BYD To Introduce Sodium Batteries In Small BEVs

If you are not familiar with BYD (OTCPK:BYDDF) in the electric vehicle revolution, now might be a good time to update. BYD (Build Your Dreams) started life as a battery manufacturer and it retains a leading position in the battery space. It has pioneered its Blade (Lithium Iron Phosphate (LFP) battery over the past 27 years. Tesla (TSLA) has adopted BYD’s “Blade” LFP batteries in its Model Y cars built in the Berlin Gigafactory in Europe. Most Australian Tesla Model 3 and Model Y vehicles manufactured in Shanghai have a CATL LFP battery. LFP batteries don’t contain cobalt, nickel or manganese, which are often cited as deal breakers for lithium batteries. For those who don’t accept that there is enough lithium, check out comments from iron ore magnate Andrew (Twiggy) Forrest on lithium availability. The big “new” news is that BYD plans to incorporate a sodium (not lithium!) battery in its small town car to be released next year. This is a big deal and investors might think about BYDDF as it has been in the doldrums (down 35.7% year on year).

Sodium batteries

BYD is developing a name for itself by doing what others have called impossible. The Lithium Iron Phosphate (LFP) battery was said to be too heavy for vehicular transport, until it wasn’t. Now Tesla is using BYD “Blade” LFP batteries in its Model Y vehicles manufactured in the Berlin Gigafactory. The recently released BYD Atto 3 has a range of 420-480 km with a 60.48 kWh Blade battery.

Now it looks like BYD will introduce the first BEV to use a sodium ion (instead of a lithium ion) battery. Like the LFP batteries before them, sodium batteries have been seen to be too heavy (lower energy density than lithium), even though they are safer because they are non-flammable and have less problem with temperature changes (good in the cold) than lithium batteries. Of course a big deal is that sodium is much cheaper than lithium. BYD and CATL have both been working on a sodium battery for BEV use. Back in July and August reports said that sodium batteries may take several years to become practical for BEV use.

The report about likely release in Q2 2023 of a small BYD vehicle (Seagull) powered by a sodium battery surfaced this week. Of course this has big interest at a time when big increases in lithium prices have made LFP batteries expensive. Previously the fact that traditional NMR lithium batteries have cobalt, nickel and manganese has made LFP batteries (no cobalt, nickel and manganese) much cheaper. The price problem has become lithium and substituting sodium solves that. A comparison in price of lithium and sodium today suggests a huge price differential (lithium $84,000/ton versus $3,000/ton for sodium). The report this week suggests that BYD will mass produce sodium ion batteries in 2023 and introduce these batteries for affordable models with reasonable range. The micro EV Seagull model is likely to be available with either sodium (expected NEDC range 300 km, or ~250 km city driving) or lithium (44.9 kWh Blade LFP/range 400 km NEDC) batteries. The price of the Seagull with sodium batteries in Australia is likely to be $A12,500, bringing cheap BEV motoring for city drivers.

Note that the news about BYD selling a sodium battery powered vehicle in Q2 2023 has been denied by the company, but the source of the rumour is seen as reliable. In the report it was claimed that none of the experts in an informal poll were prepared to bet against BYD as a major BEV player.

It seems that CATL is also close to producing a sodium battery for use in electric vehicles.

BYD going global with sales of its electric vehicles

BYD is a major BEV manufacturer in China and a well known brand, but it is only recently that BYD has addressed global markets. BYD has a global presence in the electric bus market but it is less well known outside of China as a BEV manufacturer. This is changing fast with the decision to have a global presence as an electric car manufacturer. Note that the Chinese New Energy Vehicle export market is growing rapidly with more than 2.2 million exports as of September 2022. While exports are up 55% year on year, year on year exports were up 90% in July, 82% August and 127% in September. The world is beginning to see a massive push by China in electric vehicle exports. The BYD plan is for 280,000 New Energy Vehicles manufactured monthly by the end of 2022; it produced 217,816 New Energy vehicles in October, up 169% compared with October 2021. It claims a backlog of 700,000 orders.

Europe & Australia

BYD has a big focus on Europe currently, with three BEV models (Han, Tang and Atto 3) available in a number of European countries.

BYD’s Atto 3 is attracting a lot of interest in Australia (I’ve ordered one!) as a well priced modern BEV. It’s entry price is under $A45,000 after incentives are considered. This makes it attractively priced (cheaper) compared with for example a similarly configured Toyota (TM) RAV4. Two more models, Dolphin (smaller) and Seal (larger), which might be renamed Atto 2 and Atto 4 respectively, are planned for Australia in 2023. Coming from nowhere BYD was already Australia’s 2nd best selling (behind Tesla) EV brand in October.

South America

BYD recently announced a partnership with the Saga Group, the largest dealership in Brazil. BYD already has a position in Brazil with franchises across 31 major cities. Three fully electric BEVs have been launched. These are the Tang SUV, the Han Premium Sedan and the compact D1. It is noted that electric vehicle markets in Brazil, Argentina and Chile are quite similar to the Chinese market, and might be valuable for BYD to develop these before getting serious about the US and Canada.

What the market thinks

Despite a lot of interesting signs, the BYD share price has suffered in the past 12 months, being down 35.7%. Perhaps this is a result of investors being wary of investing in Chinese companies. Curiously there is only a single (buy) recommendation from Wall Street Analysts in the past 90 days. This is strange for a company that has been described as “Tesla (TSLA) without the drama“, but maybe that is what happens when there is less drama. Note Tesla has 27 authors on Seeking Alpha in the past 30 days and 35 Wall Street Analyst recommendations in the past 90 days. There is no question that BYD is a major participant in the electrification of transport, but a small number of Seeking Alpha authors cover the spectrum of pessimism to optimism (6 authors in the past 30 days are divided with 1 strong buy, 2 buy, 1 hold and 2 sell recommendations). A “hold” Seeking Alpha Quant rating is likewise curious giving the company “F” for Valuation and “D-” for Momentum. Perhaps I’m missing something, but I don’t think so.

The past 6 months has been dismal for BYD shareholders with the share price falling 29.9%, but with a spate of recent news the share price is up 16.7% in the past 5 days.

Conclusion

I understand that many investors are cautious about investment in Chinese companies. Juxtaposed Ideas has explored the dramatic underperformance of BYDDF shares largely due to geo-political concerns. At the end of the day investors are at the mercy of the Chinese Government, but on the other hand it is hard to understand why China would create problems for a major foreign export industry which looks like it might dominate the electrification of transport. BYD has operated without drama and so is a relatively unknown name outside of China. BYD Chairman Wang Chuanfu is the 11th richest person in China ($17.7 billion) and he thinks success comes from a motto of “do more and talk less”, which is at the other end of the spectrum from Elon Musk. The BYD story is no less remarkable than the Tesla story and it can’t be overlooked for much longer, even if Warren Buffet is selling down.

I’ve been fortunate to have invested in BYDDF at a time when it was completely unloved, but investors have an opportunity now to consider investment at a time when it is substantially lower than it was a year ago, and for no good reason, perhaps other than progressive selldown by Berkshire Hathaway (BRK.B), although Berkshire Hathaway still has ~16% stake in BYDDF. BYD not only makes a lot of cars, but it is at the forefront of a lot of innovation as transport gets electrified. It isn’t just about batteries, which I’ve highlighted here. Like Tesla, BYD is vertically integrated and it has a strong position in several other areas (eg Chip manufacture, mass produced 8 in 1 electric power train, high efficiency heat pump which enhances low temperature driving) as well as careful plans for global roll out of its electric vehicles.

I am not a financial advisor but I pay close attention to the end of the internal combustion engine and how transport is rapidly getting electrified. I hope that my comments are helpful to you and your financial advisor as you consider investment in electrification and perhaps contemplate investment in BYDDF as China begins to dominate the coming revolution in transport.