In all markets there is the high end and the low end of the market. Companies have to pick one or the other to compete because in the high end, companies sell less units, but the margins are higher per unit. On the low end, the company sells as many units as possible as the margins are low. All low-end companies want to capture some of the margins of the high-end unit companies and often times changes in technology make it possible.

In an article by Keith Bradsher of the New York Times News Service, the government of China has gone full throttle in the EV market. The government encourage companies to make EVs in China, offers discounts for buyers, state companies own the raw materials to bring them back to China to go into the EVs and Chinese buyers are buying EVs.

China’s BYD has emerged as the leader in EVs with 80% of its sales are in China and each of the last 2 years, the growth has been over 1 million vehicles. The 20% of sales will increase for BYD is building assembly lines in Brazil, Hungary, Thailand and Uzbekistan. There are plants ready to go in Indonesia and Mexico. At the moment, BYD is not in the US because of Trump era tariffs, but BYD does sell buses in the US. (will the tariffs still be in place with the Mexican plant?).

BYD is leading China’s export push in electric cars and has built the world’s largest car carrier ships to transport them. The BYD Explorer 1 brought 5,000 cars from Shenzhen (where BYD is headquartered) to the Netherlands.

The city of Shenzhen is the hub of China’s electronics industry and BYD has tapped into it.

The company was founded in 1995 to make batteries for Motorola, but Chair Wang Chuanfu dreamed of making cars. His first vehicles were terrible, but they have gotten better over the years. In 2016, Wolfgang Egger, an Audi designer and his team redesigned the vehicles.

In 2020, BYD introduced the Blade battery. The batteries replace the industry’s standard chemicals in rechargeable lithium batteries – nickel, cobalt and manganese with cheaper iron and phosphate at a fraction of the cost. BYD sells cheaper models than Tesla with more limited range, but every year technology evolves.

Linking to dividend paying stocks, markets and companies evolve in every market because at the top end are the best margins. The companies that focus on the lower end need to keep costs low, but with technology can move to higher margins items. The companies at the top begin to see their margins squeezed and then the market dictates what happens next. With your investments, one of your homework checklists is to ensure the margins you bought at are remaining constant or you should look for alternatives.

There are more questions than answers, till the next time – to raising questions.