BYD aims to redefine luxury for EV era

BEIJING — Chinese EV maker BYD will showcase its premium brand's first sedan at the Beijing auto show beginning Thursday, in a challenge to the likes of Germany's Mercedes-Benz, which three years ago pulled out of the Denza brand's development, citing slow sales.

The Denza Z9GT is the fruit of BYD founder Wang Chuanfu, who continued to support the brand after Mercedes-Benz effectively became a sleeping partner in their decade-old, 50-50 premium EV venture by cutting its stake to 10 percent.

The car will complement Denza's N7 and N8 SUVs and D9 multipurpose vehicle, whose surging sales have contributed to BYD's domination of China's EV market at the expense of legacy foreign automakers.

"In the past, traditional luxury brands were defined by their logos. Today, luxury for new energy brands are defined by technology," Denza general manager Zhao Changjiang declared at an April 1 event.

The Z9GT enters a saturated domestic market in the midst of a price war, while overseas, governments are looking at Chinese EVs with a critical eye while blaming what they call a glut of Chinese production that is flooding markets.

Denza's success is central to BYD's goal of being a global major rivaling long-time leaders such as Toyota Motor Corp. and Volkswagen Group with a stable of brands at different price points, shedding its image as a low-cost automaker.

The upmarket push is also needed to increase profitability while the price war squeezes margins of mainstream models.

Denza's D9 has become the group's most profitable model with annual sales of 119,000 from which, on average, it pockets about a quarter of the roughly 400,000 yuan ($55,215) price, Denza managers said.

That is about 10 times as much as BYD's average profit per vehicle for January-September last year, analysts estimated.

Storied automakers such as Porsche and Ferrari have dominated the luxury market supported by decades of development centered on traditional gasoline engines, whereas Chinese brands had neither the history nor technology to compete.

Early Chinese attempts, such as the 2003 Beauty Leopard sports car from Geely Automobile, struggled to sell. BYD hoped to fare better under the halo of Mercedes-Benz.

The breakthrough came when EVs became feasible along with advancement in so-called intelligent technology, allowing small, nimble companies such as Tesla to disrupt the industry.

A subsequent EV boom and BYD's decision to stop building gasoline-only vehicles three years ago has seen the automaker grow rapidly, backed by technology developed in-house and covering key components and features as varied as the battery, chassis and autonomous driving.

"The methodology for building a premium EV brand could be different from that for conventional gasoline cars as there have been some fundamental changes in the core capabilities of a car," said analyst Zhang Yichao at consultancy AlixPartners.