Chinese EV manufacturer BYD is set to showcase the first sedan from its premium brand, Denza, at the upcoming Beijing auto show. This move marks a direct challenge to established luxury carmakers like Mercedes-Benz, which withdrew from the brand’s development three years ago due to slow sales.
The Denza Z9GT is a product of BYD founder Wang Chuanfu’s persistence with the brand, even after Mercedes-Benz effectively became a sleeping partner in their decade-long 50-50 premium EV venture by reducing its stake to 10%. The car will complement Denza’s N7 and N8 SUVs and D9 multipurpose vehicle, which have contributed to BYD’s growing dominance in the EV market.
Denza’s success is crucial to BYD’s goal of becoming a global automotive leader, rivaling long-established players like Toyota and Volkswagen with a portfolio of brands catering to different price points. The upmarket push is also driven by the need to increase profitability amid a price war that is squeezing margins on mainstream models.
The D9 has emerged as Denza’s most profitable model, with annual sales of 119,000 units, yielding an average profit of approximately a quarter of its roughly 400,000 yuan price tag. This profit margin is estimated to be about 10 times higher than BYD’s average profit per vehicle from January to September last year.
While traditional luxury automakers like Porsche and Ferrari have long dominated the market with their storied histories and expertise in conventional engines, Chinese brands have lacked the heritage and technology to compete effectively. Early attempts, such as Geely Automobile’s 2003 Beauty Leopard sports car, struggled to gain traction.
BYD hoped to achieve greater success by leveraging the reputation of Mercedes-Benz. However, the turning point came with the rise of electric vehicles and advancements in intelligent technology, which enabled nimble startups like Tesla to disrupt the industry. BYD’s subsequent decision to focus exclusively on EVs three years ago has fueled its rapid growth, supported by in-house development of key technologies, including batteries, chassis, and autonomous driving systems.
Last year, BYD expanded its brand portfolio with the addition of the ultra-luxury Yangwang brand, featuring an SUV and sports car priced over 1 million yuan. It also launched the off-road brand Fangchengbao, whose first model is priced above 289,800 yuan and rivals established brands like Jeep, Jaguar Land Rover, and Toyota’s Land Cruiser. In comparison, BYD’s best-selling Dynasty and Ocean series of cars are priced between 69,800 and 331,800 yuan and accounted for the majority of sales in the first quarter of this year, while premium models contributed only 6%.
Denza’s premium vehicles offer features such as nappa leather seats and crystal-embedded gear sticks, along with advanced technologies like an in-house developed active suspension system and assisted driving capabilities not available in BYD-branded models. The designs are led by Wolfgang Josef Egger, who has worked for European luxury brands such as Alfa Romeo, Audi, and Lamborghini.
Denza claims that the Denza N7 offers comparable features to luxury SUVs like the Mercedes-Benz GLS, Porsche Cayenne, and BMW X7 at a fraction of the cost. A unique selling point of the Denza Z9GT is its exceptionally small turning circle, an advantage in congested urban environments. Yangwang cars even boast the ability to float in water in the event of an accident.
The shift towards electric vehicles has created an opportunity for Chinese brands to challenge established luxury carmakers, as technology becomes the defining factor in the premium market. This strategy has proven successful in China, even though profit margins may not yet match those of traditional luxury brands like Ferrari and Porsche.
BYD’s cost control优势 gives it a significant advantage in terms of innovation, as it can allocate more resources to research and development compared to legacy automakers who are still struggling to achieve profitability in the EV space. This cost advantage also allows BYD to price its premium models more competitively, boosting their appeal in the market.
Despite initial challenges with the lukewarm sales of the N7, Denza has responded swiftly by introducing a revised version with additional features at a lower price point. This strategic move is aimed at driving volume sales growth by 40% this year.
In the current market environment, the focus is on boosting sales rather than creating timeless classics. BYD is determined to do whatever it takes to increase market share and establish itself as a major player in the global automotive industry.
