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.
Tweet This
Share on Facebook
Digg This
Save to delicious
Stumble it
RSS Feed
Right, even the Chinese central government’s announcements are questionable sometimes. If you believe in the bold claims by BYD blindly, you must be either a child or an idiot.
“Lin blamed the unexpected sales on seasonal factors, formidable weather conditions like floods and mudslides, and difficulties in expanding capacity to meet market demand.”
It is very funny that if BYD cannot have enough cars to meet market demand, they should raise the price and sales should be roughly the same in past few months. The reality is just the opposite. What a poor PR BYD got!!!
Loading comment…
Quick search of the SZ listing bought up this.
http://english.peopledaily.com.cn/90001/90778/90860/7121595.html
No surprise on most of the stuff in the post.
The quest to be #1 has derailed General Motors and Toyota. Volkswagen Auto Group is the latest to declare their intentions to be the biggest in the world. We’ll see what it dose to them in the future.
Lin Mi is saying that the company needs to concentrate on brand immage. Yes, and quality first and foremost! BYD has stated that they will sell the e6 to fleets in the US at the end of this year.
They will not sell the e6 to the public until late 2011 or early
2012. If consumers find those vehicle lacking in quality, performance, and features, BYD will have blown a chance to make a good first impression. Future sales in the US market will then be difficult at best. Forget the quantity and do the quality. That will give them the growth and immage they desire.
e6 is just a testing mule for BYD’s ET-Power battery technology. The upcoming JV EV(Mercedes B-Class based)will be the secret weapon to kill Chevy’s Volt. Now the question is can BYD mass produce a battery system for such application ???
hk, I don’t think the mass producing part will be the problem for BYD but these points might….
E6 is still not ready for production. Regardless of if it’s a testing mule or not the technology is still unproven by any source outside of BYD. Strangely we have not heard Wang “full of BS” Chuanfu harping on about it for some time. Everything about the e6 is “claimed” until proven.
The BYD-Daimler entry into the market won’t happen until around 2013 by which time the Volt, Leaf and even the other domestic offerings will have had time to gain traction and market share which won’t help BYD-Mercs cause much unless it’s something pretty special. Hardly a secret weapon when BYD can’t even get their own vehicle to market. 500,000RMB buys a pretty good car in most countries around the world.
Lack of charging infrastructure. This is not a problem for BYD alone but is a pretty major factor. We have all discussed this many times on CCT already.
Of course, all the production issues with the battery tech will be non-existent after the Leaf and Volt go on sale. A BYD rep will be the first one in the door to buy one of each so they can ship it back to China to strip it and see how it works…. BYD won’t be the only one doing this though.
woxihuanpijiu, I agree with most of what you said on the e6 but you have overlooked the most important factor.
It is not whether BYD got the lithium-ion battery technology because it already has 30% world market share. The key issue here is all those batteries are single unit or in a cluster of few units. For a battery system for EV application, it involves multiple units in hundreds that have to perform in a strict specification. Any single cell fails will destroy the whole battery system. The tricky part here is whether BYD got the technology to mass produce all those batteries in a economical way.
Until then, we all heard F3DM and e6 are produced in small batches only. I sincerely do hope BYD can start mass production of at lease F3DM ASAP to compete against Prius & Insight and demonstrate your real ET-Power. BYD, your F3DM, F6DM & e6 have been dragged on for ages without any solid proof. If the reality shows any sign of phony claims, BYD will be a history.
Isn’t the 30% market share for mobile phone batteries? Simplo, LG, A123 and a few others are miles ahead with multi cell development so the technology is obviously already available but is most likely self developed by the companies themselves. Does BYD have engineers smart enough to develop that tech in the best way possible?
The F3DM failed as a fleet vehicle in China and even with public sales has failed to really take off. The e6 was a great idea but with BYDs continuous pushing back of the deadlines it has missed a huge opportunity to make a big impact.
The Prius has lead the way forward for hybrids (and EVs) for some time but even now its possible to buy an oil burner Econetic Fiesta with better fuel economy.
If we think that BYD is indeed a paper tiger, unable to deliver on its claims, then why would Mercedes be so foolhardy as to throw in with them? They must have done some due diligence before hand.
My own take on the situation is that poor quality is catching up to them, and that too much emphasis was placed on ICE driven niche models like the F8. They should have focused on both proving and marketing their hybrid models in China and overseas.
Now you know what the main issue is.
Mr.Buffett and Mercedes Benz are no dumbs either, they are deeply involved with BYD. I do believe BYD got the know-how and the advantage of low-cost manufacturing where other competitors could not enjoy. I do hope the Merc-BYD JV is a real and substantial one that both partners can share their own highly guarded secret technology to make this EV dream come true.
Buffetts name is on the deal but he was introduced to it by his deputy Charles Munger and Chinese American investor Li Lu (who is an informal adviser and shareholder in BYD himself). Berkshire Hathaway is in the business to make money for their shareholders so 10% in BYD co (not just auto) was a very good investment. 10% will get them someone on the board but not much sway in how things are done.
Daimlers involvement is not hard to figure out…. They don’t really have a full scale EV program and needed access to the technology available other than the cooperation and shares they have in Tesla. BYD’s tech must have been good enough to convince MB to form a JV and seeing it was only signed a few months ago it will be interesting to see how the deal pans out over the next year or two. Hopefully it works out better than the last merger that Daimler did.
OK, now it boils down to the consensus that BYD is still a big contender in this EV race. GM choose Korean LG as battery supplier instead of American A123 because of cost factor and Chinese BYD will surely beat the Koreans in costing. Don’t forget A123 has a JV in Shanghai to produce its batteries and partners with Chery in EV projects. Yet BYD is still in an upperhand as it is both a car and battery manufacturer. Both Mitsubishi and Nissan start marketing their EV but with heavy Japanese government subsidies, so in terms of cost factor Chinese made EV will remain highly competitive.
Why did they throw in with Chrysler?
Vie, are you talking about Daimler Chrysler?
You must be coming from MARS !!!
Vie, there were various reasons on what happened. Do some research and you will get a good gist of what went wrong and where.
Here’s a few links to point you in a starting direction. Just remember there is more than one side to the story.
http://www.pressbox.co.uk/detailed/Business/How_Daimler_Chrysler_Merger_Failed_122434.html
http://blogs.drive.com.au/2007/05/daimlerchrysler_history_of_a_f.html