BYD
April 28th, 2009
Submitted by: Matthew Eves
For the past two quarters the auto industry has been making the front page of the Wall Street Journal with bad news. The big three have been sinking and it still is unclear who will make it through without having to file bankruptcy. I am not a huge fan of American made automobiles and now doubt I’ll ever be, unless they REALLY restructure and start putting out some better products.
I have wondered for some time why China doesn’t have a significant presence in the automotive industry in the US. I didn’t even know if they made cars until I did more research. Here is a list of over 20 auto manufacturers that clearly points out my ignorance: Click here
I have discovered one reason is that they have been hesitant to compete with big name auto companies who have been producing gasoline engines for many decades. It would have been difficult for them to enter this market with their existing technologies and be competitive.
However…
An article in the Wall Street Journal on (01/12/09) (view here) sparked a lot of interest with news of BYD’s electric powered vehicles. The hype of electric vehicles has brought a level playing field, since even the big auto manufacturers have minimal experience building them. BYD’s vehicles are priced very competitively in relation to hybrid vehicles from Toyota and Honda and coming in about half the expected amount of the Chevy Volt. Who is BYD? BYD was established in 1999 as a rechargeable battery manufacturer. Since their inception they have grown to the third largest producer of portable rechargeable batteries in the world. They now make… cars.
I have found some negative buzz with regard to Chinese auto parts, but it is important to note that this is more focused on aftermarket replacement parts, not OEM parts outsourced in China.
With Ford, Chrysler, and GM mired in their respective troubles and European cars at a price point out of the league in discussion, China’s automobile companies may have an open door into the market and be able to compete in the US. BYD has accomplished product differentiation and offers it at an extremely low price. The average MPG on their vehicles is over 50, and they aren’t hideous! It will be interesting to see the reception of these vehicles in the US.
I think at this point many are willing to try something new, and if they market the product well it could be a very successful business in the US. Would you buy a Chinese automobile?
I’m not sold yet… Warren Buffett is (one of the noted investors in BYD). But hey what does he know?
Some of the safety issues have been reported at: http://www.autosafety.org/china
Entry Filed under: Pre-Departure, China
9 Comments Add your own
1. Chris Carr | April 30th, 2009 at 6:21 am
See this interview with auto industry expert Bill Russo, Part I and II.
In short, he notes it will be 5 to 10 years before we start seeing Chinese cars in the US and EU.
Sounds like a long time away, but as you age you will be even more shocked by how fast said time period can go by and arrive.
http://www.aimeebarnes.com/blog/?p=337
I remember, like yesterday, when friends ad neighbors scoffed at the “poor quality” of “those Japanese cars.” Detroit isn’t laughing or scoffing anymore …
2. Jamie Hastings | May 18th, 2009 at 11:54 am
That is pretty interesting and it makes sense that China would be able to begin importing cars to the U.S. I guess I was a bit ignorant as to the existence of Chinese car manufacturers. While the electric car has seen little success yet here in the states, I would not be surprised if it has a growing popularity in the near future as oil prices are undoubtedly going to rise once again and people will begin to look at switching their American Iron for something a bit more economical. I think it is an important question as to how Chinese Auto Manufacturers will differentiate themselves from the Japanese and Korean imports? Will they use their incredibly cheap labor to sell inexpensive cars? Will it be “copies” of others manufacturers technologies or will it be a technology of their own?
If I had to guess I would think that they could take advantage of their ability to create large numbers of cars coupled with cheap labor to produce an extremely low priced vehicle that gets good mileage. However, a big differentiator here is Chinese manufacturers not only stealing brand loyalty here in the States, but producing a support system for parts, service, etc.. I am not sure, but this may be unchartered territory for a Chinese company?
3. Scotty Hayes | May 25th, 2009 at 8:22 pm
It’s only a matter of a little time before we see some serious Chinese iron on the global stage. I too believe there will be a serious push for Chinese electric cars when gas gets out of control again or perhaps even sooner. China will definitely take advantage of their vast labor resources and sell many, many cars to price and environmentally conscious individuals across the globe. However, the worldwide support system for the Chinese models could be a serious challenge for the Chinese producers as well as great business opportunities for all else. Wonderful question Jamie, but it brings more questions to my mind than answers. The Maruti Suzuki tour should be extremely beneficial to this topic when we come armed with our questions.
From all of the economic challenges today I believe a wiser consumer has been born. People will no longer stand for unsatisfactory performance. Ultimately, consumer demands dictate what types of automobiles are made and what companies fail and what companies flourish. Although not enough, even the American government has recently pushed the industry towards better standards. I don’t think the American manufacturers are doomed. I believe through a massive change in focus and mission and with major restructuring the big three will always in some degree affect and influence the auto industry as a whole. (Maybe that is my American pride?) I believe the situation in the auto industry today is very similar to Zakaria’s theme in the Post American World, although the U.S. manufacturers might not be as dominant as they once were, they are a serious force to be reckoned with. Countries, such as India and China, have grown by leaps and bounds recently and in every which way, including automobile manufacturing. The growth in the auto capabilities of these countries will not be by itself the demise of the U.S. auto industry. The specific reaction of the big three, to the changing times, is what will make or break them. Stay tuned sports fans.
4. Michael Mossman | May 31st, 2009 at 2:07 pm
The electric car industry is exciting right now because there are many players developing what should be great products. I believe that for the electric car to be successful it must be affordable to the masses. BYD looks like it is trying to make a relatively affordable electric car. The US electric car manufacturers are going for a higher end strategy and product. Tesla’s first car costs $100,000+ and Chevy’s Volt is expected to be $40,000+, if it ever makes it to the market. I give Tesla and Chevy credit for making a push for electric and hybrid cars but their first models are too expensive for the masses. BYD may be a leader in the US electric car industry if they can successfully mass produce their electric vehicle and import it to the United States.
5. James McMillan | May 31st, 2009 at 9:43 pm
Electric cars are no doubt going to gain more and more popularity as the year’s progress. I don’t think the environmentally conscious culture is just a fad. It’s turning into a way of life and even a style that we will pass on to our kids. Like Matt said, for China this is a huge opportunity since it levels the playing field with the big car manufactures with their years of experience building regular gas guzzling engines. As Dr. Carr pointed out, it may take a few years for China to really start making an impact in this field but look out because they are likely to play a big part with their proven manufacturing abilities and cheap labor. BYD specifically is taking a different approach to their cost cutting methods by manufacturing most of the components on the car itself such as air conditioning, seat belts, airbags, etc. With Buffets backing it appears that BYD is setting the stage for some long term success.
6. Andre Ourthiague | June 1st, 2009 at 12:26 pm
Even in the electric car industry the US is far ahead other countries. The EV1 (the subject of “Who Killed the Electric Car”) demonstrated GM’s ability to produce an electric car that could meet US customer needs requirements, despite failing as a commercial product. The battery technology required in electric cars is very sophisticated, and is something that is nowhere near perfected. Its not simply a matter of producing cars, it is an issue of developing key technologies, and the US has a three decade head start.
I’m interested to see how China approaches the US market. US drivers want a car that can drive fast for long distances. This is not the profile of a typical Chinese driver who typically drives less and is happy with less performance. The customer wants and needs are simply different and a car that is designed to meet China’s needs will have a hard time appealing to US desires. From an engineering standpoint the conflicting customer requirements appear to be a major hurdle that will need to be addressed.
7. Josh Hickman | June 3rd, 2009 at 2:30 pm
I think it is obvious that U.S. companies need to take any innovators like BYD seriously. Although our United States hasn’t taken electric cars as the current trend, companies like this will be flourishing one our gas prices skyrocket over what they were last spring ($4.75 / gallon+). Even though right now may not be an ideal time to sell cars (or anything else for that matter), it seems like BYD has some time to perfect some of the issues with its vehicles (styling, mechanical issues as noted by the reported on the WSJ video, etc.). They will probably have to do some research to find out what American’s are looking for such as acceleration, reliability, comfort, etc. and now is a perfect time to do so before trying to hit the markets hard.
I feel that American consumers will at first resist the efforts of a Chinese automobile in the states simply because they have not proven success in the country. People want to buy a car with a proven track record in terms of performance and reliability and do not want to risk having problems with their car like Jaguar had in the 80’s and early 90’s. Since Japanese and German manufacturers have saturated the market with a quality product, why would we take a risk in a Chinese company?
I think there is great potential for the company if they were to secure a contract with the government for replacing gas-guzzling taxis. Both financial success and reputation would be good for BYD, in addition to some good press for the government taking an initiative to at least fight the pollution problems. Maybe then American consumers would hear the news and be a little less resistant. I am excited to see where this company will go.
8. Justin Miller | June 13th, 2009 at 6:35 am
Wow. I too had absolutely no idea how many car companies there were in China. I checked out the BYD website and you right, their cars actually don’t look that bad. The S8 in particular was nicer than some of the standard made by other manufacturers. While I don’t think I’m ready to buy one yet, I think they’re heading in the right direction. How ironic would it be if the auto industry, started in, and dominated by the U.S. for so long, was taken over by Chinese automakers? I know Japanese automakers have pretty much already taken it over, but I feel like many people view their country as being very comparable to American. I think the Chinese automakers have a long way to go to catch Toyota and Honda, but it could happen. You have to start somewhere, and I would predict that at least one of the companies will gain major U.S. market penetration in the next 10 years. I think their best option would be to partner or buy and existing U.S. company, like Fiat is doing with Chrysler. This way they can transition into the market and gain Americans trust first.
9. Bill Russo | July 9th, 2009 at 2:27 am
This is a presentation I gave on July 2nd at the EU Chamber of Commerce in Beijing. It describes China’s New Energy Vehicle initiatives.
http://tinyurl.com/n2ujup
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