BYD backing away from worlds biggest car company dream
Late last year BYD announced it would be the world’s biggest car manufacturer by 2025, now it seems that BYD are backing out of that goal in a bid to shore up meager sales in their home markets.
Two years ago, BYD Auto announced its ambition with certainty to become the No.1 automaker by sales in China in 2015 and 2025 over the world.
Under the pressure of a weakening auto market in China, the Warren Buffet-backed carmaker has become more and more low-key since August 4 when it slashed its full-year sales target in 2010 by 25 percent to 600,000 units.
The company’s Shenzhen-based spokesman Lin Mi told the Global Times Tuesday that they had been overconfident in the auto market this year and BYD’s ability to expand capacity. The BYD, whose founder says the name stands for Build Your Dreams, has decided to tap on the breaks to work more on its brand image.
Poor sales
In the past five years, BYD’s annual unit sales almost doubled every year, hitting in 2009 448,000 units, nearly tripling the sales over the previous year.
“Sales in 2009 boosted our confidence in hitting our sales targets in 2015 and 2025. However, things are not running as smoothly as we expected,” Lin said.
Lin said the company’s internal sales target for this year was 1 million units, higher than 800,000, the target it made public.
Yet over the first seven months of this year, the company only met less than one third of its internal sales target in 2010.
Lin blamed the unexpected sales on seasonal factors, formidable weather conditions like floods and mudslides, and difficulties in expanding capacity to meet market demand.
“Unlike other automakers that outsource parts manufacturing, BYD produces all auto parts used on vehicles itself. If we expand our vehicle production capacity to 1 million or 800,000, we will have to equip our auto parts plants with proportional staff and production facilities. If we were able to do that, quality couldn’t be guaranteed,” said Lin.
Factory debacle
BYD’s expansion plan also ran into property problems. The Ministry of Land and Resources said July 15 BYD illegally built seven factories on 112 acres of farmland it agreed to buy in Xi’an from a local economic development agency.
BYD planned to spend 10 billion yuan ($1.47 billion) this year in expanding production capacity at its new energy production base, Changsha, Xi’an, and headquarters in Shenzhen.
The first batch of buses produced in Changsha have rolled off the assembly line and capacity expansion in Shenzhen also run smoothly.
A government decision on whether to punish BYD for the illegal factory construction will be made by September 30.
BYD’s existing Xi’an factory, built in 2005, can assemble 300,000 cars in the 3 series a year. The company previously planned to finish constructing the factories by 2011.
Increasing dealer pullouts in cities such as Beijing, Southwest China’s Sichuan Province and East China’s Zhejiang Province also held down BYD’s sales to some extent, though the company said its impact had been exaggerated.
Dealers including Ping Yong, BYD’s flagship dealer in Chengdu, the capital of Sichuan, have pulled out of BYD’s sales network this year, saying high inventory and BYD’s demanding management practices dried up their cash flows.
Lin said the public has made a fuss over BYD. “The sales network is a world of the survival of the fittest. Dealers joining and leaving networks is common to all automakers. More dealers joined us than those that left,” said Lin, who declined to provide exact numbers.
Ping Yong joined BYD’s rival Geely after breaking away from BYD, the China Business News reported.
BYD also delayed a mainland listing due to stock market downturn and said Monday it hopes to list on the Shenzhen Stock Exchange later this year. The company planned earlier to raise 2.85 billion yuan ($421 million) to finance battery, vehicle and auto parts projects.
Rolling out high-price vehicles
When asked whether BYD will readjust its plan to become the largest automaker both in China and the world, Lin provided no direct answer but said that BYD values branding and quality more than quantity.
BYD has been planning to launch five models this year, priced above 100,000 yuan ($14,713), to build BYD into a brand covering multiple products instead of remaining synonymous with low-end. These products are also expected to help improve profitability of the company.
BYD launched its first multi-purpose vehicle last week and a sedan late last month. Their impact on BYD’s sales remains yet to be seen. The company will launch other medium- and high-end models including another sedan and an SUV.
Rivals Geely and Chery are also motoring into the medium- and high-end market, which has long been dominated by joint ventures.
Geely will launch its first luxury multi-purpose vehicle this month. Chery began last year to sell high-priced vehicles under brands Riich and Rely. Analysts say competition between domestic automakers and joint ventures will be fiercer as both are now expanding into each others’ territory.
E6 go to US first
BYD founder and chairman Wang Chuanfu said Monday BYD will launch electric vehicles in the US later this year.
China launched a pilot program in June in five cities including Shenzhen to provide subsidies to buyers of electric and hybrid cars. Buyers of hybrids and electric vehicles could receive up to 50,000 yuan ($7,320) and 60,000 yuan ($8,826) in subsidies per unit respectively.
The Shenzhen government announced in July it would provide another 30,000 yuan ($4,413) and 60,000 yuan respectively.
Even with the government support, BYD sold no more than 500 F3DM plug-in hybrids this year in China.
“BYD might sell electric car E6 in the US first. Consumers there are more likely to accept electric vehicles than people in China,” said Lin. BYD said in late April it would open its North American headquarters in Los Angeles.
BYD is also planning to move into the new energy vehicle market in Europe. Lin said the company is visiting several cities right now, and the location of Europe headquarters is yet to be decided.
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The cost vs lifespan argument really has no merit because it’s California law that dictates how long the packs need to be under warranty for. LG, NEC, BYD et all will all follow those rules. The Prius has been following those rules for 10 years so it’s hardly new.
California has the strictest vehicle emissions regulations in the USA but also the most loyal tree huggers who will buy EVs and then complain about the price of electricity in having to charge the vehicle…. 16 other states follow the CA rules.
The battery in the Volt DOES NOT meet California’s 10 year 150,000 battery warranty requirement because GM didn’t apply for AT-PZEV status so only has a nationwide 8 year 100,000 warranty instead.
http://blogs.edmunds.com/greencaradvisor/2010/07/chevy-volt-wont-get-californias-3000-phev-credit-or-10-year-battery-warranty.html
On the subject of the 100,000 mile 8 year warranty if that applied to the Leaf (which it does) and E6 using quoted range of the vehicles it produces some interesting figures on how many cycles the battery will need to endure in perfect conditions.
Volt… 2,500 cycles (40 miles between recharging)
Leaf… 1,000 cycles (100 miles between recharging)
BYD E6. 333 cycles (300 miles between recharging)
Quick charging will shorten the life of the battery as well but having to charge a battery less will extend the life of the battery immensely. These figures don’t take into account loss in capacity which all batteries face though. Most regular batteries have a cycle life of between 500-1000 cycles. It’s highly unlikely this generation of EV packs will be any different.
Following these figures the E6 with it’s “affordable battery” that doesn’t need to be plugged in and charged everyday will seem like a better investment to many if they really want an EV.
IHC, you better have words with these guys. They are claiming that they designed and engineered 95% of the battery in the Volt.
http://media.gm.com/content/media/us/en/news/news_detail.brand_gm.html/content/Pages/news/us/en/2010/July/0714_volt_battery
@ hk
> A123 is not afraid of IP issue with Chinese partner and a JV is setup in Shanghai to make batteries. Make sure you know what you are talking.
It is you who need to know what you are talking about.
http://articles.latimes.com/2010/may/08/business/la-fi-green-manufacturing-20100509/3
“But in ramping up production in China, A123 paid an immeasurable price: loss of its intellectual property, the ideas and engineering that made its products better.
The company did what it could to slow the technology transfer by breaking down the manufacturing process into steps, Riley said, but “we ended up having to teach these guys how to make our state-of-the-art, world-class batteries. … And some of them are now competing with us directly.”"
@ woxihuanpijiu
> The battery in the Volt DOES NOT meet California’s 10 year 150,000 battery warranty requirement.
It will from 2012. http://www.autoblog.com/2010/09/01/chevrolet-volt-will-not-be-eligible-for-hov-lane-access-until-mi/
> BYD E6. 333 cycles (300 miles between recharging)
E6 does not go 300 miles between charge; it’s like 200 miles claimed now, much less in reality.
> Most regular batteries have a cycle life of between 500-1000 cycles.
LG’s battery(Or any other Korean automotive grade battery for that matter) is not a normal lithium-ion battery.
> It’s highly unlikely this generation of EV packs will be any different.
They have to be different from cellphone batteries that BYD is familiar with because requirements are different.
IHC
Now I understand why you keep on bugging this lithium-ion battery issue. Dr.Chiang is a Chinese and founder of A123 Systems. What a big target for our good old friend I_H_C.
Yes, I am not as knowlegeable as you to provide so many links to twist around during debate. Do I know(fully understand) what I am talking about? Of course not all the time.
Let me give an advise to all nationalistic Koreans, the more you bash China the more you loose business from Chinese customers. Japanese will not bash China openly as you did, so we buy their products despite of their atrocities done to us in WW2. Some Chinese may buy Korean products only because of cheaper, if they can afford they will prefer Japanese.
Now back to IP issue with A123, BYD is just a scapegoat for A123 to grant government fundings. A123 has state-of-the-art technology that BYD cannot copy. They are competitors but targeting different market segments. Mercedes is not competing with BYD and ironically they come together in EV development.
IHC, the 2012 target is still 2 years away….. not really relevant or a selling point for the vehicle this year is it? That was stated in the edmunds link I provided as well.
Your crystal ball theory is as usual pretty baseless because there are no hard data yet to explain the range of the E6, Leaf or Volt. Even the EPA won’t publish mileage rating for the Volt yet. Regardless of how you look at it the Volt will only do 40 miles on battery power….. All for only $41,000
Now about South Korea’s battery industry.
http://english.yonhapnews.co.kr/business/2010/07/10/38/0501000000AEN20100710002600320F.HTML
South Korea’s entire li-ion industry uses only around 20% of local parts and expertise so it’s doubtful the LG sourced battery in the Volt is super special and long lasting. It was only a few years ago that LG laptop batteries were going POOF.
Most of the comments on the Volt are pretty baseless anyway because it is basically a golf cart with a generator. The E6 and Leaf are at least pure EV vehicles or will be when they finally get released.
The advertised range of the BYD e6 began at 240mi and has since been revised downward to 205 miles, then 200 miles, and most recently to 186 miles, by Li Chuanfu says Xinhua.
All these range figures are just speculation and subject to more variables than you can shake a stick at.
But what about chemical stability and safety? Doesn’t BYD’s LiFePO4 battery have the edge in that department?
@ hk
> Let me give an advise to all nationalistic Koreans, the more you bash China the more you loose business from Chinese customers.
Chinese who are concerned by that would most likely not buy anything Korean already.
> Japanese will not bash China openly as you did
They do, it is just that Japanese have a poorer command of foreign languages as Koreans do, so they tend to bash China in their own languages only. I assure you, Japanese think of Chinese as a sub-human race in places like 2ch. But most of foreign bashing at 2ch is directed as Korea as Japanese see Korea as the most significant external threat to Japan’s economy and culture, not China.
In Korean portals like kj, Japanese traffic accounts for 80% of all traffic, where Japanese 2ch rightwingers pay a subscription to bash and trash-talk Korea and all things Korean. Of course this is tolerated because Korea is a free-speech country where you can say anything as long as it’s not the praises for Kim Jong Il. But the very fact that so many Japanese spend time and money to bash Korea at Korean portals in addition to their home portals show you how Japanese has become mindful of Korea. You never see tens of thousands of Japanese flooding Chinese portals to bash China, because Japanese just don’t care about China, yet.
@ woxihuanpijiu
> Your crystal ball theory is as usual pretty baseless because there are no hard data yet to explain the range of the E6, Leaf or Volt.
People tend to trust American and Japanese performance claims more than Chinese performance claims.
> South Korea’s entire li-ion industry uses only around 20% of local parts and expertise
Of course lithium and manganese are imported.
> so it’s doubtful the LG sourced battery in the Volt is super special and long lasting.
Take Ford’s word for it. Ford went with LG after testing batteries from 30 suppliers, fully understanding that LG’s supply constrained and that they would be short-changed in supply if LG runs into a supply trouble, because Hyundai and GM signed on before Ford and they get a supply priority over Ford.
Ford’s selection of LG was totally stunning and unexpected, because LG already had 7 automotive customers. Then the report is leaking out that VW is the 8th customer(LG gave a good hint of this automaker which is bigger than GM, but was waiting for that automaker to make the announcement itself), who must be aware that they get a low priority if LG were to run into a supply problem.
So why are Ford and VW signing on with LG when they know they would get a low supply priority? Because there is nothing comparable on the market in terms of durability. We are talkiing about a battery that loses only 5% of capacity after 450K miles according to Hyundai testing, a figure unheard of elsewhere.
@ dragin
> most recently to 186 miles,
Ouch.
> But what about chemical stability and safety? Doesn’t BYD’s LiFePO4 battery have the edge in that department?
Nope. Liquid electrolyte batteries can’t last more than 10 years, most much less. All Japanese, American, and Chinese EV batteries are of liquid electrolyte types.
Korean batteries are super-durable because they use solid electrolyte. Only Koreans have perfected the large capacity solid electrolyte battery technology. Koreans are several years ahead of everyone else in EV battery technology, and this is why there is an industry-wide fear in Japan that they may have already lost the EV battery war to Koreans.
But Chinese in general suffer from a lack of free-flowing information caused by the Great Firewall of China and heavy governmental censorship, so they aren’t aware of outside situations.
IHC
OK you ask for it.
According to western standard, dog eaters are sub-human species. You have no gut to say it to Chinese and borrow Japanese mouth to utter such thing.
Korean = dog eater
dog eater = sub-human
Korean = sub-human
Am I correct?
@IHC
>People tend to trust American and Japanese performance claims more than Chinese performance claims.
And people tend to think that Korean vehicles are cheap and can only compete on price…. The will think the same when Chinese vehicles start selling more in western markets as well but really that will not be much of a surprise to most….
>Take Ford’s word for it.
Will do, CPI who Ford signed the contract with is a subsidiary of LG/Chem and is run by some ex Ford staff… including one who was involved in the hybrid program. Having networks in the business world is always a good thing.
>Only Koreans have perfected the large capacity solid electrolyte battery technology.
This is unproven really because the li-ion cells have not been around that long. If no Volts explode in the first year of use then everything should be hunky dory.
>Of course lithium and manganese are imported.
And because 10 of the 14 LG Chems manufacturing subsidiaries are Chinese based….
>Korean batteries are super-durable
This is unproven in real world conditions the same as the BYD ones are.
In reality is only the packs used the Toyota and Honda hybrids are proven to be reliable and both those are outdated Japanese tech according to you.
>We are talking about a battery that loses only 5% of capacity after 450K miles according to Hyundai testing, a figure unheard of elsewhere.
Baseless claim with no link to back it up… I looked, feel free to provide one if you can.
>Koreans are several years ahead of everyone else in EV battery technology
Not according to the Korean Government. Link is the one in a previous post. Getting figures from BYD is nigh on impossible but that’s nothing unusual for a Chinese company. When everything is released there are sure to be comparisons made by INDEPENDENT sources.
>Korea is a free-speech country
Epic fail on that one…. http://www.privacyinternational.org/article.shtml?cmd347=x-347-103782
Google Korean Free Speech for more examples and its not just about the North.
@Dragin
Sorry I thought I might have had my figures a little messed up… I was having too much fun debunking IHC.
186 Miles would give the E6 a roughly 540 cycle life in perfect conditions, still not too bad really.
IHC,
“But in ramping up production in China, A123 paid an immeasurable price: loss of its intellectual property, the ideas and engineering that made its products better.
The company did what it could to slow the technology transfer by breaking down the manufacturing process into steps, Riley said, but “we ended up having to teach these guys how to make our state-of-the-art, world-class batteries. … And some of them are now competing with us directly.”
You know BYD have been doing R&D for battery for more then 10 years. Are you trying to say that after all those R&D they are still so dumb that they can’t get anything out of it, so they have to copy from A123 or whoever. So, only the western, Japanese, and Korean have enough intellectual capability to grasp the technology behind it?
Anyway you can check below for real ride on E6.
http://green.autoblog.com/2010/08/31/video-ride-along-in-byds-e6-electric-taxi/
IHC
So much so about your great LG Chem achievements even the Japanese giants confess of defeated by Koreans, contracts from GM, Ford, VW are signed to guarantee the leadership in power pack technology.
If you pull back and look from a wider perspective, these well established auto makers are just getting into the bandwagon of green environment. EVs to them are just PR show, they are in no way giving up multi-billion dollar investments on conventional gas engine business. By the same token, the Japanese battery giants will not give up their proven NiMH technology. Are you sure the Japanese cannot develop your Li-polymer batteries for competition? No one question the innovation ability from A123 Systems, LG open up this new market will invite more investors to join in.
American, German, Japanese & Korean auto makers will just play around with EVs for the sake of the profits they are currently enjoying. GM has scraped its previous generation EV1 project is a good example. Only Chinese government is serious in this EVs concept and will promote EVs as the future transportation means to reduce dependence on foreign oil. I have better faith in Chinese auto makers to get the EV dream come true.