BYD cuts prices and staff
Clearing inventories and laying off staff are typical scenes from a business that is preparing to close up shop but Chinese media reports are saying that BYD is undergoing a massive job-cut campaign recently, and most of the laid-off staff are the sales personnel, also rumors are circulating that Warren Buffett intends to dump his BYD stock after BYD’s poor sales in 2010,
According to Chinese media reports, BYD had launched the layoff campaign before the Chinese New Year with around two thirds of the auto sales division being laid off. However, industry analyst Jia Xinguang believes that the layoff of sales personnel is the business of BYD dealers rather than BYD itself.
According to Jia, a massive layoff of sales personnel means BYD’s dealers are faced with heavy pressure. Another industry source discloses that there is something wrong with the cooperation mode between BYD and its dealers.
The source says that BYD rewards its dealers with cars, and such kind of rewarding mode had been negated ten years ago. Besides, its cars are sold at very low prices, and the maintenance charges are set at a low level. It’s quite difficult for dealers to make profits with such low margins.
Du Fangci, assistant secretary general of CAAM, says that automakers should deal with their relationship with dealers and suppliers well and make sure they could earn money, to ensure the stability of the industry chain.
BYD’s fiscal report for last Q3 also showed its inventories hiked greatly from the same period of 2009. The price reduction campaign launched a week ago could be seen as a move to clear stocks and supplement funds. Du believes that it’s inevitable for BYD, an industry newcomer, to encounter some problems during its rapid growth, but it should learn the industry rules.
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Well, we knew this was bound to happen some time. Not good for the people who are caught up in this, but probably good for China’s car industry in the long term.
Let me justify that: BYD, we must all recognise, made a business of copying other peoples cars. That’s hardly unique in the industry, companies from all over the world have in the past copied (or at least ‘Were influenced by’) other makers vehicles. However any successful company cannot continue to do that forever, at some point they have to begin investing in their own research, design and development departments. So far BYD appears, at least from a European perspective, happy to keep cloning other peoples cars – with the exception of a couple of models.
They should have already invested in R&D, and if they haven’t then I doubt they will be around for more than a couple more years. I’m not going to write them off just yet – its possible I’m being unfair to them and they have invested the money they made – but its clear they aren’t moving fast enough yet.
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