Chinese electric vehicle makers led by BYD are rapidly expanding their market share beyond their home turf into Europe, Southeast Asia, and South America. While improved technology, quality, and aggressive marketing are cited as growth drivers, analysts say overwhelming cost competitiveness remains the key factor.
According to industry sources on the 25th, Hyundai Motor and Kia, which had consistently held a top-three position in the global EV market excluding China, slipped to fourth place last year with 609,000 units sold. BYD’s sales surged 141.8% in just one year, jumping from 259,000 units in 2024 to 627,000 units, closing in on second-place Tesla (1.01 million units). Through March of this year, BYD has sold 204,000 units, overwhelming Hyundai-Kia (169,000 units) and threatening to surpass Tesla (239,000 units) as well.
Behind this offensive lies a cost gap that has been hard to close. The most critical factor is batteries. China holds an unrivaled position in this component, which accounts for 30-40% of EV manufacturing costs. According to SNE Research, China’s share of global battery installations reached 70.4% as of last year. Backed by cheap raw materials and labor stemming from abundant natural resources and a large population, China is producing batteries at incomparably low prices.
Bloomberg NEF, a global energy market research firm, calculated the average price of lithium-ion battery packs in China at $84 per kWh as of last year. Over the same period, the price was $121 in North America and $131 in Europe. The industry estimates Korea’s battery pack price in the low $100s. While Korea and Japan, traditional battery powerhouses, focused on ternary (NCM, NCA, etc.) batteries that offer good energy efficiency but are costly, China steadily improved the performance of cheaper LFP (lithium iron phosphate) batteries despite their somewhat lower efficiency, turning the market on its head. LFP currently accounts for 60% of the global battery market, with ternary batteries making up 40%. Korea and Japan are belatedly chasing LFP development.
China is further reducing manufacturing costs through extreme vertical integration. BYD reportedly produces about 75% of the key components used in its vehicles in-house. The company has built a production system covering not only batteries but also drive motors, reducers, and automotive semiconductors, leading some to say it “makes everything except tires and glass.” By eliminating margin structures of intermediate suppliers and parts makers, BYD is structurally cutting costs. In contrast, Tesla and Volkswagen have vertical integration ratios of 46% and 35%, respectively, while Hyundai-Kia is estimated to be around 40%.
This structural cost advantage translates into significant gaps in finished vehicle prices. According to U.S. market research firm Rhodium Group, BYD (Seal) holds a manufacturing cost advantage of $4,700 (about 7.1 million won) per vehicle over Tesla (Model 3). Cost savings from vertical integration accounted for $2,369, followed by reductions in overhead and R&D expenses ($1,766), delayed payments to suppliers ($214), and direct government subsidies ($292). While government subsidies appeared small in this study, the industry believes that tens of trillions of won in annual support flowing to Chinese EV makers plays a major role in lowering vehicle prices. The Center for Strategic and International Studies (CSIS) estimated that total support invested by the Chinese government from 2009, when it began earnest EV industry promotion, through 2023 amounted to at least $230.9 billion (about 348 trillion won).
The cost competitiveness built up this way translates directly into price offensives in global markets. In Germany, BYD’s small hatchback “Dolphin Surf” starts at 22,990 euros (about 40 million won), roughly 20 million won cheaper than its local rival, the Volkswagen ID.3, which is priced at 33,995 euros (about 60 million won). In Korea, the Dolphin is priced at 24.5 million won, lower than the Hyundai Casper Electric (starting at 27.87 million won). BYD’s mid-size SUV Sealion 7 starts at 44.9 million won, while the Kia EV5 starts at 56.6 million won, a difference of about 12 million won. “Cost reduction for Korean automakers is no longer a choice but a matter of survival,” an industry official said.