©Reuters. FILE PHOTO: BYD Atto 3 EV car is displayed at the 39th Thailand International Motor Expo, in Bangkok, Thailand November 30, 2022. REUTERS/Athit Perawongmetha/File Photo
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By Phuong Nguyen and Francesco Guarascio
HANOI (Reuters) – Chinese electric vehicle (EV) maker BYD Auto Co plans to build a plant in Vietnam to make car parts, three people familiar with the plan told Reuters, in a move that would reduce dependency of the company from China and would strengthen its supply chain in Southeast Asia as part of a global expansion.
The investment in northern Vietnam would exceed $250 million, one of the people said, expanding parent company BYD Co’s (OTC:) presence in Vietnam, where its electronics unit produces solar panels.
The move underscores a broader trend by manufacturers to reduce their exposure to China amid trade tensions with the United States and production disruptions caused by Beijing’s previous COVID-19 lockdowns.
BYD declined to comment.
The Xian-based automaker, which outlasted rival Tesla (NASDAQ: ) Inc in EVs by more than two to one in China last year, is expanding elsewhere in Asia, including Singapore, Japan and Europe.
Backed by Warren Buffett’s Berkshire Hathaway (NYSE: ), BYD produces both plug-in hybrids and pure electric vehicles. Like Tesla, BYD controls much of its supply chain, including battery manufacturing, a strategy that sets it apart from established automakers.
The company announced in September that it would build an electric vehicle assembly plant in Thailand with an annual capacity of 150,000 cars starting in 2024.
By investing in Vietnam, BYD is looking to add capacity, control costs and diversify production from its operations in China, where demand has been strong.
Talks are underway to select a site for the plant in Vietnam, the sources said, who declined to be named because the discussions are confidential. One said construction was to begin by the middle of the year.
DOUBLE FOOTPRINT
It wasn’t immediately clear which components BYD would build in Vietnam and whether it would include batteries or battery packs.
BYD’s planned investment and a $400 million project by digital display maker BOE reported by Reuters this week would be equivalent to more than a quarter of the $2.5 billion Chinese companies invested in Vietnam last year.
US companies such as Apple Inc (NASDAQ:) and their suppliers, such as Taiwan’s Foxconn and China’s Luxshare, have also sought alternative manufacturing hubs, with neighboring Vietnam a major option.
BYD is looking to lease 80 hectares (200 acres) of industrial land, more than doubling its presence in Vietnam, where its electronics unit leases 60 hectares, a second source said.
The Vietnam plant will export components to the assembly plant to be built in Thailand, a source said.
The Vietnam operation could also serve the local market, mainly through maintenance services and spare parts for BYD vehicles imported from China, a source said.
This would pose a direct challenge to VinFast, a Vietnamese EV maker that started selling cars in 2019 and plans to expand into the US and Europe.
In December the US Department of Commerce found that units of BYD and other Chinese companies were circumventing 10-year US tariffs on Chinese solar cells and panels.
If completed in May, that conclusion would mean those companies would be subject to duties on products manufactured in Vietnam and some other Southeast Asian countries.