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BYD has done it again: overtakes Tesla globally for 2025. But even now, critics dismiss its rise as solely a China story, attributing its success to its huge domestic market and generous subsidies. But this debate will not last long.
The Chinese electric vehicle maker’s sales growth in its home market, long considered the main growth driver, is now slowing. Total sales fell 18.3 percent in December as price competition intensified and rivals closed the technology gap. Full-year sales growth slowed to 7.7 percent. The stock market is already reflecting that outlook. BYD shares have fallen by a quarter from their May peak and trade at 17 times forward earnings, compared with Tesla’s valuation of more than 200 times, reflecting expectations that car sales will outpace expectations.
But while growth in China has slowed, BYD’s overseas sales have surged, rising more than 150 percent last year to more than 1 million vehicles. Europe has been at the center of that expansion, with BYD overtaking Tesla in several markets, particularly the UK.
The UK is a small EV market in terms of global volume, with a few million battery electric registrations per year compared to China’s millions. Even BYD’s sales here increased sixfold last year and it became the UK’s sixth-largest carmaker in December can’t explain why it delivered 620,000 more EVs globally than Tesla last year.
Yet the importance of the UK lies in being a diagnostic market for car manufacturers. It has no politically protected mass-market domestic manufacturers, high price transparency and a fleet-oriented procurement structure. Demand for electric cars has been growing rapidly in recent months and EV sales last year reached a record 473,000 units, or 23.4 percent of the total market, according to the Society of Motor Manufacturers and Traders. Nearly half of all new cars are purchased by fleets that care most about residual values and depreciation risk.
In recent years, Tesla’s UK models have suffered faster residual value declines than comparable EVs. It is reported that for fleet buyers of Tesla’s Model Y in the UK, depreciation in EVs is inevitable, meaning BYD’s lower starting price combined with a more stable product and pricing cycle in Europe poses less downside risk.
This is why the UK matters disproportionately to BYD. Asia, where fleet decisions are shaped by country-specific national regulations, offers no comparable single market where local success translates into regional advantage. But in Europe, leasing companies operate across borders so a fleet decision made in one country often shapes purchases elsewhere. The UK is home to many of Europe’s largest fleet management companies. Success here does not guarantee acceptance in other European markets, but it reduces internal approval hurdles across the region.
New car registrations in Europe amount to about 11 million cars per year and about 60 percent of those are fleet purchases. About one-fifth of those fleet registrations are now electric, which means there is an addressable fleet EV market of about 1.2 million vehicles annually. Even if BYD only targets a 5 percent fleet share, that would be more than 60,000 cars in new sales a year before any retail sales.
The way BYD is gaining ground in Britain follows a familiar historical pattern. Like Japanese carmakers before it, BYD is making inroads through fleets, taxis and compact cars. These are segments where cost matters more than brand history. What’s new is speed: A transformation that took Japanese carmakers two decades has taken BYD less than three years.
BYD still faces the risk of further tariffs, localization demands and political resistance in Europe, while Tesla remains profitable and has been very capable of adjustment. Even conquering the UK market will not be able to compensate for BYD’s slowing sales in the Chinese market overnight.
Yet the direction of travel has now changed. For much of the last decade, Tesla was taken as proof that car making was no longer an industrial business, but one driven by software and narrative. BYD’s success in selling cars to buyers who care less about storytelling suggests the opposite.
june.yoon@ft.com
