Deconstructing BYD’s American Dream
Source:Chief Editor, CCEN   Date:2010-05-24   Author:Tom Pellman

Earlier this month, China’s best-known electric car company BYD delivered 30 pure electric cars to a taxi company in Shenzhen. The arrival of the E6 models, which the company describes as all-electric “SUV-MPV crossover vehicles,” was a historic occasion. It was also a warm up for the main event – when BYD begins selling the E6 in the U.S. later this year for around US$40,000.

 

Aside from the experiences of limited numbers of high-end vehicles like the Telsa Roadster, no one quite knows how the US will respond to electric vehicles. Certainly BYD’s competitor GM has pinned its electric hopes to the Volt, which debuts later this year as well at around the same price. Nissan’s Leaf, which will retail for US$32,000, is slated for launch in December as well.

 

The closing months of 2010 are shaping up to be an exciting time in the US, a time we finally discover whether or not middle-class American’s are ready to buy electric cars. But faced with a decision between these three – one perennial American brand, one well-established and recognized Japanese brand and BYD – to buy an untested technology, will Americans go for BYD’s E6?

 

I don’t think so.

 

Don’t get me wrong. There’s a lot to like about BYD, whose name used to mean “Brings You Dollar” but has now morphed into “Build Your Dreams.” The company’s chairman Wang Chuanfu is a visionary leader who has managed the transition from battery making to automobile manufacturing. As most know, Warren Buffett currently holds a 10% stake in the company.

 

There will simply be too many unknowns for the E6 to take off in the US. The brand is unfamiliar. For those who have heard of BYD, the company is synonymous with economic compacts marketed to first-time car buyers in China. Even though BYD is at the forefront of lithium ion car battery development, as a car maker they produce low-cost, bare bones car lines. Americans paying US$40,000 for a car will have much, much higher standards. BYD’s competitors Chevy and Nissan are two brands that have at least produced a US$40,000 vehicle before.

 

BYD may well win the race by being the first auto company to release a mid-range all-electric car this year, but this only means there will be more scrutiny upon its arrival. Electric car battery technology is still in its developmental phase. If the E6 makes a bad first impression – be it in the form of battery problems or safety issues – it will written off as a “cheap Chinese product.” This is exactly the reputation BYD can’t afford to assume.

 

The significance of BYD’s arrival in the US is big, of course, and maybe that is what Chairman Wang values more than actual sales. Perhaps we should think of the E6’s arrival in the US as a gesture from one of China’s most progressive companies that it can keep pace with top global brands in developed markets.

 

Yet, BYD’s China strategy for developing electric vehicles seems much more plausible. China’s auto market is the fastest growing market on the planet, and the potential for all-electric commuter cars as positively immense. On this front, BYD announced in March a “comprehensive technology partnership” with Daimler to develop electric vehicles for China. This type of cooperation makes sense. BYD provides its know-how in battery technology while Daimler brings experience in vehicle making.

 

Why not simply concentrate on China’s burgeoning market, I wonder?

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