Byd’s Driverless System Grasps a Big Thing
Length: • 6 mins
Annotated by John Philpin
Feb 17, 2025
The Electric
By Steve LeVine
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China’s Byd has shattered assumptions that Western carmakers can earn solid subscription revenue for limited self-driving software, which Byd is giving away as standard equipment. This week, we show that Byd’s demonstration is a new example of a hard reality faced by electric vehicle and battery startups: Above almost anything else, customers crave something that’s free.
In a call with analysts last month, General Motors CEO Mary Barra predicted a terrific flow of new revenue within five years—$2 billion a year in recurring fees from customers using its autonomous driving system, Super Cruise.
But China’s Byd may have blown a hole in Barra’s forecast. Last week, Byd CEO Wang Chuanfu said the company would offer autonomous driving capability as a standard feature in 21 vehicles in the coming months—in other words, for free, including in its $9,000 electric Seagull.
Chuanfu’s move shook a longstanding presumption of Western carmakers, including Tesla, GM, Ford and Mercedes-Benz, that autonomy would be a big future revenue driver for them. Instead, within just a few years, Chuanfu predicted, customers will expect driverless functionality much as they do “a seat belt or an airbag”—as equipment that simply comes with every car.
GM’s revenue expectations from Super Cruise reflect industrywide ambitions: Tesla recognized $596 million in revenue from its Full Self Driving system last year, and CEO Elon Musk told analystslast month that revenue from FSD and humanoid robots could eventually make Tesla “the most valuable company in the world by far.” Tesla is building manufacturing lines for FSD and robots “for what I think will be an epic 2026 and a ridiculous ’27 and ’28,” Musk said.
Some early reviews of Byd’s system are strong, though its name—God’s Eye—may be over the top. And caution seems warranted given that Byd introduced the system as an option in its luxury vehicles only in 2023, and it’s unlikely the company could match the features of FSD and other autonomous systems so soon.
That may not matter if motorists aren’t seeking to sleep while driving, but basic convenience, like getting to work hands-free in otherwise soul-killing, bumper-to-bumper highway traffic.
If Byd’s cars can do that safely with standard equipment, Tesla may have a hard time charging $8,000, the one-time fee for FSD, plus $99 a month. If Tesla seeks to charge even $5,000 or $6,000 for FSD in China, one of its main markets, “it’s DOA,” Tu Le, founder of Sino Auto Insights and an authority on Chinese EVs, said on his podcast Friday. “They will have to reconcile their strategy in China.”
For now, Byd appears to plan to make functions like automated parking and hands-free driving standard only in cars it sells in China. Chuanfu did not say when, or even whether, he would extend the free offer outside the country. But Byd is a brutal competitor; price cuts helped it sell 4.2 million cars globally last year, a 41% jump from 2023.
In the countries where it can obtain regulatory approval to sell cars featuring God’s Eye, Byd is likely to offer it for free or a nominal fee. Either way, Western carmakers will likely have to match it in countries where Byd sells its cars and forgo much or all of the recurring revenue they had expected, or potentially lose market share.
In a way, Byd’s offering of standard autonomous driving follows the China playbook, which we have detailed multiple times: Since the 2000s, Chinese companies have come to dominate industry after industry by transforming the economics through government subsidies and brutal competition. That’s how Chinese companies like Contemporary Amperex Technology Ltd. have come to make most batteries in the world. And it’s how Byd, which began making cars in 2003, has emerged as China’s biggest automaker, and last year the third largest in the world, rising from ninth place in 2023.
But Byd is also following something else—the truism that people really like free things. Author Chris Anderson tracked this dynamic in a 2009 book called “Free: The Future of a Radical Price.” Anderson called free “the foundation of entire industries” tracking back as far as one wants to look. But he argued that powerful computers have changed the notion of free, creating “an extraordinary new ability to lower the costs of goods and services close to zero. While the last century’s free was a powerful marketing method, this century’s free is an entirely new economic model.”
Cars cannot be replicated for free. But the idea of free has so permeated society that it’s shaking up the business models of the EV and battery industries. In 2020 and 2021, numerous next-generation battery makers went public under the assumption that silicon anodes, lithium-metal anodes and other innovations would command a solid price premium over standard lithium-ion batteries, because they could substantially increase driving range.
But that isn’t what has happened. Instead, battery developers have found that automakers will buy their next-gen inventions only if the resulting battery costs no more than conventional technology. In other words, they want the innovations, but only if the boost in performance comes at no cost. This is a key reason many of the startups are struggling to make it.
Automakers have also struggled to make money on their EVs—Ford lost $5.1 billion on its EVs last year. Beyond cutting costs to the bone, Ford has looked to recurring revenue from services like its BlueCruise assisted driving system to make its EV division profitable. Ford charges $49.99 a month, $495 per year or a one-time purchase price of $2,495 for BlueCruise. Last year, CEO Jim Farley said gross margins on BlueCruise were more than 70%. GM charges $52.99 a month or $579.90 per year for a premium version of Super Cruise. A GM spokesperson said Byd’s move won’t affect GM’s revenue forecast because it is for sales in North America, where Byd doesn’t sell cars. Ford declined to comment.
Byd’s advantage is that it makes almost everything in its cars in-house, including its batteries and some of its chips. This isn’t the case with its autonomous driving hardware, so it’s swallowing the cost by making the feature standard and—at least for now—announcing no price bump on the cars themselves.
In a note to clients, Evercore ISI’s Chris McNally said Byd has three different autonomous systems. In its cheapest cars, like the Seagull, it will install a base-level system consisting of 12 cameras, five radar sensors and sound sensors. Those allow hands-free highway driving and cost the company roughly $1,000 to $1,500, McNally estimates.
Byd’s higher-end systems, to be installed in premium and luxury models like the Denza and Yangwang, include lidar sensors and Nvidia artificial intelligence Orin X chips. They cost Byd roughly $2,000 to $2,500, McNally estimates.
The higher-end systems allow motorists to drive on both highways and in cities hands-free, though drivers must keep their eyes on the road. The systems also include automatic braking.
Le, the Sino Auto founder, told me that making God’s Eye standard “puts Byd’s competitors specifically in China on their heels,” including Western automakers selling there. As for elsewhere in the world, he assumes that Byd is already seeking country-by-country regulatory clearance so it can sell cars equipped with God’s Eye abroad. Byd did not respond to a request for comment.
Western automakers need to get ready, he said. Byd is “probably working feverishly with their European lobbyists” to make it possible for the company to sell autonomous-enabled cars across the continent by 2027, he said.
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Noteworthy
CATL restarted production at a mothballed lithium mine and processing plant in the Chinese province of Jiangxi. Amid a global surplus of the metal, the share prices of lithium miners like Ganfeng Lithium Group and Lithium Americas initially fell on reports of the restart, but they largely recovered by the end of the week.
Freyr Battery said it would establish its U.S. headquarters in Austin, Texas, after moving to the U.S. from Norway. The announcement came a week after the company officially killed its planned Georgia battery factory. After long struggling to make batteries, Freyr last year transformed itself into a solar panel maker, buying a Chinese-built solar panel factory in Texas.
Honda and Nissan ended their long mutual courtship and decided not to merge. Analysts said Hon Hai Precision Industry, the Taiwanese phonemaker known in the West as Foxconn, would likely make a new run at acquiring Nissan.
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