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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@ hk
> GM choose Korean LG as battery supplier instead of American A123 because of cost factor
No GM did not. LG lithium polymer is currently the longest lasting lithium battery you can buy today, and this super durability, plus higher energy density and crash safety was the reason LG won. Unlike China, 8~10 year battery warranty is the norm in the US, and it is difficult for Chinese batteries to break into US/European markets because of durability issues.
IHC, as you mentioned it wasn’t the cost factor but A123 could have become GM’s main supplier if those tests were passed. Not hassling you just stating some facts. GM choose it from a structural standpoint, it doesn’t really mean they are safer.
Lets not forget that A123 is Black & Deckers main battery supplier and that proves that A123 batteries can handle abuse….. aside from B&D uses many R/C enthusiasts dismantle B&D packs to use in R/C planes, Boats and cars because they can handle lots of abuse. readers with A123 B&D power tools are free to tell us if their battery packs suck.
A123 is Li-Fe, not Li-ion and not simply the cheap Li-Fe that is accepted as a hobby grade one now through online HK retailers or BYD
GM is a big company and they chose LG for their own reasons…. nothing relevant to BYD at all really unless there is a direct correlation between the 2-3. LG is a major world supplier of electronics and any decision for what should be used where is made at a management level beyond what most of us are used to.
http://gm-volt.com/forum/showthread.php?t=2936
1. “The cells in the LG Chem battery were deemed the most appropriate in structural integrity testing” <= Ok, this says LG cell was most appropriate in structural integrity.
2. "the cell size was the best fit with the cooling system that GM had designed for the Volt." <= This clearly has nothing to do with structural integrity.
3. "The LG Chem battery provided the best results in rear-impact and side-impact crash tests." <= This is debatable, but what does it mean when somthing is proved to deliver best result in crash tests? Safety, of course!!!
4. "Most important to GM, which would be footing most of the manufacturing cost, was its confidence in the battery's ease of manufacturability and LG Chem's established track record in Li-ion manufacturing" <= This has nothing to do with structural integrity.
That GM statement was about merits of LG cells that led them to choose it over A123's, in terms of 1. structural integrity, 2. cooling 3. crash test performance(Crash tests are conducted to measure safety, not how well the car/object stays in one piece) and 4. manufacturing cost. Structural integrity covers just no. 1 and a portion of no. 3.
OK, IHC, I buy it but cost factor also plays an important role. I wonder why LG will not supply the whole battery assembly from Korea to save cost instead of having GM to setup a battery assembly plant in the US. May be GM will shop around in future for a cheaper Chinese supplier to lower Volt’s selling price.
HK, a bit off topic,,,,, thread is about BYD. IHC voiced a genuine honest opinion which is pretty much correct. LG has grown to be a world leader in future tech even if they and (samsung) have facilities in China GM wanted certain things at a certain time…. supply and demand, let it be…..
if it matters I an REALlY anti GM but some benefit of the doubt needs to be given……. best no to be biased too much.
Mr. woxihuanpijiu, do respect other’s opinions. Do not always say off topic off topic to discourage further discussion. I welcome IHC to express his China-bashing opinions that only showing his arrogance & ignorance to us.
hk
@ woxihuanpijiu
> GM is a big company and they chose LG for their own reasons…. nothing relevant to BYD at all really unless there is a direct correlation between the 2-3.
It is relevant to BYD, or any other Chinese battery maker for that matter, as BYD has yet to prove its batteries last 15 years and can be warrantied for 10 years as required in the US.
LG’s cell is super durable, it loses only 5% of its charge capacity after 450,000 mile testing according to Hyundai. Next-generation automotive Li-Polymer batteries from Korea available in 2012 should last through 9,000~10,000 charge cycles.
@ hk
> I wonder why LG will not supply the whole battery assembly from Korea to save cost instead of having GM to setup a battery assembly plant in the US.
GM wanted to keep some engineering inhouse and learn about battery engineering. Ford does buy complete pack and control system from LG for Focus EV and Transit EV.
> May be GM will shop around in future for a cheaper Chinese supplier to lower Volt’s selling price.
Chinese can always bid, assuming they have a designed lifespan of greater than 15 years, and meet all safety and performance requirements.
IHC
Am I telling the real story? A123 System is not as good as LG Chem? A123 has a JV in Shanghai to produce batteries, GM will ask A123 to supply a new version for backup or second source. That is the reason why GM has built her own battery assembly plant. I would suggest LG to start battery production in China to lower the cost, otherwise A123 will grap the business. Ford employs LG batteries is just simply a me-too reaction, she is in no way to promote EV judging from her financial situation.
@ hk
> A123 System is not as good as LG Chem?
No they are not. In fact, A123 just lost a court battle to steal battery engineers from LG. http://english.donga.com/srv/service.php3?bicode=020000&biid=2010072992218
BYD stole battery tech from A123.
Now A123′s trying to steal battery technology from the market leader, LG Chem.
> GM will ask A123 to supply a new version for backup or second source.
Second sourcing doesn’t work because these batteries are not interchangable. Basically, the automaker is locked into single battery design at the engineering stage.
> I would suggest LG to start battery production in China to lower the cost
Battery plant is like a semiconductor plant; labor cost doesn’t matter.
> otherwise A123 will grap the business.
A123 can’t sell its battery to American automakers. Heck, even Chrysler dropped them. Why do you think A123 would have a better luck in China?
> Ford employs LG batteries is just simply a me-too reaction, she is in no way to promote EV judging from her financial situation.
This is an odd statement, since Ford is the only US automaker not bankrupt and is generating a $2.5 billion profit per quarter.
Basically, everything you state contradicts reality.
IHC
I don’t have time to verify what you have told us so I just take your words on the success of LG Chem. But let me bring you back to the real planet Earth with what we all know outside Korea.
1. No industry will depend on a single source/supplier. GM has its own battery assembly plant is for that reason, don’t be so naive to believe in what GM told you.
2. Chinese rechargeable batteries beat the then Japanese market leaders in mobile phone/notebook. It is the cost factor that works. A123 System’s JV in China will get her in a better position to fight the battle with LG/BYD. Better Place & A123 System are no dumbs, the EV from Chery’s Riich G5 will upturn the future auto market in big cities. GM’s Volt still has to carry an ICE as other hybrids do so A123 bets on full EV.
3. Ford has loss for so many years that she sold all the affiliates (Jaguar, Aston Martin, Volvo, Mazda…). You are telling us Ford is in good shape and affords to play with EV?
4. Toyota Prius & Honda Insight are pretty successful in hybrid market, Mitsubishi i-MiEV & Nissan Leaf full EV are ready for sale around the world. Now you are telling us LG is the EV battery market leader, well where are the Hyundai/Kia hybrids & EVs? A fastest growing auto maker Hyundai together with the best LG power pack supplier cannot come up with anything but hiding behind GM’s butt?
Wakeup and back to the reality !!!
@ hk
> 1. No industry will depend on a single source/supplier.
Batteries are not interchangable, so that restricts whom you can buy from.
> don’t be so naive to believe in what GM told you.
GM’s 2nd source is well-known; it’s Samsung. So why is GM negotiating with Samsung instead of some Chinese vendor? Because GM has the most experience working with Korean-style lithium polymer batteries. So GM’s current experience allows them to switch to another Korean vendor supplying Korean-style lithium polymer battery, but not to Japanese and Chinese batteries.
> 2. Chinese rechargeable batteries beat the then Japanese market leaders in mobile phone/notebook. It is the cost factor that works.
It is acceptable to throw away a cellphone battery after a couple year of use. It is not acceptable to throw away an EV battery after a couple year of use; EV batteries are required to be warranted for 8~10 years, and actually last for 15 years of use.
This is why BYD the cellphone battery king cannot land any EV battery deals outside of China.
> You are telling us Ford is in good shape and affords to play with EV?
Well, Ford is not bankrupt, unlike GM and Chrysler.
> well where are the Hyundai/Kia hybrids & EVs?
Hybrids : On sale in Korea since last year, in the US this year.
EV : On sale in Korea next year.
> A fastest growing auto maker Hyundai together with the best LG power pack supplier cannot come up with anything but hiding behind GM’s butt?
If you are actually following Volt development, a lot of Volt fans are angry that LG sold GM its first generation battery for Volt, while selling its second generation battery for Hyundai’s PHEV due out in 2012. You can compare Volt’s battery pack to Hyundai’s battery pack and Hyundai’s pack is much smaller while providing same AER.
IHC
You just loop around without answering my questions.
1. Second source issue
There is not much difference between LG & Samsung from sourcing point of view. A123 is another story, any CEO will know the benefits. May be Koreans are smarter and next Apple/Microsoft are coming from the Goguryeo. Let me give you another example, in China’s high speed train system there are two technologies derived from Germany & Japan. I am not saying they are compatible but both running smoothly. Why can’t Volt has two power pack sources? It is not rocket science to modify the charging stations. Your argument is invalid and no sensible person will buy it.
2. Cost factor issue
You may look down upon Chinese BYD in lithium-ion battery business. From technology point of view, Chinese are the lowest but they have the cost factor in playing. Ok you can have state of the art Japanese/Korean/American power packs but in unaffordable price. Chinese power packs may not meet the highest standard but a cheaper and affordable with acceptable performance version will surely promote EVs especially in big cities. It is a race between Chinese affordable EV against Japanese/American high-tech EV. Your 15 years durabilty argument is nonsense, a Mercedes has customers and Tata has users as well.
IHC, I think it’s time to stop bashing. You should go to Shenzhen and take a ride on one of the 40 BYD e6 taxis already in operation then give your comment. Also by the way, BYD Li fe battery is different from A123.
@ hk
> in China’s high speed train system there are two technologies derived from Germany & Japan. I am not saying they are compatible but both running smoothly.
Same thing in Europe too. You have French, German, Spanish, Italian, Canadian, and even Japanese(Hitachi) train models sharing same railway network. Why? All complies to UIC standard.
There is no such similar standard in EV world. Everyone’s battery behavior is different.
> Why can’t Volt has two power pack sources?
Two power pack sources of similar type is acceptable(ie LG and Samsung).
Two power pack sources of dissimilar type is not acceptable(like LG and BYD), because it is too much engineering and verification work.
By selecting LG’s battery, GM and Ford locked themselves into buying from Koreans only, as Korean EV batteries are all lithium polymer batteries designed to be interchangeable at design stage.
> It is not rocket science to modify the charging stations.
You do not understand what’s involved in rapid charging. Rapid charging requires a two way communication between the battery controller and the charger, in order to assure only the safe amount of current(Which varies depending on charge level) flow into battery.
In order for Japanese CHADEMO rapid charger to interface with Korean battery controllers, they must have a common communications protocall. It is not an issue of having same socket and plug.
> Chinese power packs may not meet the highest standard but a cheaper and affordable with acceptable performance version will surely promote EVs especially in big cities.
Which do you think is cheaper?
One $10,000 LG battery pack @ 15 year lifespan = $10,000 total
Two $5,000 BYD battery pack @ 7 year lifespan(I am beng generous here) + $1,000 battery replacement labor cost = $11,000 total.
> It is a race between Chinese affordable EV against Japanese/American high-tech EV.
Panasonic, Honda CEO, and Nomura analysts disagree.
Like Honda CEO said, Honda isn’t afraid of Americans and Chinese; Honda is afraid of only Koreans.
> Your 15 years durabilty argument is nonsense
Well, we know Volt is warranteed for 8 years.(GM plans to upgrade it to 10 years within 2 years after more test data is collected). Leaf is also warranteed for 8 years(Nissan didn’t want to do it because NEC battery isn’t durable) because they had no choice. Hyundai will most certainly provide a 10 year warranty on its EVs because 10 years is their standard warranty.
8~10 year battery warranty is going to be the standard in the US. For a battery to carry 10 year warranty, it must be designed for a lifespan of 15 years or longer.
@ Lokman
> Also by the way, BYD Li fe battery is different from A123.
Of course not. It is a 80% copy, not a 100% copy. How BYD acquired(stole) A123′s battery tech is well published. Even A123 was using BYD’s example as the reason why they must establish the battery plant in the US using US federal subsidy.
IHC
OK enough is enough, I am just talking to a wall.
“Even A123 was using BYD’s example as the reason why they must establish the battery plant in the US using US federal subsidy.”
To correct you, 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.