good way to focus this conversation on a much broader topic, which is the rise of what you call Industry 4.0, and the transformation of industry in China. That ties into a lot of the themes you’ve been writing about—whether it's military tech, EVs, or other broader industrial spaces.

The last few weeks have seen some exciting announcements from BYD—namely the release of the Julion, the Level 2 ADAS system that’s going to be rolled out across all cars in their range. And I think it was just last week that they announced five-minute charging with 1-megawatt capacity, starting with some of their higher-end models.

For a lot of people, this feels like a shock—how is this all happening so quickly? But to me, it feels more like an overnight success that's actually been decades in the making. So I’m really hoping you can help us understand how BYD is able to move so quickly, and how it has built a business capable of operating at this kind of cadence.

I think it’s important to recognize that BYD has some really smart people behind it. Wang Chuanfu and his partner Stella are really bright, and they’ve had a clear vision for BYD for a long time. They started as a battery company—that’s their core DNA.

They got into cars because Wang Chuanfu had a long-term vision of how the future would look. If you look back to the early 2000s, there was already a concern in China about energy security—particularly the vulnerability of the Malacca Strait, through which much of China’s energy supply passes. There was this underlying fear that the U.S. Navy or another foreign power could cut off access to vital energy resources.

So there was always this hope, or strategic goal, within China for energy independence. Wang recognized early on that China is rich in solar energy. If you think about it—America has fossil fuels, Saudi Arabia has oil, Australia has natural gas and minerals, and Russia has both oil and gas. China, by contrast, has vast areas with strong sun exposure and available land. So it has significant potential for renewables.

His dream was to achieve energy self-sufficiency through solar power, and to move transportation off fossil fuels by making EVs and electric buses. But to deal with the intermittency of renewables, you also need batteries. So he had that vision very early on.

That’s why he got into cars. He literally bought a car company without knowing how to drive—he just had the vision. He believed that in order for China to transition to a clean energy future, it had to start with transportation, which is one of the biggest emitters and a major factor in energy dependence.

Let’s try to put this in context. So, Wang Chuanfu is a materials science graduate. He moves to Shenzhen in the 1990s, and soon after, he founds his own company. Am I right that the company initially supplied cheaper batteries for feature phones—like for Nokia and others?

Yeah. In the early stages, he was basically doing what a lot of Chinese entrepreneurs were doing—getting into the low end of the market and winning on cost. Chinese labor was really cheap back then, so his focus was on cost control and producing batteries that undercut companies like Panasonic.

And in 2003, despite not knowing how to drive, he goes to Xi’an and acquires a failing auto manufacturer. And didn’t he buy a semiconductor company around the same time?

Yes, around the same time. The semiconductor acquisition was interesting because people didn’t understand why a battery company would want to get into semiconductors.

He also got into LEDs, and again, people were puzzled by that. But later it became clear—if BYD was going to become the largest automaker in the world, being able to produce 6 billion LEDs a year was going to be a huge asset.

He also got into solar, obviously, and BYD Electronics. These were all parts of his strategy to be fully vertically integrated. Unlike many automakers at the time, his end goal was to create a complete new energy ecosystem in which BYD had a hand in every part of the process.

He started off selling mostly internal combustion engine cars, but he invested heavily in R&D to develop dual-motor vehicles. The F3DM was his first dual-motor car. And he was an early pioneer in EVs, well before anyone else.

He developed an 800-volt architecture years ago and started building charging stations in China early on. A lot of the early charging infrastructure in China was built with BYD’s help.

Their focus was always on developing core competencies. When the BYD Han came out in 2020 or 2021, that was the first moment when you could really say: okay, BYD has something special here.

It was a car that could go from 0 to 100 km/h in 3.9 seconds. At the time, no other Chinese automaker was doing that.

So I'm curious—how would you define BYD today? Because it's not just a carmaker, is it? It's so different even from a traditional OEM in the sense that they make many of their own components.

Yeah, I would consider them more of an energy transition company that’s actively expanding into more areas. When we talk about all the recent work they’ve done—like ADAS and fast charging—that's part of a broader strategy.

Think about it this way: when you hire people, when you recruit talent, there’s a ramp-up period—from the moment someone starts working for you to when they become productive. And then, when you develop new car models, it can take two or more years for that technology to be incorporated into production vehicles.

So a lot of the tech you see on BYD cars today was actually developed or in the lab two or three years ago—back when their R&D team was still relatively small. They’ve gone through a massive ramp-up recently. Now they have close to a million employees, with around 120,000 researchers as of the end of 2024. A few years ago, that number was much smaller.

What I’m saying is: up to now, BYD has been very focused on energy transition. But going forward, I don’t expect them to stop there. I’d expect them to push a lot harder into areas like artificial intelligence and semiconductors, for example. They’ll still be huge in the auto industry—the goal is still to dominate there—but in terms of electronics, AI, and semiconductors, I imagine they’ll be committing a lot more resources.

You mentioned the inflection point for BYD’s EV program being the launch of the Han model—was that in 2021? I’m curious, can you tell us a bit more about what makes an electric vehicle superior? So, in other words, why is this such a desirable product to have?

Yeah, if you look at it from a historical perspective, it’s very hard for mechanical systems to beat electrical systems. And it’s very hard for electrical systems to beat software-based ones.

Take the phone industry, for example. We started with those early Alexander Graham Bell-style rotary phones—remember the ones where you had to physically turn the dial? Then came push-button phones. Then handheld phones, which shifted things into the realm of consumer electronics. And then we got smartphones—more intelligent, software-oriented, feature-rich—and those became dominant.

So, from that point of view, it’s kind of strange that the auto industry remained stuck for so long in this outdated internal combustion engine model. Even the airline industry moved faster—we had fly-by-wire technology in planes like the Airbus A320 back in the 1980s. But we didn’t have drive-by-wire in cars until very recently. That tells you how slowly automakers were innovating.

Now, in terms of why electric is superior to internal combustion—it comes down to energy efficiency and responsiveness. The rate at which a battery can discharge energy is much faster than what you get with a combustion engine.

If you’ve ever stepped into a Tesla or any electric vehicle, you’ll notice that the moment you press the accelerator, the car just goes. The electric motor kicks in instantly. There's no lag, no delay from combustion or gear shifting. With an ICE vehicle, there’s that initial pause while the engine builds enough energy to start rotating and moving the car.

Because of this, you don’t get the same level of acceleration from ICE vehicles as you do from EVs.

Another advantage of plug-in hybrids or battery electric vehicles is that the whole system is wired. That means sensors, reactions, safety systems—they all respond more quickly. The car can detect a potential collision and take corrective action almost instantaneously.

Once you’ve built out that electrical architecture inside the car, it becomes a lot easier to layer on additional capabilities—whether it’s acceleration, safety, or integrating more advanced features like ADAS and AI-driven systems.

Mechanical controls just aren’t as precise. Electrical controls react faster, and that makes a real difference when it comes to driving performance and safety.

That’s why, at least in the Chinese market, we’re seeing people move rapidly toward electric systems.

And when it comes to integrating AI into cognitive technologies and ADAS, it’s much easier to do that when the car is already wired up with the necessary chips and internal systems.

I quite like the new definition from CATL—calling them EIVs, or electric intelligent vehicles, rather than just EVs. I think that really encapsulates everything you’re describing about what you can do with the software.

Yeah, because I think most customers out there—they’re not all looking to make an environmental statement. Once you get past that initial group of environmentally conscious buyers, you need to win over the rest through features.

That’s why Chinese cars are becoming more like consumer electronics. There’s a lot more built-in interest. We’re going from the Nokia moment to the iPhone—or Android—moment. That’s what’s happening in the car industry right now.

Yeah, and that’s perfectly represented by Xiaomi—a consumer electronics company now becoming the flag bearer for the whole industry. And they’ve done a great—

Apple wasn’t able to do it, but Xiaomi was.

Yeah. Their car looks amazing, and the performance is wicked.

But TP, going back a second—when did NEVs really start to take off in China? Was it around the same time the BYD Han model came out, or was it later?

2021 was when it really started taking off. There was the “Tesla effect,” where people in the Chinese auto market began to get the sense that EVs were just better.

That was when BYD launched the Han, along with the e-Platform 3.0, the Blade Battery, and DM 4.0. A lot of that technology—both plug-in hybrid and battery electric—became really popular.

Around that time, other NEV makers improved too. XPeng and NIO started making good cars, and Li Auto did as well. Tesla also brought a wave of excitement into the EV space.

That’s when you saw companies like Xiaomi get involved—they launched their EV project in 2021. Huawei had been working on it for a while, but 2022–2023 was when they really started making an impact.

So I’d say it was a confluence of factors: the Tesla effect, plus the fact that the technology finally reached a point where range was sufficient, charging infrastructure was expanding, and AI features were becoming cool enough for people to think, “This is better than an internal combustion engine car.”

I’m old enough to remember when safety was a big concern too—some of those early electric cars back in the early 2010s, you’d hear stories of them catching fire when they overheated. So now, when you think about safety, range, charging, and features—it feels like every reason not to buy an EV has been overcome, thanks to advances in engineering and technology.

And I think one of the most interesting developments in recent years has been price. There was that BYD “Electric is Cheaper Than Gas” campaign—that really drove the message home, didn’t it? So now, price isn’t even a barrier if you want a car like this.

Yeah, I think I just want to explain why we’ve seen this happen in China—because I think there are a few factors, right?

First, there’s no particular reason internal combustion engine cars should be cheaper than EVs. If you think about it, EV architecture really isn’t that complicated.

You’ve got your electric motor, your battery, your electric drive, and your electric control system. The battery powers the motor, and the car moves. That entire process is less complex than all the fancy engineering that’s gone into internal combustion engine (ICE) vehicles over the years.

So the key is: once you can ramp up production and build out your supply chain, and once the CapEx is paid off, the cost comes down significantly.

Now, BYD itself has quite a few advantages over its competitors. It’s interesting—if you look at what they do, they start by acquiring land. They make deals with local governments, saying, “We want to build a huge factory here, and we need this land.” So they acquire a big plot and expand from there.

Then they bring in their own construction company—because yes, they actually have their own construction company—to build the facility. And that construction company uses electric trucks and equipment that BYD itself manufactures.

A lot of the equipment used inside their factories is also domestically sourced or made in-house. For example, BYD Electronics manufactures EMRs—autonomous mobile robots that move materials around the factory. They have other machines and equipment made by their own subsidiaries as well, though of course, they also buy from outside vendors when needed.

Their production is highly automated. And in terms of energy, they rely heavily on solar panels to power operations. They get very cheap electricity from their own solar production facilities, which they install on rooftops and elsewhere. They also have their own backup battery systems to level out electricity demand.

When it comes to vehicle components, they produce most of the major parts themselves. They even make the LCD screens.

They manufacture all their own electric motors and electrical systems. They control the entire battery production process. They own lithium mines and operate their own anode, electrolyte, and separator plants. They’ve invested heavily in the raw materials and basic components—not just for the cars, but for the battery systems that power them.

They’ve also put a lot into semiconductors. They produce many of their own analog chips, microcontroller units (MCUs), and power control chips—including silicon carbide power modules.

They’ve got the best silicon carbide chips in China right now. And they’re getting into chip design too. So they’re developing AI chips for ADAS systems and the smart cockpit. And that’s something we’re going to see a lot more of over the next few years.

Let’s zoom out for a second, because I think this is really interesting.

You start with this very expansive vision of electrifying the economy—driven by both national strategic concerns and environmental goals. And then, at the micro level, you’ve got this guy who starts by making low-cost lithium-ion batteries, and then expands outward into the application of those batteries.

Can you walk us through why BYD pursued this path of vertical integration? And maybe pull together some of the thoughts you’ve already shared—what advantages does this give them, in terms of cost, or their ability to rapidly iterate on new products and designs?

Yeah, so I think part of the business culture in China is very much centered around achieving as much vertical integration as possible—for two main reasons: one, to lower costs, and two, to control your own destiny.

When I talk about controlling your own destiny, I mean not having to worry about supply issues, or being held hostage by suppliers who might have a monopoly in a certain area and charge 10x what it actually costs to produce.

You see a lot of this in the solar industry. Most of the major solar panel makers in China are highly vertically integrated. BYD is similar in that regard, and it’s also true for Chinese wind turbine manufacturers.

So it’s a common theme in Chinese industry. You don’t see it as much in the West, but if companies want to compete with Chinese firms, they’ll likely need to match this level of vertical integration. Tesla is probably the best example outside of China—they’ve done a great job controlling costs and also produce many of their components in-house.

But Tesla’s also deeply integrated into the Chinese auto supply chain.

Right, and there’s definitely always been a cultural concern within China about being cut off from Western technology. To prevent that, there’s a strong push to develop everything internally.

Okay, maybe we can use the example of silicon carbide to illustrate this. Tell us a bit about it—because I think you've written that BYD may now be the world’s largest manufacturer of silicon carbide.

Can you talk about the challenges involved in that, what the applications are, and how that ties into some of BYD’s recent announcements?

And for a layman like me, can you explain what silicon carbide is and why it matters for EVs?

Sure. So, first-generation semiconductor materials are based on silicon—that’s what most of the chips in our phones use. Apple, NVIDIA, Qualcomm—those chips are all built on silicon, especially the ones using leading-edge nodes like 3nm or 5nm processes.

But then you have what are known as second- and third-generation semiconductor materials. Silicon carbide is considered a third-generation material.

It has properties that make it more resistant to high voltage, high current, and heat, and it also results in less energy loss.

So when it comes to EVs, the key is efficiency. With silicon carbide, you can operate at higher voltages more efficiently. You can build more compact inverter systems, which makes the components smaller and lighter.

Right now, the entire EV industry is moving toward higher-voltage platforms. In China’s higher-end models, you’re already seeing charging systems using what’s called the 800-volt platform. BYD recently announced a 1000-volt platform.

The benefit of silicon carbide is that it allows you to operate at these higher voltages more efficiently, with less electricity lost in the process. That means more range.

One of the commonly cited benefits is that using silicon carbide chips can give you around 8% extra driving range.

The reason these chips weren’t widely used before is cost—they used to be expensive, so you'd only find them in high-end models. Tesla has used them for a while, and BYD initially only included them in the performance versions of the Han and Seal.

But as the cost of silicon carbide has come down, we’re seeing it adopted more broadly across the industry. And I’d expect that over the next year or so, as BYD ramps up production, most of their vehicles will use silicon carbide chips—simply because it's better technology.

To me, that really illustrates a couple of key points. One, BYD is not just a battery maker. And two, in order to solve the problem of how to charge faster and deliver more range, they’re looking into adjacent components as well—in this case, the substrate on which semiconductors are printed.

And then, to your point about costs coming down—that’s not some natural phenomenon. They’ve had to invest at massive scale to make that happen.

Yeah, it really requires a lot of R&D and also a lot of CapEx.

In the Western tech space, it’s not looked upon favorably to be involved in high CapEx, low-margin industries. But that’s the space BYD has had to operate in—and still does.

They’ve gone through a long period of that, and while their margins today are actually decent, their earnings are still not huge—mainly because there’s still a lot of depreciation on the books from all that CapEx.

We’ve talked a lot about vertical integration. What do you think are BYD’s other competitive advantages?

I think the leadership has a really long-term vision—and that’s rare. They also move really fast.

I’ll give you an example: the whole ADAS (advanced driver assistance systems) initiative actually started as a misstep by BYD.

They missed the boat at first. They understood that you need to go from EV to AV—autonomous vehicles—but they didn’t grasp how quickly that shift was happening. And back in 2023, they didn’t have a big smart car team. As I mentioned earlier, their R&D team was relatively small at the time, and not necessarily focused on autonomous driving.

So in 2023, there was this moment where Huawei came out with autonomous driving features that were significantly better than BYD’s. Li Auto and XPeng were also ahead.

There was this feeling in China that BYD was falling behind on software—that it had bad software, basically.

Yeah, that was the reputation they were getting. So Wang Chuanfu made a big pivot. He basically spent all of 2024 focused on getting BYD’s autonomous driving capabilities up to speed.

They held a major ADAS tech unveiling in January 2024, where they announced their platforms and new investments. Everyone expected them to go big—but the speed at which they actually moved exceeded all expectations.

Before the ADAS announcement came out, there was already speculation online about how widely deployed it would be. But what really shocked people was that almost every model in their lineup was going to get ADAS—for free.

The only ones that didn’t were the lowest-spec versions of the Seagull and the Qin Plus DM-i. That was significant, because BYD was saying: every car we sell is going to at least have the capability to drive on highways without the driver touching the wheel.

And even as recently as 2024, only about 10% of passenger vehicles in China had that level of functionality. So when the biggest EV maker in China suddenly moves to equip 95% of its lineup with L2+ ADAS, that’s a huge shift for the market.

What they also did—and this is smart—is they snapped up all the available supply in the market.

So when Wang Chuanfu made this move, he was incredibly ambitious—far more than anyone expected. I read somewhere that he personally spends 30% of his time just on the ADAS program.

He pushed his team to develop the algorithms for the entry-level ADAS version in-house, so they wouldn’t have to pay a premium to third-party partners like Momenta. That helped keep costs down.

And now he’s pushing them to develop BYD’s own AI chip, to lower costs even further.

That touches on a really good point—the intense competitive drive in the market. I’m wondering if you can tell us a bit about that competitive dynamic in the Chinese EV industry: where you think BYD is different from its competitors, and what's driving that intense competition?

Yeah, I think there are several very impressive players in the market, and many of them are extremely well-funded with strong technology.

But what really stands out about BYD is its ability to scale. This is a company that went from selling 400,000 cars a year to over 4 million. The way they’ve been able to scale up production so rapidly requires intense competitiveness, strong leadership, and excellent organizational capacity.

We're seeing a bit of that from others too. Take Xiaomi, for example. The fact that they weren’t even in the auto industry a year ago, and now they’ve essentially buried the Tesla Model 3 in China—that’s telling.

And that’s just their first model.

Exactly—wait until the second one comes out. It’s crazy. Even Xiaomi's pace of scaling up production within a year is incredibly impressive.

Yeah.

And you can see the competitive pressure everywhere in China.

Take Huawei, for example. Just a year ago, they were selling 30,000 to 40,000 vehicles a month under their AITO brand. Now, before launching their new M9 model, they’ve dropped to 10,000. I’m not saying they’re in trouble, but they’ve definitely hit a slowdown in orders.

It’s just such a hyper-competitive space. You launch a new model, and you might be hot for a few months—until a competitor drops something newer, flashier, or better, and suddenly they’ve stolen the spotlight.

Some recent success stories are companies like Leapmotor, which went from relative obscurity to becoming a pretty respectable EV maker. XPeng was almost dead and buried, and then they came out with the Mona M03—and now they’re back in the game with something highly competitive.

It’s a brutally cutthroat industry. Most players are willing to operate at zero margin—or even below margin—just to survive. There’s even a saying in the Chinese auto industry: Are you here to compete, or are you just going to lay down?

If you “lay down,” it means you’re giving up—and no one wants to give up. Everyone fights until the banks come and shut them down.

So it feels like one of the biggest beneficiaries of all this is the consumer—because the competition is driving prices down and fueling an explosion of features and innovation.

A lot of people outside China would probably be jealous of the options Chinese consumers have right now.

And I guess that kind of intense pressure has also contributed to the collapse of ICE market share—and the decline of foreign brand dominance—in China.

Yeah, I started talking about this back in 2023, but I really began writing more seriously about it in 2024.

In 2023, you could already see that Nissan and Honda were in trouble. Volkswagen and Toyota were still holding on a bit. And BMW, Audi, and Mercedes—what we call BBA in China—were basically holding flat or even hitting all-time high sales in China by lowering prices.

But by 2024, you could start to see the decline clearly. BMW sales in China, for example—it was very obvious. Honda sales were collapsing. And GM... GM's collapse was one of the most shocking. They were down something like 80% year-on-year in just the first seven months of 2024.

BMW’s situation was also alarming. Their average sales price was down 10–20%, and their sales volume was down 30–40%. Just insane numbers. And this was because their vehicles were simply becoming less competitive. Once consumers started seeing what else was available, they started switching.

As for the Japanese industry—they rely heavily on the American market too. But now, with Trump having just imposed a 25% tariff, combined with the hit they’re taking in the Chinese market, brands like Nissan and Honda are really in trouble.

I wouldn’t be surprised if Japan ends up losing several car brands over the next few years. When you’re losing both sales and market share, and your production footprint is too large, you’re going to have to downsize. The cost structure just becomes unsustainable.

Exactly. Once you start losing scale, everything unravels.

It also feels like the dimensions—or the vectors—of competition have shifted. It’s no longer about who can make a good internal combustion engine and manage a global supply chain. Now it’s about battery chemistry, software engineering, and things that traditional OEMs don’t really have the muscle for.

Yeah, and the Tier 1 suppliers are feeling it too. We’re seeing a lot of layoffs right now at Tier 1s.

I think it’s just because volume is coming down. If fewer ICE cars are being sold—or if they’re being sold at lower margins—then Tier 1s are obviously going to suffer.

And when Tier 1s start losing scale, the production costs of ICE cars go up. So over time, EVs will only become more competitive compared to ICE vehicles.

We can’t leave Tesla out of this conversation. How is Tesla doing in China?

I think Tesla is losing competitiveness in China as well—and it has nothing to do with Elon Musk himself.

It’s just a case of overwhelming competition. Tesla hasn't moved fast enough.

When it first entered the Chinese market with just the Model 3 and Model Y, that was enough—they were very competitive at a time when other automakers didn’t have many EV models. But now, everyone has multiple models, and Tesla’s lineup hasn’t kept up.

Tesla's big advantage used to be its AI and autonomous driving tech. But that’s very hard to develop effectively when you don’t have access to localized training data.

Chinese roads are incredibly complex. And because of the current AI-related restrictions between the U.S. and China, Tesla can’t easily export its models to China for training, nor can it get Chinese driving data out of the country to train abroad.

So you end up with a situation where Tesla’s ADAS doesn’t really understand Chinese road rules. And when all the Chinese competitors are offering ADAS systems that are well-tuned to local driving conditions, Tesla falls behind.

There are even stories of drivers using Tesla’s ADAS in China and racking up so many traffic violations during their first drive that they’re afraid to use it again.

You were saying the two Tesla models haven’t been refreshed in a while, and one of their differentiating technologies—ADAS—has now, thanks to BYD, essentially become a commodity. And it wasn’t even trained well for local conditions.

Yeah. And I just don’t think Tesla is moving fast enough to deal with the competitive pressures.

That’s actually the issue all legacy automakers are facing—they’re just not moving fast enough.

One thing I tweeted today was how, after Deepal released its R1 model, which became really popular in China, basically all the Chinese OEMs said they were going to integrate it—within two or three weeks of the announcement.

Meanwhile, today BMW announced that it’s working with Alibaba to develop an AI cockpit for its cars—but that won’t arrive until 2026.

So you see these German automakers making big announcements about their electrification and AI efforts, but everything is on a two- or three-year release cycle.

That’s part of why they’re losing. They move too slowly.

One of the other tectonic shifts in recent years is that China has, if I’m correct, become the world’s largest exporter of automobiles. That’s another change decades in the making.

Can you talk to us a bit about that? And do you think the export market serves as a kind of safety valve for the intense competition in the domestic market?

And beyond tariffs, how do you think OEMs in places like Japan, Europe, or even the U.S. will respond to this wave of—frankly—a superior product coming out of China?

Yeah, the interesting thing about China’s auto exports is that the majority of them are still internal combustion engine vehicles.

Many of the companies are exporting their older ICE models because they were the first to build up overseas distribution networks.

And in many of these destination countries, there isn’t much charging infrastructure yet, so it’s still hard to sell EVs in those markets.

In terms of EV exports, that’s only started picking up more recently. For example, BYD exported over 400,000 EVs last year, and this year they’re aiming to double that to around 800,000—which is a big number.

But a lot of the exports are also coming from foreign automakers. They’ve got underutilized or idle factories in China that are no longer competitive in the domestic market.

So if you’re, say, Hyundai, and you have empty factories in China because your products aren’t selling locally anymore, what do you do? You start manufacturing in China and exporting to other countries instead.

I think in China right now, there’s a growing distinction between Made in China and Designed in China. As you move up the value chain, the goal is to have more Designed in China products—and that’s where BYD comes in.

It’s a lot more profitable for "China Inc.," for example, to design cars and then assemble them overseas, rather than just being the place where cars are assembled and exported.

What you’re still seeing with most exports from BYD and other EV makers is that they’re building the cars in China and shipping them overseas. But then those cars get hit with tariffs in many of those countries.

When BYD enters a new market, there’s often some sort of agreement in place where the local government says, “Okay, we won’t impose tariffs—but you need to manufacture locally.”

We’ve already seen this happen in Brazil, Thailand, and Indonesia with BYD.

So what BYD does is promise the local government: “We’ll start by testing the market. We’ll build our sales network and see how well the cars sell.” Usually, they do pretty well. Then they move to the next phase: building a local car assembly plant.

From there, the local governments typically say, “We don’t just want to be a final assembly point. You need to bring more of your supply chain here.”

So over time, you get greater and greater localization. The critical technologies and key parts of the supply chain will still be developed and produced in China, but a lot of the other components will be manufactured in the country where the cars are sold. That’s how they maintain market access.

The U.S. is a different story—Europe, too, to some extent—but in most countries, as long as you build the cars locally, they’re happy.

If you build a car locally in South Africa, for example, that’s just as good as GM or Volkswagen building there. It’s not controversial.

Even within Europe, a lot of the new plants are being built in countries that have an auto industry but don’t necessarily have a national brand.

Spain, for instance, has a Volkswagen Group brand, but there’s no uniquely Spanish version of Volkswagen. So they really welcome the investment.

So I think we’re going to see more automakers getting around tariffs and market access issues by establishing local assembly plants and gradually increasing their local content percentage over time.

But just by virtue of the superior product—and the increasing scale that supports more innovation at lower cost—it feels like an unstoppable movement.

We’re just going to see more and more Chinese cars being exported—or, as you say, eventually localized outside of China.

In other words, their market share is going to keep growing.

Yeah, so I would say that if you look at the Chinese auto market—the industry itself—it currently produces about 38% of global vehicle output.

I don’t really see that number increasing significantly beyond 38%, because that’s already a huge share. Maybe it gets to 40%, but what will increase significantly over the next five years is the share of the global market held by Chinese brands.

That’s a key distinction.

Another point I want to make is that if you go to many countries around the world, car prices are actually higher than what you'd find in Europe or North America.

If the main exporter—or the main foreign brand entering those countries—is a Chinese automaker, then car prices will come down. For example, a company like BYD isn’t going to sell a car for more in Morocco than they would in Germany.

So there’s still a lot of growth potential outside North America and Europe. Even if Chinese brands only have, say, 5% of the European market, they already dominate the Chinese domestic market and are capturing a growing share in Latin America, Southeast Asia, and Africa.

People often overlook those markets, but if you can dominate them, the growth is still significant in percentage terms over time.

TP, I’d like to go back for a second to look at BYD’s battery chemistry.

Why did they choose to go the route of lithium iron phosphate (LFP), and what are the pros and cons of that choice?

Yeah, so I think one of the main issues with LFP batteries early on was their lower energy density compared to the more conventionally used battery chemistry at the time—nickel cobalt manganese, or NCM.

Also known as, lithium ternary batteries.

Back then, people favored NCM because it was the only chemistry that could reliably deliver a decent range—like 600 kilometers or more.

But BYD, I think, always saw advantages in LFP early on because it’s inherently a safer technology. You can also use a larger portion of the battery’s capacity.

Take my Tesla, for example. I’m supposed to keep the battery between 10–15% and 80% most of the time. Once it drops below 15%, I have to charge it, and I almost never charge it above 80% during a regular week.

So effectively, I only get to use 60–65% of the battery’s total capacity.

With LFP, on the other hand, you can charge it to a much higher level without causing damage. That means you get more usable capacity and more charge cycles over the battery’s lifespan.

What BYD did was really perfect the chemistry, production process, and packing technology of LFP with their Blade Battery.

They became confident enough to subject the battery to extreme tests—like the nail penetration test, or being crushed by a 50-ton truck—because LFP is so thermally stable. It won’t combust under abuse the way NCM might.

And because of that confidence, they were able to take it a step further and develop structural battery packs—integrating the battery directly into the vehicle’s chassis.

That reduced some of the negative effects of lower energy density.

Now, the interesting thing about the LFP battery is that it also has a higher charging and discharging rate compared to NCM batteries.

If you think about it, the discharging rate of a battery is really important—because when you can discharge at a faster rate, you can accelerate faster, maintain acceleration for longer, and achieve higher top speeds.

When the BYD Han was doing 0 to 100 km/h in 3.9 seconds and hitting over 200 km/h, most of the ternary (NCM) batteries on the market weren’t reaching that level of performance. They were topping out around 180 km/h.

Now you’re seeing BYD models go from 0 to 200 km/h in something like seven seconds, and they can exceed 300 km/h.

What that tells you is that with the right battery, you can sustain very high output. Your electric motors can operate at the upper end of their performance range for longer.

A lot of times when EV makers say their motor can output, say, 350 kilowatts—that’s technically true, but only for a few seconds. If you want to sustain that level of power for 15 seconds or more, you need a battery that can consistently deliver high discharge rates without overheating or degrading.

And the same goes for charging. The LFP battery that BYD has developed—particularly their latest iterations—can sustain high charging rates.

I don’t know if you’ve seen the charging curve of the Tesla Model Y in Europe. The long-range version uses a non-BYD battery, while the short-range version uses a BYD battery.

What’s interesting is that the short-range version with the BYD battery has a much smoother charging curve. From 10% to 60%, it charges at a consistently high rate. The NCM battery, on the other hand, peaks early and then drops off quickly.

Oh really?

Yeah. That’s the advantage of BYD’s battery tech—when you use the right materials, and when the battery has lower internal resistance, it can handle higher heat and maintain efficiency.

Pair that with superior battery management software, and you can sustain higher charging rates for much longer periods.

We saw this with the BYD N7 in those recent tests—it was charging at 600 kilowatts and could sustain rates above that for an extended time.

So I’m curious—do you think the choice of battery material is a real competitive advantage? Are companies now locked into the paths they’ve chosen?

And when it comes to solving the charging speed issue, you seem to have two camps. NIO is trying to build the world’s largest battery swapping network, while BYD is using its materials advantage to go with the flash-charging approach.

Is this pursuit of LFP to such a high level actually a competitive edge for BYD?

Yeah, because I would say battery swapping definitely has its place. It’s great for trucks, heavy machinery—BYD actually uses battery swapping technology for those applications too.

But it’s not ideal for passenger transport. You’d need a nationwide network of battery swapping stations, and right now there’s no uniform standard for how those batteries should be designed or swapped.

Also, a lot of people just don’t like the idea of swapping out their battery for someone else’s. That’s a real issue—it’s just not something most consumers are comfortable with.

So I don’t think NIO actually expected charging technology to evolve as quickly as it has. BYD probably saw this coming a long time ago.

The obvious reality is that battery charging tech is only going to keep getting better.

We’re now talking about what's called 10C charging. To explain: 1C means it takes one hour to fully charge a battery. So 10C means it only takes six minutes.

And over the next few years, we’re going to see solid-state batteries come into play. They’ll support even higher energy densities, faster charging speeds, and better safety. That’s going to be a real game changer.

I don’t think it’s unreasonable to expect 20C charging at some point. We already have 400 kilometers of range in five minutes. In three years, we might get that in just three minutes.

Wow.

Yeah, those are the kinds of advances we could see when solid-state batteries become more mainstream.

We’re still in the early stages of the electrification of transportation, and range anxiety will slowly fade as battery technology improves.

Eventually, you’ll be able to charge your EV about as fast as filling up a gas tank.

There are already jokes going around—like, you won’t even have time to finish your coffee at a charging station because your car will be done charging by then.

Yeah. I was also curious about another aspect of BYD, which is that it operates multiple different brands—and within each brand, it offers quite a large number of models. That contrasts sharply with Tesla’s approach, which is to have four models under a single brand.

I was wondering if you could tell us a bit about why BYD chose that strategy, and what you think its strengths and weaknesses are.

I think BYD is aiming to become the next Toyota Group, right? Toyota has multiple brands. Volkswagen does too.

BYD felt it needed both a mass-market brand and a higher-end brand. Lexus exists for a reason—and that’s why BYD created its Yangwang brand: to target the premium market that wasn’t being addressed by its mainstream offerings.

Now, it does have a rather unusual strategy in that it operates both the Ocean Series and the Dynasty Series. They have separate showrooms, and they often end up competing with each other—sometimes with products that directly overlap.

That’s one of the quirks of BYD, but I think it’s also a reflection of Chinese corporate culture. There’s a tendency to embrace internal competition.

Geely, for example, has a similar setup with many overlapping brands within its portfolio.

And it seems like Chinese consumers enjoy having highly customized options too.

Exactly. I think Tesla needs to offer more models. Their streamlined lineup might work in some countries, but it’s just not going to cut it in China with so few models.

Yeah. And do the different BYD brands use common platforms? Is that how they make this strategy economically viable?

Yes, they do. They have several platforms they use. The most well-known is the e-Platform 3.0, which is their main battery-electric platform.

Then they have their platform for plug-in hybrids, which powers most of their mass-market DM-i models.

For higher-end vehicles, they use more advanced platforms. There’s the e⁴ platform, which has four independently controlled motors that enable features like crab-walking and 360-degree turning in place.

They also have the e³ platform, which is similar to e⁴ but uses three motors—still offering impressive maneuverability.

And then there’s the DMO platform, which is a plug-in hybrid architecture specifically designed for outdoor and off-road vehicles, used in their Fang Cheng Bao lineup.

So yes, there’s a lot of shared technology—especially when it comes to battery systems. Everything uses the Blade Battery.

They offer both high and lower charging rate versions, depending on the platform and price point. Of course, everything comes with trade-offs—the 1000V platforms, for instance, are going to be more expensive than the 400V ones.

Okay. TP, let’s wrap up.

I want to end with an open-ended question: What does BYD tell us more broadly about Chinese industry? And what does it tell us about the electrification of the economy—and its wider implications?

Yeah, so I think I’ll start with the electrification part, because that’s a really interesting topic.

What we’re seeing in the market is a very rapid electrification of the passenger vehicle segment. A few years ago, EV penetration was around 10–15%. Now it’s about 55%, and by the end of this year, it could reach 65%—or even higher.

That kind of shift, in just a few years, is going to have a huge impact on gasoline consumption within China.

From an energy security perspective, this is significant. Last year, we already saw gasoline and diesel demand plateau. This year, we’re likely to see a sharp drop in demand for those fuels in China.

There are a couple of possible responses to this. One is to try to compensate by shifting into more chemical production from crude oil. But there’s only so much global demand for chemicals.

So either China ends up crushing European refiners with oversupply, or—even if they do pivot to chemicals—they’ll still be consuming less crude overall.

Over the next few years, the growth in crude demand we’ve seen out of China for the past 10–15 years is going to be replaced by a decline.

And think about what that means for countries that depend on high oil prices. If crude settles at $60 and doesn’t go up, a country like Saudi Arabia is going to face real pressure.

Same for the Permian Basin in the U.S.—many of those oil fields aren’t profitable at $60. At a certain point, when the less productive fields are shut down, it becomes very difficult and costly to get them operational again.

The other half of the question was—what does all this tell us about Chinese industry?

You’ve made a really pithy point before, that we’re moving from Made in China to Made by China.

And I feel like, by developing superior products for the electric age, Chinese industry now has this massive competitive advantage that we’re only just beginning to appreciate. And that’s going to disrupt a lot of industries and companies around the world.

Yeah, exactly.

One thing we’re seeing—and this carries over from the EV industry into other sectors—is the speed at which Chinese companies adopt and implement new technologies.

That pace of adoption is striking. We saw the same thing in the phone industry, in TVs, and across consumer electronics.

Now, whether you actually need some of these features—like deep-sea capabilities, for example—is a different question. But you can clearly see how slowly companies like Samsung and Apple move in comparison.

So it’s possible that, yes, OpenAI or ChatGPT may still be ahead of Chinese models when it comes to large language models.

But the real question is: can the rest of American industry take advantage of that lead at the same speed China’s industries are adopting and applying new technologies?

It’s a different story, right? Even if you get there three months ahead of Alibaba, DeepSeek, or ByteDance—but the domestic AI industry isn’t moving fast enough to put that technology into products or roll it out—then it doesn’t really matter.

Because if Chinese OEMs already have it integrated into their products and they’re already highly competitive, your lead becomes irrelevant.

This whole shift toward AI and smart manufacturing—and the speed of adaptation—is a real challenge for manufacturing industries in many countries.

Once you get to the point where AI-powered robots are good enough to produce low-end goods, you’re not just hurting high-end manufacturing in other countries—you’re also undercutting their low-end manufacturing as well.

There was a recent story about how Indonesia’s textile industry is being crushed by Chinese manufacturers.

Chinese textile makers are using robots for most of the work—robots that can operate 24/7 without breaks. Once you get past the upfront CapEx, it becomes extremely hard for even the lowest-wage economies to compete.

Yeah. The future’s going to be... interesting.

This is a topic that’s widely discussed inside China, but barely talked about outside of it.

Maybe, as you say, EVs are just the tip of the spear—a signal of what’s coming.

You should think of EVs as a red herring. There’s a lot more coming after this.

TP, it’s been absolutely fascinating speaking with you. I’ll wrap it up here. If people want to learn more or follow your work, where can they find you?

I write on Substack under the name TP Huang, and I also post on Twitter/X under the handle @TPHuang.

Great. Thank you so much for your time—I really appreciate it.

Thank you.