BYD Will Accelerate Bottom-Up EV Trend With Under-$11,000 Model

(Bloomberg) -- For most of the last decade, electric vehicle adoption was a top-down story. Automakers started offering battery-powered models at the high end of the market and slowly worked their way down to more accessible price points.

Tesla was the standard-bearer of this approach. The company’s debut model, the Roadster, cost more than $100,000. Its two high-volume vehicles, the Model 3 and Y, now start in the low- to mid-$40,000 range.

There were good reasons to take this path. Margins tend to be higher in premium segments, and EV batteries have historically been expensive. Many consumer products have followed a similar trajectory over the years as part of the normal adoption cycle.

But as underlying battery technology continues to improve, the dynamics of the market are starting to shift. In North America and Europe, EV adoption is still following the top-down trajectory, but there are signs something different is happening elsewhere.

China epitomizes this shift. As I’ve written previously, EV adoption there is taking place simultaneously at both the bottom and top ends of the market and is quickly squeezing toward the middle. The smallest cars in China went electric quickly due to attractive price points — the Wuling Hongguang Mini EV starts at around $5,000 — and city-level policies that incentivized purchases of plug-in vehicles. Sales in that segment are now fully electric.

BYD’s launch of its new Seagull model last month is the latest indication that EV momentum will continue to build at the lower end of the global vehicle market, as well as the top. Consider the specs of the base model: 305 kilometers (190 miles) of range, fast-charging capability and a starting price under $11,000. It seats four and looks good.

In an increasingly bottom-up world, EV adoption will also start to take off in emerging markets like India, Indonesia and Thailand, where governments may not be in a position to offer generous subsidies or pursue the strong-arm regulatory tactics found elsewhere. While it’s still early, some of that already appears to be happening.

In Thailand, automakers only sold around 9,600 battery-electric vehicles last year. Deliveries jumped to 14,700 just in the first quarter of this year.

The numbers are still modest overall, but India and Indonesia are also showing rapid growth, which BNEF expects to continue this year and beyond.

These are fast-growing auto markets with price-sensitive buyers. That price sensitivity is often cited as a reason for why they’ll be much slower to adopt EVs.

But price sensitivity cuts both ways. It acts as a deterrent before EVs hit price parity, and an accelerant afterward. With the BYD Seagull, we may approach that acceleration point in emerging economies sooner than many expected.

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