5 reasons BYD is surging ahead after eclipsing Tesla’s quarterly sales for the first time

• BYD has just notched another big victory in its fight to overtake Elon Musk.
• The Chinese EV maker’s quarterly revenues outstripped Tesla’s for the first time.
• BYD is reaping the benefits of its lineup of affordable EVs and hybrids and is eyeing global expansion.

BYD has just scored another victory in its battle to overtake Tesla.

The Chinese EV giant said in its third-quarter earnings on Wednesday it had surpassed Tesla’s revenues from EV sales for the first time.

BYD recorded revenues of 201.1 billion yuan ($28.2 billion) in the three months to September 30, up 24% from the same quarter last year. Tesla posted sales of $25.2 billion over the same period.

It’s another marker for the industry juggernaut, which has ridden China’s EV boom to become one of the country’s largest automakers.

BYD briefly overtook Tesla as the world’s biggest EV producer at the end of last year, and after a record quarter, is aiming to put Elon Musk‘s company under further pressure.

Here are five reasons BYD is booming:

1. Affordable EVs

BYD is known for its cheap electric vehicles, and has spent this year making them cheaper.

The automaker launched a wave of price cuts earlier this year, which included lowering the price of the ultra-cheap Seagull hatchback to under $10,000.

Those price cuts gave BYD an advantage over Tesla, whose cheapest vehicle in China is the 231,900 yuan ($32,600) Model 3, and appear to have spurred sales.

BYD announced record monthly deliveries on Friday, with the company selling half a million passenger vehicles in October.

2. Luxury vehicles

As well as making their cheapest cars cheaper, BYD has expanded into luxury vehicles.

The automaker launched the Yangwang U8, a $150,000 premium SUV that comes with an onboard drone last year.

BYD also unveiled its first supercar, the 1.68 million yuan ($235,000) Yangwang U9, in February.

The expansion of local automakers into China’s premium market has put pressure on European giants like Mercedes and BMW. Experts told BI that this would enable firms like BYD to target less price-sensitive customers and grow beyond China’s brutally competitive mass market.

3. Global expansion

BYD has embarked on an ambitious expansion drive this year to boost sales outside China. Executives have said they want half of BYD’s sales to come from abroad in the future.

Though US and European tariffs on Chinese EVs make selling in these regions problematic, BYD is rapidly setting up factories worldwide to cut costs and avoid trade barriers. It’s also focusing on emerging markets such as Mexico and Brazil.

4. Hybrids

A key part of BYD’s success is its hybrid range. Unlike its rival, Tesla, BYD also offers a selection of hybrid vehicles, which are popular in China.

Some 311,000 of the 500,000 passenger vehicles BYD sold in October were hybrids, with hybrid sales rising by 62% year-on-year.

BYD has sold nearly two million hybrid vehicles this year. The automaker says its latest hybrids can go up to 1,250 miles without stopping for gas or charging.

Dylan Khoo, an analyst at technology intelligence firm ABI Research, told BI the core of BYD’s success this quarter stemmed from plug-in hybrid electric vehicle (PHEV) sales in China.

“Newly launched models based on BYD’s fifth generation DM-i PHEV technology have been huge sales successes,” he said.

5. Vertically integrated supply chains

The core of BYD’s success — and part of the reason it can produce EVs so cheaply — is that it tries to make almost every component in-house.

BYD produces its own batteries and computer chips. BYD executive VP Stella Li recently told MotorTrend that BYD manufactures every component of its Dolphin electric hatchback, apart from the tires and windows.

“BYD’s high degree of vertical integration — making rather than buying many key strategic components — means it can control production of batteries and chips and can do so at very low cost,” said David Bailey, professor of business economics at the University of Birmingham.

BYD did not respond to a request for comment from BI.