BYD’s factory shut down before it started
From GE Anderson’s Forbes blog:
BYD, a Hong Kong-listed automaker based across the border in Shenzhen, has aims of becoming bigger than Toyota someday, but in the short term at least, they may have to scale back their expectations. At the beginning of this month BYD broke ground on its second factory in the city of Xian. This new 5 billion yuan factory, due to open in 2011, has a projected capacity of 400,000 cars a year.
Yesterday, BYD was ordered by the central Ministry of Land and Resources to halt construction of its new factory because of a “land use violation.”
The Ministry’s announcement gave no further specifics as to the nature of the violation. In its defense, BYD said that it had conducted due diligence and obtained the necessary approvals from local government. So it would appear that the violation has been committed not by BYD, but by the local government.
Perhaps the violation comes as Beijing has stepped up its enforcement of land use policies. There was much talk during this year’s National People’s Congress of the need to prevent local governments from appropriating farmland to sell to developers, a situation that has led to much social unrest in recent years. Regardless, BYD has become yet another victim of the vagaries of doing business in China.
Until now, the conventional (yet somehow simultaneously unorthodox) wisdom has been for foreign companies to worry more about local governments when setting up their businesses in China. Just because you got approval from someone in Beijing didn’t mean that all problems were solved. Local governments are the ones with the real power to make or break your business, and “as everyone in China knows” the central government devolved a lot of their powers to the local governments back in the 1980s.
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Recently in a CCTV2 program Dialogue, Wang Chuenfu of BYD explained why Mercedes Benz choose BYD as a partner in developing EV. He said MB has purchased several domestic models in China and knocked them off to investigate the technological expertise of local auto makers. It was determined that BYD passed the examination with flying colours. If such statement is true, I would doubt the creditbility of MB. If Wang can say such thing in public TV, I will not surprise to learn BYD together with local government carried out the mentioned ill-practice.
BYD’s half year sales only meet 36% of the targetted 800,000 units. May be this is the right move by BYD in fine tune its future capacity.
OH no! Fenqing Ed and his family are out of their dream job in BYD(build your dreamcrap)..it’s so sad. I heard GM is hiring, but Fengqing Ed won’t work for them because according to ED BYD is better than GM and all american car makers..
This clearly is a very complicated matter. Doing business here can be tricky. The saying: “It’s easier to ask for forgiveness than get permission.” did get some people in trouble.
Dealing with the gvmt. officials is always tricky. I personally think it’s not BYD’s fault if the local gvmt. did not clear the permission all the way up. It would not surprise me if the inquiry was pushed by competitors looking for a way to slow BYD down.
Admittedly the sales are not as high as projected but the company is still on a roll. F3 has been the best-selling car for how long?
Yes, the ball is still rolling. M6 is just out and followed by S6. F3 is followed by G3 & L3, F6 by I6 & G6 …. F0 is selling at the lowest price. Hopefully BYD’s sales growth for 2010 matches those of other domestic players.
I watched a BBC doco about the terracotta warriors not long ago and they were saying that central govt is planning long term to excavate up to 60sqm around the known tombs in search of more historical finds.
It is possible that the BYD factory got caught out under some central govt zoning issue which the local govt don’t care so much about.
Why don’t you try backing up your words with some proof.
what’s the big deal, just bribe the official and get things done!