China Decoded Series uncover the success stories behind Chinese companies — and the lessons we can learn from them.

In 2025, BYD (Build Your Dreams) overtook Tesla in global electric vehicle sales. So what can we learn from the rise of this green automaker from Shenzhen, China’s Silicon Valley?

1. Key milestones

In 1995, Shenzhen — often called China’s Silicon Valley — was bursting with energy and entrepreneurship. That was then and there BYD was founded as a battery maker. By 2002, it had already become a world-leading supplier of mobile phone batteries. Looking for its next big opportunity, BYD set its sights on electric cars.

2. Keys to success

BYD’s success was driven by three things: forward thinking, calculated risk-taking, and a hands-on approach to learning through reverse engineering.

3. Forward looking

By 2003, BYD had already become a global leader in battery manufacturing. It recognized the huge opportunity in China’s growing demand for cars, but the market was already crowded with established gasoline carmakers. So BYD looked beyond the present and bet on the future of electric vehicles.

4. Risk taking

Few stakeholders understood why BYD wanted to enter an entirely new industry. Investors were unhappy, but BYD saw car-making as a key part of its vision for a green energy ecosystem and believed it was the right risk to take.

5. Reverse engineering

BYD knew nothing about carmaking at first, but that did not stop it. Its research team took apart many of the best-selling cars on the market to study how good cars were made.

Reverse engineering had already helped BYD break into the battery industry, and it used the same hands-on approach again. After more than a year of study, BYD built its first car — and the rest is history.

6. Why BYD isn’t Tesla?

BYD’s rise from a small Shenzhen battery manufacturer to the world’s largest electric vehicle maker is a story of company brilliance operating within a deliberately engineered state system.

The Chinese government identified EVs as a strategic sector in the 1990s and over two decades it directed and funded an interlocking system of conditions: R&D funding, mandatory production quotas through the dual-credit system, licence plate restrictions in major cities that made petrol cars expensive to own while exempting EVs, a battery “whitelist” that temporarily shut out foreign competitors and gave domestic firms like BYD a protected window to reach scale, and regulatory constraints that progressively closed off new fossil fuel vehicle projects.

China became the only country to develop a complete EV value chain from lithium mining through battery production, vehicle assembly, charging infrastructure, and recycling, not by accident, but through coordinated industrial policy across central and local government over more than twenty years. The Chinese Government supported local authorities to build on this infrastructure as part of its long-term strategy.

Within that system, BYD distinguished itself through extreme vertical integration: designing and manufacturing its own batteries, semiconductors, powertrains, and even operating its own shipping fleet which gave it cost control and supply chain resilience that competitors relying on external suppliers could not match. That’s the brilliance of the company – to exploit the state support to build a highly effective supply chain.

Its Blade Battery, based on lithium iron phosphate chemistry, combined safety, durability, and low cost. The company scaled production from half a million to over four and a half million vehicles in just a few years.

Its pivot to cars was in 2003, when BYD acquired a struggling state-owned traditional car manufacturer. The early vehicles were unremarkable: in a now-famous 2011 interview, Elon Musk laughed off BYD as a serious competitor. But by 2022, BYD had completely stopped producing petrol engine vehicles, focusing entirely on electric and plug-in hybrid technology.

By 2025, BYD had surpassed Tesla in global EV sales and expanded manufacturing into Brazil, Thailand, Hungary, and Turkey to sidestep trade barriers.

But the broader context matters: many Chinese companies enjoyed the same state support and failed. The government created the conditions for successful EV manufacture — the subsidies, the mandates, the protected market — then BYD’s technological depth, manufacturing discipline, and strategic judgement were what allowed it to succeed.