The world’s biggest electric vehicle company looks nothing like Tesla
Americans associate electric cars with the luxury of Tesla
On the floor of a cavernous factory in southern China, dozens of unfinished cars, freshly painted in cherry red or dark silver, dangled 6 feet above a spotless concrete floor. Their engines had been installed a few moments earlier, but they were still skeletal, more the promise of vehicles than the real thing. As they drifted down the line, a sledlike robot scooted into position beneath each chassis, slowing to match its speed.
The robot carried a crucial payload: a battery about the size and shape of a double mattress, wrapped in a gray plastic casing. Suddenly, an accordion lift extended upward from the sled and inserted the battery into the car’s undercarriage. Workers in blue jumpsuits and white cotton gloves moved swiftly to the battery’s edges, carrying rivet guns connected by curling red cables to a supply of compressed air. Once the battery was rattled into place, the accordion retracted, sending its robot host scurrying off in search of fresh cargo.
Americans associate electric cars with the luxury of Tesla, the unrivaled conveyance of choice for the Sand Hill Road set. But these newly assembled vehicles, part of a family of SUVs called the Tang that retails from about 240,000 yuan ($35,700), are aimed squarely at middle-class drivers in the world’s largest electric vehicle market, China. Their manufacturer, BYD, is in turn the No.?1 producer of plug-in vehicles globally, attracting a tiny fraction of the attention of Elon Musk’s company while powering, to a significant extent, a transition to electrified mobility that’s moving faster in China than in any other country.
Founded in Shenzhen in the mid-1990s as a manufacturer of batteries for brick-size cellphones and digital cameras, BYD now has about a quarter-million employees and sells as many as 30,000 pure EVs or plug-in hybrids in China every month, most of them anything but status symbols. Its cheapest model, the e1, starts at 60,000 yuan ($8,950) after subsidies.
BYD’s cars and other vehicles—a Tonka set of electric buses, forklifts, utility vans, street sweepers, and garbage trucks—run exclusively on batteries the company manufactures itself. Its sprawling Chinese facilities can produce almost 30 gigawatt-hours of power annually, more than enough to run every iPhone ever made. Last year, BYD opened one of the world’s largest battery plants, a 10 million-square-foot facility in Qinghai province, and in February it broke ground on another of similar size. This empire has made a billionaire of its founder and chairman, a former government chemist named Wang Chuanfu. It’s also been a boon for another high-net-worth individual, Warren Buffett, whose Berkshire Hathaway Inc. bought a 10 percent stake in BYD a decade ago.
Even for a nation of superlatives, China has adopted EVs at a stunning pace. Thanks to generous government subsidies and municipal regulations that make owning an internal combustion vehicle in many cities inconvenient, expensive, or both, China accounts for more than half the world’s purchases of electric cars. More EVs were sold in Shanghai last year than in Germany, France, or the UK; the city of Hangzhou, smallish by Chinese standards, had higher sales than all of Japan.
Virtually all of Shenzhen’s 20,000 taxis are electric BYDs, compared with fewer than 20 of any make in New York. More than 500,000 electric buses ply Chinese roads, compared with fewer than 1,000 in the Eager to beat back city smog and support a growing industry, the Chinese government has said it intends to eliminate fossil fuel-powered vehicles by an as-yet-unspecified date, probably about 2040. Given the scale of the market, China’s demands stand to shape 21st century carmaking every bit as much as the American consumer’s shaped the 20th—giving it pole position in the transportation industry and all the strategic advantages that entails.
This acceleration toward an electric future is a triumph for Wang, 53, who began advocating for mass EV adoption more than a decade ago. It’s also creating an unprecedented challenge for his company. Attracted by China’s huge customer base and clear policy direction, Volkswagen, Ford Motor, and other global automakers are introducing dozens of electric models tailored to local tastes. They’ll arrive just as the Chinese government scales back purchase subsidies, a move that will disproportionately affect manufacturers such as BYD, whose products skew toward the affordable end of the market.
Meanwhile, the company’s chances overseas are threatened by a wave of anti-China sentiment, expressed through measures like a recent effort to ban Chinese bus producers from receiving federal funds. Investors are worried: BYD’s Hong Kong-listed shares—the best-performing on the planet during one stretch in September 2017—have slumped 18 percent over the past 12 months.
Wang and his colleagues are determined to prove doubters wrong by building an aspirational global brand, something no Chinese manufacturer has accomplished. And while they’re proud of the company’s pioneering history, they’re acutely aware that getting somewhere first doesn’t ensure long-term success. BYD may have begun China’s electric revolution; now the carmaker’s leaders have to figure out how to finish it.
In the early 1990s, Wang was living in Beijing, working as a midlevel researcher at the General Research Institute for Nonferrous Metals, a government lab that forged practical innovations from metallurgical findings. His work focused on the rare-earth metals essential to batteries and consumer electronics, and as the entrepreneurial fervour of the Deng Xiaoping era filtered into government, he began wondering what might be possible in the private sector.
In 1995 he founded BYD in Shenzhen, which was undergoing its fabled transformation from regional market town to globally connected megalopolis. It’s not clear if BYD stood for anything; the company now says it’s an acronym for “build your dreams” and renders the phrase in chrome on some car models, but this could be an attempt at retconning.
Wang was a nobody in Shenzhen, one of thousands of young entrepreneurs angling for a piece of the global supply chain. But he was also an expert in batteries at a moment when they were coming to underpin a fundamental technological shift. As lithium-ion-powered laptops and mobile phones became commonplace in the late 1990s, BYD’s low costs and nimble production methods gradually allowed it and other Chinese companies to unseat Japanese manufacturers as the go-to suppliers. (Not without controversy: As it grew, BYD was sued for intellectual-property theft by Sanyo Electric Co. and Sony Corp. The Sanyo suit was settled; a Japanese court rejected Sony’s complaint.) By the early 2000s, BYD batteries were in Nokia handsets, Black & Decker power tools, Dell notebooks, and even the era’s ultimate status symbol, Motorola’s Razr phone.
In 2002 the company went public in Hong Kong. The next year, BYD bought a majority stake in Xi’an Qinchuan Auto Co., a troubled state-owned carmaker. At the time, battery-powered cars were curiosities, limited mostly to orphan models designed to meet regulatory mandates in California. But Wang saw them as a natural extension of BYD’s core business, arguing that the deal would “expedite the development and production of rechargeable power batteries for electric motor vehicles.” Investors emphatically disagreed, pushing BYD’s shares down by a fifth on the day of the announcement.
Automotive product timelines are lengthy, and Wang’s influence on BYD Auto, as the acquired business was renamed, wasn’t apparent until 2008. That year he unveiled the F3DM, the first plug-in hybrid to be produced at commercial scale anywhere. Technologically novel, with a claimed 60-plus miles of pure-electric range, the car had approximately zero sex appeal, in contrast with Tesla’s Roadster, which made its debut the same year. “We drive faster in our driveways,” Car and Driver said, sniffing at the F3DM’s 93 mph top speed. It was a flop in China and abroad; BYD has barely exported passenger cars since.
Yet as Tesla was focusing on the midlife-crisis market, BYD was electrifying less glamorous vehicles and building a business supplying solar panels and other infrastructure. The company began mass-producing electric buses in 2009, and the next year won a 1,000-vehicle order from the province of Hunan.
Similarly sized contracts followed, along with smaller deals in cities such as Amsterdam, Frankfurt, and Los Angeles — though the latter deal and another in Albuquerque became embroiled in criticism over mechanical problems that led the New Mexico city to return its BYD buses. In California, there were also allegations that workers were making as little as $1.50 an hour. (California regulators dropped a wage complaint after BYD showed it was paying more than minimum wage, and the company says its vehicles worked correctly in both cities.)
In retrospect, the logic of focusing on big, lumbering vehicles operated by cost-conscious public transport authorities was obvious. Typical car-buyer concerns such as acceleration and top speed are less of an issue for a vehicle designed to stop every few blocks. Nor is range anxiety a factor on fixed routes. Putting commuters on electric buses, the thinking goes, also helps build brand awareness and acceptance for EVs generally. And the possible upsells are manifold: BYD solar generators, BYD energy storage installations, BYD fast chargers, perhaps even a few BYD electric forklifts to shuttle parts around.
BYD’s totalising philosophy becomes evident as you approach the company’s headquarters in the eastern suburbs of Shenzhen. The last leg of the trip runs down BYD Road, a six-lane corridor divided by rows of solar-powered BYD light standards. About 40,000 people work on the campus, traveling to its factories and office blocks on BYD buses.
The internal roads are almost spotless, patrolled at frequent intervals by BYD street sweepers. In front of the hexagon-shaped central office block, the company has built a test track and station for SkyRail, a prefabricated monorail system designed to be dropped into place above congested city streets—a hedge in case the EV revolution doesn’t take hold.
Wang works on the second floor of the main building. Pride of place on his desk belongs to a model of a bright red Tang SUV. On the shelves behind, next to scaled-down BYD dump trucks, are a white sculpture depicting a seated Mao Zedong and a photo of Wang embracing Buffett—an all-too-tidy metaphor for socialism with Chinese characteristics.
Although corporate lore frames Wang as something of a Great Man of Electricity, in person he’s unassuming, with soft shoulders, a round face, and full cheeks. For an interview he wears his usual uniform: dark slacks and a light blue button-down with a subtle company logo sewn by the breast pocket.
The shirt color reflects his managerial role—BYD’s Star Trek–style dress code requires technical supervisors to wear beige, production-line employees dark blue, and so on. His faded ID photo, hanging on a lanyard around his collar, looks as if it dates to the early 2000s. Employees are eager, sometimes awkwardly so, to tell stories about Wang’s disinterest in the fruits of his net worth, approximately $4.8 billion, according to the Bloomberg Billionaires Index. While on his way to meet investors in Hong Kong, one colleague recalls, the chairman was advised to spruce up his look; his solution was to spend a few dollars on a new shirt from a roadside vendor.
Wang concedes that BYD is facing a brutal contest for customer loyalty. But he also professes confidence that the world is on the cusp of a permanent shift to electric mobility and that his company will be out front at home and then abroad, where he estimates it could eventually sell 20 percent to 30 percent of its vehicles. “We are tapping into a once-in-a-century opportunity,” he says, opening his clasped hands for emphasis. “And we have the whole industrial chain. No one else does that.”
In automotive circles, Wang’s predictions of the combustion engine’s imminent demise often meet profound skepticism. Chinese sales of new-energy vehicles, a category comprising plug-in hybrids, pure EVs, and fuel-cell cars, more than tripled from 2015 to 2018, but they still account for only 4.5 per cent of the total. The doubters, he argues, underestimate the country’s capacity for reinvention. “The Chinese way is to replace everything at once,” Wang says. “When we switched from black-and-white to color TVs, it took three years. In the West it was 10. Going from feature phones to smartphones took about one year. In Europe it was three. Cars will be the same. It will go very fast.”
Wang says he’s argued in conversations with government officials that with the right mix of subsidies, research incentives, and regulatory mandates, China could turn off its last conventional car by 2030.
In buses it’s already well on its way, with taxis making rapid progress. Wang says delivery vans and other logistics vehicles could follow soon. Such a switchover in the country that now accounts for almost a third of global carbon emissions could help address climate change —not to mention improve BYD’s bottom line. “We might receive some objections about cost, but the cost to the environment is higher,” Wang argues.
No other large country is prepared to move so fast, least of all the , where the Trump administration has proposed eliminating subsidies for EV purchases and sought to cancel planned improvements to mileage standards.
Source: business-standard
