Chinese Automaker BYD Raises $5.6 Billion for Global Expansion and R&D

Chinese electric vehicle (EV) giant BYD has announced plans to raise $5.6 billion via a share placement, aiming to bolster its global expansion and invest in cutting-edge technology. The company, which has been making significant strides in the EV market, seeks to strengthen its competitive edge over rival Tesla and other major players.

BYD plans to sell 129.80 million shares priced at HK$335.20 each, equivalent to US$43.10. The shares are priced at an 11.8% discount to the average closing price of HK$380.10 for the last 10 consecutive trading days up to and including March 3, 2025. The company expects to raise about HK$43.51 billion in gross proceeds, equivalent to US$5.59 billion.

The funds raised will be allocated to various strategic initiatives, including:

1. Research and Development (R&D): BYD will use a significant portion of the funds to invest in R&D, particularly in the field of intelligence driving. This will help the company stay competitive and continue to innovate in the rapidly evolving EV market.
2. Overseas Expansion: BYD aims to accelerate its overseas expansion using the raised funds. This includes investing in production facilities in key markets to reduce tariff risks and keep pricing competitive. The company is building a factory in Szeged, Hungary, and another in Izmir, Turkey, with a combined capacity to produce 500,000 vehicles per year.
3. Continuing Investment in R&D related to intelligence driving: BYD will continue to invest in R&D related to intelligence driving, which is a key area of focus for the company. This investment will help BYD maintain its competitive edge in the market and stay ahead of the curve in terms of technology and innovation.

Eunice Lee, a senior analyst at Bernstein, has praised BYD's overseas potential and believes that the company's rationale for the share placement is reasonable. However, she also expects there to be short-term weakness in BYD's shares due to the equity placement.

The fundraising comes as competition in the new energy vehicles industry intensifies. BYD has been widening its lead over Tesla in artificial-intelligence-powered driving technology for Chinese car buyers, with the introduction of a new system for low-price mass-market vehicles. The advances by BYD and other Chinese automakers contrast with Tesla's inability to release its latest driver-assistance software in China, owing to what Chief Executive Elon Musk described in January as regulatory hurdles.

AI-powered software for autonomous driving is evolving quickly in China, the world's largest EV market. Startups XPeng and Li Auto, as well as supplier Huawei Technologies and others, have all introduced market sophisticated driving-assistance technology.

BYD sold 3.7 million passenger cars in China in 2024, up 37% from the prior year. Tesla's sales in comparison rose 9% to around 660,000 cars. Globally, BYD is nipping at Tesla's heels as the largest maker of full EVs.

Shares of BYD in Hong Kong have gained 36% so far this year, outperforming the benchmark Hang Seng Index's 15% rise.

In conclusion, BYD's planned capital infusion is expected to have a significant positive impact on its competitive position in the global electric vehicle market. By strengthening its R&D capabilities, accelerating overseas expansion, and improving production efficiency, BYD can better compete with Tesla and other major players, potentially increasing its market share and brand recognition.