Shenzhen, spring 2009. Fifteen yellow towers of eighteen storeys stand on the BYD campus, and most of its roughly 5,000 car engineers and 5,000 battery engineers live in them.
The company has a famous shareholder. In September 2008 a subsidiary of Warren Buffett’s Berkshire Hathaway paid about $230 million for 9.89 percent of it. In his next letter to shareholders the chairman called BYD an amazing Chinese company
and noted that Berkshire held a tenth of it.
The state is also in the room. By April 2009 central and city governments are offering up to $8,800 for each hybrid or electric vehicle bought by taxi fleets and government agencies in thirteen cities. The money is meant to create the first customers, and the customers are meant to create the industry. The stated aims were a world-leading industry, cleaner cities and less imported oil. Taxi fleets and government agencies are an odd first market: they buy because they are told to or paid to, not because a driver has compared prices. A subsidy of this kind can start a market, but it cannot show whether the product will ever be wanted without it.
That is the whole idea of this chapter, and it is easy to get wrong in either direction. A subsidy cannot conjure engineers. Engineers cannot find customers without one. In China the two arrived in the same decade, and the engineers had been in training for a good while before the subsidy came.
BYD did not begin with cars. Wang Chuanfu, a researcher at a state institute in Beijing, gathered a team of twenty in Shenzhen in November 1994, and the company was formally founded in February 1995 as a maker of rechargeable nickel-cadmium batteries. Japanese firms were then shifting to higher-value chemistries (nickel-metal hydride and lithium-ion) and leaving nickel-cadmium behind.
The company grew by doing the work differently. Where Japanese plants were highly automated, BYD used more manual labour and built much of its own machinery, which the standard company history says brought its unit costs to a fifth or a sixth of its Japanese competitors’. Customers followed. In 1996 it won an order from Sanyo; by 1997 Philips, Panasonic and Motorola were buying from it. By July 2002 it was the world’s largest maker of nickel-cadmium cells, with 65 percent of global output. Rivals pushed back. Sanyo sued over patents in September 2002, and the same history records that patent claims by Sony and Sanyo against BYD did not succeed.
A second firm was growing on the same rung. Amperex Technology, ATL, was founded in 1999 by Robin Zeng to make batteries for portable devices, at first on licensed technology. Japan’s TDK bought it in 2005, and Zeng stayed on as a manager.
Neither company was learning to build a car. Both were learning to make a cell cheaply, in volume and without defects, for customers who would send it back if it failed. That is process knowledge: the skill of the production run, which is carried by technicians and by the suppliers around them. The staircase of the earlier chapters is a staircase of exactly this. Each floor trains people for the one above.
Around the time the subsidies began in 2009, ATL set up a research division for electric-vehicle batteries. In 2011 a group of Chinese investors led by Zeng spun that division out as a new company, Contemporary Amperex Technology Limited, which everyone calls CATL, and took 85 percent of it. TDK kept the other 15 percent until 2015.
A phone battery is not a car battery, and the new company learned the difference alongside a customer. According to a secondary account, China required foreign carmakers in 2011 to transfer key technology to Chinese partners in order to qualify for electric-vehicle subsidies. In 2012 CATL’s first main customer was BMW Brilliance, BMW’s joint venture in China.
How the two worked together is recorded in an interview. The chief executive of BMW Brilliance, Wei Lande, told China’s Daily Economic News in 2018 that in the early days BMW’s specialists and CATL’s engineers formed a joint development team. The team worked through the battery production standards and set up the process flows. CATL, in turn, sent technical experts to support BMW Brilliance’s battery centre, which he said helped it start production smoothly. Wei described BMW’s interest as early access to CATL’s cell technology through a strategic partnership.
The record cited here is lopsided. It gives the carmaker’s side in its chief executive’s own words, and the supplier’s side only through what CATL disclosed about the prepayment, so the book does not claim to know what CATL expected to gain.
That is what process knowledge looks like when it moves: people in a room, working through a customer’s standards, not a licence changing hands. A foreign firm with decades of quality discipline sat beside a Chinese one that had the cells and the cost base, and for some years each was useful to the other.
In July 2018 the arrangement took a financial form. CATL disclosed that BMW Brilliance would pay 815 million yuan for a battery capacity construction project and a first prepayment of 2.85 billion yuan, about $427 million, for a long-term supply contract. BMW also got the right to invest up to the same sum in CATL if it sold new shares, which the report put at roughly a 1.6 percent stake. A foreign carmaker was financing the capacity of its Chinese supplier. In the BMW chief executive’s telling, the aim was early access to the cell technology. By 2016 CATL had become the world’s third-largest maker of batteries for electric and hybrid vehicles, behind Panasonic and BYD.
Every floor stands on the one below
Take away any step and the ones above it do not float. Try it.
Source: Dan Wang, Breakneck; SNE Research
See the numbers
| Floor | What | When |
|---|---|---|
| 1 | Peasants who could read | 1949–78 |
| 2 | Toys and garments | from 1979 |
| 3 | Phone batteries | BYD 1995, ATL 1999 |
| 4 | EV cells | CATL spun out 2011, world's largest by 2017 |
| 5 | 40.2% of the world's EV batteries | Jan–May 2026 |
There is a part of this story that firms and subsidies do not explain, and it concerns who was allowed to compete.
In March 2015 China’s Ministry of Industry and Information Technology issued standard conditions for makers of electric-vehicle batteries, and a list of approved suppliers took effect on 1 May. Only a vehicle that used batteries from a listed supplier could enter the Catalogue of Recommended Models, and the catalogue was the gate to government subsidies. Over four batches the list grew to 57 enterprises. The Korean and Japanese giants, Samsung, LG and Panasonic, had not yet qualified.
The list was a narrow gate in a wide market. Fifty-seven enterprises passed through it over four batches, so it did not pick a single winner; what it fixed was the kind of firm that could supply a subsidised car. What it did to the price, the quality or the pace of the Chinese makers is a different question, and the documents cited here do not answer it.
So there were two kinds of support at work, and they should be kept apart. The subsidy helped buyers. The list shaped what they could buy. A Chinese carmaker that wanted the subsidy on its car had good reason to choose a battery from the list, and the Korean and Japanese firms that were not eligible were among the most experienced. The list is documented. Its effect on CATL and BYD is the book’s inference, and the sources opened for this chapter do not measure it.
It ended on 21 June 2019, when the ministry annulled the list. A reader should hold that fact beside the story of the engineers: the knowledge was real, and so was the shelter in which it grew.
2018VancouverMeanwhile a different part of the staircase was under pressure.
On 1 December 2018 Meng Wanzhou, the chief financial officer of Huawei, was arrested in Vancouver at the request of the United States while changing planes on a flight from Hong Kong to Mexico. The US alleged that Huawei had used a subsidiary, Skycom, to get around American sanctions on Iran, and that Meng had misled a bank about the relationship. China’s foreign ministry summoned Canada’s ambassador to lodge a strong protest. Meng spent almost three years under house arrest in Vancouver. In September 2021 the US Justice Department dropped its extradition request under a deferred prosecution agreement, in which she acknowledged making false statements to the bank while denying guilt on the key charges, and she flew home. The book records the allegation and the agreement. It does not weigh the motive of either government.
On 16 May 2019 the US Commerce Department’s Bureau of Industry and Security added Huawei and sixty-eight non-US affiliates in twenty-six destinations to its Entity List, citing reasonable cause to believe the company had been involved in activities contrary to American national security or foreign policy interests. A year later it widened the reach of its rules to cover items made abroad with American technology and destined for Huawei. In December 2020 it added China’s leading chipmaker, SMIC, and subjected items needed to make semiconductors at 10 nanometres or below to licensing.
None of this concerned batteries. It concerned the next floor up, where a country that still imports its most advanced chips and chipmaking tools depends on the licensing decisions of another government.
Not every Chinese champion had an easy road. BYD’s net profit fell for three years running from 2017, to 1.6 billion yuan in 2019. Wang Chuanfu later called it the company’s darkest moment. In 2020 the company received the equivalent of 2.1 billion euros in Chinese state subsidies. Learning and shelter arrived together, in the same accounts.
On 7 October 2022 the Commerce Department went further. A rule, published in the Federal Register on 13 October, required licences to export advanced computing chips to China and the equipment to make chips at the frontier: logic at 16 or 14 nanometres or below, NAND memory with 128 layers or more, and DRAM at 18 nanometre half-pitch or below. It also barred American citizens and residents from supporting the development or production of such chips at Chinese fabs.
Four days later one American analyst set out a possible side-effect. Gregory Allen of the Center for Strategic and International Studies wrote on 11 October that locking American chip designers out of China would route revenue to Chinese chip firms and give them the scale to compete, even as it hurt Chinese data-centre operators in the short term.
On 29 August 2023 Huawei put its Mate 60 Pro on sale, a launch reported to have been moved forward from 12 September to coincide with a visit to China by the US commerce secretary, Gina Raimondo. The phone was reported to use a chip made in China that had been thought impossible to produce without restricted Western technology. Whether the controls slowed Chinese chipmaking or taught it self-reliance is disputed; the ChainBreak sets out the limits of what the sources show.
2025New YorkOn Monday 27 January 2025 the app of the Hangzhou start-up DeepSeek overtook ChatGPT as the most downloaded free app in the US App Store. That day Nvidia lost close to $600 billion of market value, a fall of 17 percent to $118.58 a share and the biggest one-day drop for any company in US history. The company’s earlier technical report on a related model said full training took 2.788 million GPU-hours on H800 chips, which at a rental price of $2 an hour came to $5.576 million. It added that this counted only the official training run and left out earlier research and experiments. The founder, Liang Wenfeng, had told an interviewer in July 2024 that money was never the company’s problem; bans on advanced chips were.
The controls did not stay still, and neither did the response. In February 2025 Xi Jinping received the country’s top technology executives, among them Huawei’s Ren Zhengfei, BYD’s Wang Chuanfu, CATL’s Zeng Yuqun and DeepSeek’s Liang Wenfeng, according to state television. By April 2026 DeepSeek’s V4 report placed Nvidia GPUs and Huawei Ascend chips in the same validation framework, and China Daily called the release a symbolic break from reliance on Nvidia. The Register cautioned that this does not mean the model was trained wholly on Huawei hardware. In March 2026 Beijing approved sales of Nvidia’s H200 chips, after hesitation that Reuters called the main barrier.
The cars followed the cells. BYD stopped making pure petrol-engined vehicles in March 2022 to concentrate on electric and plug-in hybrid models, and from 2023 it was China’s largest carmaker by annual sales. In 2023 it sold 3.02 million vehicles, up 62 percent on 2022, 1.44 million of them plug-in hybrids. In the fourth quarter it sold 525,409 battery-electric cars against Tesla’s 484,507, and its net profit rose more than 80 percent to about 30 billion yuan. The International Energy Agency counted more than 17 million electric cars sold worldwide in 2024; in China they were almost half of all car sales, over 11 million, and one car in ten on the road was electric. In September 2025 Berkshire Hathaway sold its whole stake in BYD, which the encyclopaedia entry puts at a 3,890 percent return over seventeen years.
The chapter’s first scene is now seventeen years old. The campus with the yellow towers made the cell; a bigger campus, and many like it, now makes the car around the cell.
2026The numbers are in. From January to May 2026, by SNE Research’s count, CATL supplied 40.2 percent of the batteries used in the world’s electric vehicles and BYD another 14.4 percent. Seven of the ten largest makers were Chinese, with 72.6 percent of the market between them. The International Energy Agency finds that China made nearly three-quarters of the world’s electric cars in 2025, that Chinese carmakers supplied 60 percent of global electric-car sales, and that Chinese electric-car exports doubled to more than 2.5 million.
Chinese makers 72.6%
40.2%CATL
14.4%BYD
18.0%Five other Chinese makers
27.4%Everyone else
Seven of the ten biggest makers are Chinese, with 72.6% of the market
One square is one percent of the market, rounded to whole squares. The key has the exact shares.
Source: SNE Research
See the numbers
| Maker | Share | Squares drawn |
|---|---|---|
| CATL | 40.2% | 40 |
| BYD | 14.4% | 15 |
| Five other Chinese makers | 18.0% | 18 |
| Everyone else | 27.4% | 27 |
| Total | 100.0% | 100 |
This is the step India now has to buy into. The thing that made it was not one decision. A small number of firms had learned to make a cell on the cheap, a state created the first customers and, for four years, kept the big Korean and Japanese battery makers off the subsidy list, and a foreign carmaker worked beside the supplier’s engineers and prepaid for its capacity. The sources do not say how much each mattered.
The ending is not a victory march either. In 2025 BYD’s net profit fell 19 percent to 32.6 billion yuan, as gross margin narrowed from 19.4 to 17.7 percent. The company blamed persistent price wars. Abroad, the flood met walls: in 2024 the United States announced it would quadruple its tariff on Chinese electric vehicles to 100 percent, and Canada said it would follow; the European Union imposed duties of up to 36.3 percent. A BYD Dolphin Mini cost 69,800 yuan (about $9,640) in China in 2024 against about $21,000 in Mexico. In June 2026 the Pentagon added BYD to its list of Chinese military companies, saying BYD supports China’s military development through its ties to state-owned bodies; BYD had not immediately responded when the report was published. The industry that the state built to be big is now trying to be profitable. On 1 July 2025 the Central Commission for Financial and Economic Affairs pledged to tackle what it calls involution, disorderly low-price competition, and regulators acted on the new-energy-vehicle sector.
India’s own battery-cell incentive was approved in November 2020, in a ten-sector package, with Rs 18,100 crore set aside for advanced chemistry cells. Whether it buys know-how or only capacity depends on the terms attached to the money.
A last point about the staircase. The battery makers began as phone-cell makers, as the earlier chapters’ floors would predict. Neither firm skipped a step, and the sources suggest the later steps rested on the earlier ones. That is why India cannot decide to build its own CATL. It has to build the floors CATL stood on, and do it in a world that has changed.
In March 2020 some of the people who worked India’s lower floors were walking home from Gurgaon.