Chinese EV Billionaire Shrugs Off Lockdown Pain To Add $7 Billion Fortune

Chinese electric car maker BYD is not only surviving the disruptions caused by the country’s Covid lockdowns, but the company appears to be thriving like never before. BYD’s stock has jumped just over 90% since March as sales of its vehicles soar to an all-time high, adding another $7 billion to Wang Chuanfu’s wealth.

The cofounder and chief executive of Warren Buffett-backed BYD, now has a net worth of $27 billion, making him the fifth-richest person in China, according to Forbes’ real-time data. The ranking is the highest for Wang since at least 2017, placing him one notch above Alibaba co-founder Jack Ma, who currently holds the country’s No. 6 position with a net worth of $26.3 billion.

The 56-year-old Wang, who has a 17.6% stake in the Hong Kong and Shenzhen-listed BYD, saw limited disruption to its operations after building a diversified supply chain and production base. Unlike billionaire Elon Musk, who had no choice but to shut down Tesla’s Gigafactory in China to comply with Shanghai’s punishing two-month lockdown, Wang’s BYD has mostly been able to keep manufacture lines in places like Changsha and Shenzhen humming along at a steady pace.

Plus, BYD has a unique business model. While most auto makers choose to source parts from specialized manufacturers, such as Chinese battery giant Contemporary Amperex Technology Ltd. (CATL), which among others supplies BMW, Geely and Tesla, BYD is one of the few companies that manufactures its own chips, batteries as well as EVs.

Yale Zhang, managing director of Shanghai-based consultancy Automotive Foresight, estimates that up to 90% of the parts used in a BYD car are made internally. This further protects the company from supply and logistics strains, allowing it to keep churning out EVs to meet growing demand. Despite the lockdown of Shanghai, consumers elsewhere in China are still placing orders. Shi Ji, executive director of CMB International Securities, estimated in an April research note that the country’s new energy vehicle sales would reach 5.5 million units this year, up from 3.5 million in 2021.

“Of all the auto makers in China, BYD is probably the one least impacted by lockdown measures,” says Automotive Foresight’s Zhang. “It doesn’t source supplies from areas around Shanghai, and the company’s production is highly integrated.”

The result is that BYD sold 641,350 new energy vehicles in the first half of this year, or a 315% growth from the same period a year ago. It has effectively overtaken Tesla as the world’s largest EV maker by sales, as the latter delivered 564,743 vehicles in the first six months of 2022, and blamed lockdown measures in China for a second quarter that missed expectations.

The Chinese company’s shares, in the meantime, soared more than 90% in Hong Kong from a March low. It is now on the cusp of reaching a trillion yuan ($150 billion) in market capitalization, a milestone that only a few firms, including CATL and Kweichow Moutai, in China have been able to achieve. Besides Wang, the rally also benefited his cousin and company Vice Chairman Lu Xiangyang, who now has a net worth of $21.4 billion, as well as director Xia Zuoquan, who is worth $4.8 billion. Warren Buffett’s Berkshire Hathaway holds a 7.7% stake in BYD.

Yet as lockdown restrictions are being gradually lifted and other auto makers resume full production, the competition for China’s EV market will certainly become more intense, says Zhang Junyi, a Shanghai-based partner at consultancy Oliver Wyman.

“Compared with the period when its rivals weren’t even able to start production, BYD’s advantage will definitely come down in the second half,” he says. “As the environment changes, it requires more effort from the company to retain the top position.”

BYD, for its part, is taking another crack at the high-end market. The company, which gets a significant portion of its sales from vehicles priced between the 100,000 to 200,000 yuan ($15,000 to $30,000) range, unveiled in May the Denza D9, an electric van produced by its joint venture with Mercedes-Benz that has a starting price of $50,000. Selling more expensive cars would, in theory, help BYD improve its net profit margin that stood at only 1.4% last year.

The company has other issues to address as well. Chinese news outlet The Paper said BYD is acquiring six lithium mines in Africa, but could be coming up against an increasingly complicated international environment and growing resource nationalism. What’s more, Chinese authorities are investigating one of its plants in the city of Changsha over allegations of foul odor and reports of children living nearby increasingly suffering from nosebleeds. A BYD spokesperson says the company has no additional comment beyond its May statement posted on Weibo, where it said the factory complies with the country’s emissions standards.

But this hasn’t deterred most analysts from issuing bullish views. In June, Nomura analysts Benjamin Lo and Martin Heung raised BYD’s EV sales forecast from 1.08 million units this year to 1.5 million, and predicted that its market share would subsequently increase from 17% to 27%. Shi from CMB International expects the company to maintain its sales momentum.

“BYD still has quite a lot of orders on hand, and it will have new factories starting production,” Shi says. “We expect the company’s sales to keep rising month-over-month over the next few months.”