During BYD’s recent over-crowded annual meeting on June 7, 2013, Mr. Wang acknowledged Tesla Motors’ astonishing success at developing high-end electric cars, changing consumer buying habits, and training environmentally conscious drivers.
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BYD Won’t Follow Tesla’s “High Tech + High Fashion” Formula
If Apple (AAPL) introduced fashion and cool into the cellphone industry, Tesla Motors is now following Steve Job’s playbook to introduce design and IT into the car industry. Even critics admit that Tesla Model S is an amazing car which win the coveted 2013 Motor Trend Car of Year title.
But Mr. Wang believes that Tesla’s high-end electric car strategy is not compatible with BYD’s low-end consumer strategy. That’s why BYD is now aggressively pursuing the market for electric buses, the “middle road” for electric vehicles.
Mr. Wang said that BYD cellphone battery is similar to Tesla’s lithium-ion battery technology, with high energy density. But for public buses and rental cars, BYD chose to use a different reusable battery which is safer and has a longer life cycle.
It seems BYD is not planning to go head-to-head competition with Tesla. “For us, the technology for pure electric car is not the problem. The problem is the market. To scale up new production capabilities, it takes about 4-5 years,” Wang said.
Some critics believe BYD tradition cars has the problem of high repair rate. They also did not invest serious money in design. Most of BYD’s car designs are “copied” somewhere from Toyota (TM) or BMW, while Tesla made serious effort to introduce cool design into their cars.
Just compare the company logo of BYD vs. Tesla. You could quickly tell Tesla is the clear winner in cool design.
Tesla’s CEO Elon Musk once laughed off BYD as a competitor saying: “Where is BYD’s electric car? Have you seen one? And they have issues with their domestic market which should be their focus.”
BYD and Nokia’s Tumble in the Last Few Years
In the last several years, Steve Jobs and Apple’s rise became Nokia and BYD’s fall. When Apple swept away Nokia, BYD’s IT manufacturing business, which had Nokia as its largest customer, had seen volume sink by nearly 50%. Due to the lack of molding capabilities for smart phones, BYD failed to get enough orders from other cellphone makers to make up the revenue shortfall. Both Charlie Munger and Li Lu did not foresee this major setback by BYD, which drive down the value of Berkshire Hathaway's 10% stake in BYD by about 80%.
But now, the after-Apple era has arrived, and BYD’s investment in the smartphone molding capabilities is paying off. They are now major suppliers for popular smartphones from Samsung and HTC.
“The smartphone shift created opportunities for large scale IT manufactures. This time we grabbed our chance,” said Wang Chuanfu. He proclaimed that this year will be the first year of BYD’s new wave of major growth for at least three years to come with several cylinders pushing forward. Also, their electric bus division is now showing profits.
BYD’s Sprawling Operations
BYD has had two huge price run-ups in the past which at one point had pushed Wang Chuanfu to become China’s richest man only for a brief period. Established in February 1995, BYD has developed from 20 employees to a corporation with more than 150,000 employees and 10 industrial parks across China in 2009, including sites in Guangdong, Beijing, Shaanxi, Shanghai and Changsha, totaling nearly 15 million square miles. It also has offices in the U.S., Europe, Japan, South Korea, India, Taiwan, Hong Kong and other regions.
BYD Company Limited is now the largest supplier of rechargeable batteries in the globe, and has the largest market share for nickel-cadmium batteries, handset Li-ion batteries, cell-phone chargers and keypads worldwide. It is the largest supplier of rechargeable batteries and it also has the second largest market share for cell-phone shells in the globe.
BYD Auto is also an innovative independent national auto brand and leads the field of electric vehicles with unique technologies. In the field of new energy, BYD has developed green products such as solar farm, battery energy storage station, electric vehicle and LED, etc.
BYD's IT manufacturing business has earned a large and stable customer base owing to its reliable product quality. Currently, its IT Business Unit's customers include international cell phone giants Nokia, Motorola, Samsung, Sony Ericsson, Kyocera, Phillips, prominent domestic cell phone companies Huawei, ZTE, Lenovo, as well as cordless phone experts Vtech, Panasonic and Sony.
On Janu. 22, 2003, BYD purchased Xi'an Tsinchuan Auto Co. Ltd. (now BYD Auto Co. Ltd.) and officially entered the auto industry. As a rapidly growing and innovative auto company, BYD's auto products and services include fuel and electric vehicles as well as auto molding and auto parts manufacturing. Its selection of vehicles include traditional high quality fuel vehicles F3, F3R, F6, F0, S8, G3, M6, L3, dual mode electric vehicles F3DM, pure electric vehicle e6 and pure electric bus K9.
BYD’s Middle of Road Strategy
Dec. 15, 2008, F3DM, the world's first dual mode electric car independent of specialized charging stations, officially hit the market in Shenzhen. January 2010, pure electric vehicle e6 got approval from the government for launch; May 2010, the world's first pure EV taxies, BYD e6 taxies run into commercial operation. January 2010, BYD's pure electric bus K9 was developed successfully. BYD has secured its leading role in the global new energy vehicle business. BYD is now cooperating with the most experienced traditional car manufacture Daimler AG (DDAIF).
Wang Chuanfu also hinted at the annual meeting that, with years of accumulated IT investments, BYD could be working at designing a “smart car” that is stands in the middle between a traditional car and a self-driving vehicle.
(Disclosure: Author has no position in BYD.)