Chapter 2

The Power of Batteries: The Story of BYD

Abstract This chapter discusses the case of BYD, a leading new-energy powered
carmaker in China. Its vision capitalizes on the trend of emerging new energy
industries, and the case will examine its ability to integrate business lines to
generate synergies and its unique business development model that has attracted
global investors including Warren Buffet.

Keywords New energy Rechargeable batteries New-energy-powered automobiles Electric-power storage stations Vertical integration Industry chain

On September 29, 2008, Warrant Buffett announced his USD $230 million
investment to acquire 10 % of shares of a Chinese company called BYD, a firm
that makes the next-generation batteries, electric cars and consumer electronics
parts. BYD was actually the second Chinese company that Warren Buffett chose to
invest. Since then, the price of BYD stock shoot to the roof, jumping nearly 10
times, and the initial investment of Buffet also appreciated from $230 million to
$2.3 billion in merely one year. As an investor famous on gains from long-holding
strategies, the speed and rate of return for his investment in BYD may seem a
sweat surprise for Warren Buffet. No question, the secret for BYDs success
for both its business and its getting such a favor from Warren Buffett and the
global financial market would be intriguing, and lets take a close look at it.

2.1 A Fast Growing Legend

BYD, founded in 1995 by Chuangfu Wang, is a privately-owned, high-tech
company. It started as a firm producing rechargeable batteries, but later expanded
its business territory to new-energy-powered automobiles and new energy industries, and gained market dominance in a fast pace. BYD is widely recognized as
the leader in the rechargeable battery industry, and meanwhile, a rising star in the
markets of electric automobiles, electric-power storage systems, and solar power
stations. BYD was listed on Hong Kong Stock Exchange (Ticker: 0285.HK) in
J. G. Wang and J. Yang, Who Gets Funds from Chinas Capital Market?,
SpringerBriefs in Business, DOI: 10.1007/978-3-642-44913-0_2,  The Author(s) 2013

The Power of Batteries: The Story of BYD

2007 and in Shenzhen Stock Exchange (Ticker: 002594) in 2011, respectively. In

total, BYD has 2.354 billion outstanding shares, and 33.69 % of which, or 793
million, are H shares. The founder Chuangfu Wang, as the single largest shareholder of the firm, owning 570 million shares, which account for about 24.24 % of
the firms total capitalization.1 In 2010, BYD was ranked the first place among the
Top-100 IT companies, and the number 8th among the Top-50 The Most Creative
Companies in the world (ranked the number one in China) by the Business Week.
The rechargeable battery products of BYD can actually be further decomposed
into lithium battery, MH-Ni battery, as well as solar cell and components. As the
leading company in the rechargeable battery industry, BYD mainly serves these
primary phone producers such as Nokia, Samsung, MOTO (Motorola), Huawei,
ZTE, and electric tool and portable electronics producers such as Bosch and TTI.
According to a report released by the Institute of Information Technology (IIT),
the lithium battery market share captured by Japan, a major lithium battery producer in the world has been shrinking in the recent years. At the same time,
however, the market share of the lithium battery produced by BYD has been
increasing, about 6.6 % in 2009, and 8.75 % in 2010. Meanwhile, BYD is the
largest producer of the MH-Ni battery in the world where its competitors in this
market include Sanyo, Panasonic and MBI.2 As for the solar cell and components
lines of BYD, it also increased dramatically in the past years. BYDs total sales
revenue reached RMB 5.004 billion in 2010 with an annual increase of 18.28 %,
largely due to the fast growth of its solar cell and components, which already
accounted for 15.16 % of BYDs total sales revenue.
At the same time, BYD has been continuously making efforts in the newenergy-powered automobiles, electric-power storage stations and PV power stations by utilizing its leading-edge battery technologies. In 2003, BYD acquired the
Xian Qinchuan Auto Co., Ltd. (now BYD Auto Co., Ltd.) to start entering into the
auto making industry. Since then, BYDs compounding growth rate for the auto
making business has reached 74.88 % during the 20082010 time span, and now it
is ranked the sixth largest auto maker in China by the China Association of
Automobile Manufacturers, and the largest among the domestic-non-joint-venture
car producers.3 On the financial side, BYDs car business achieved revenue of
RMB 48.82 billion, net profit of 1.385 billion, and EPS 0.6 Yuan in 2011. From
2007 to 2011, the average annual growth rate of BYDs car business revenue
reached about 20.76 %, and the net profit 10.68 %. In 2011 alone, BYD sold 1,222
new-energy-powered cars with an increase of 480 cars over 2010. BYDs auto
business now becomes the major source of its total sales revenue, accounting for
about 50 % of the BYDs total sale revenue.

All data for BYD are from Prospectus of BYD, 2011 unless indicated otherwise.
Worldwide Market Update on NiMH, Li Ion and Polymer Batteries for Portable and the Future
Applications, Institute of Information Technology (IIT), 2010.
3
Analyst Report on BYD, Guotai Junan Securities, 2011.
2

2.1 A Fast Growing Legend

So the question is, what actually happened behind these magical numbers, and
what business models and strategies powered BYD for its fast development and
drove BYD to where it is today. Lets take a closer look.

2.2 Choose a Budding Industry

When we explore the success ingredients of BYD, the first thing catching peoples
eye is the industries that BYD selected to enter. BYDs major business lines cross
rechargeable batteries, new-energy-powered automobiles, and new energy industries which are all sunrise industries in China and in the world as well. In particular, the new-energy-powered automobile was the most notable one of BYD in
the market today.
Chinas auto industry, generally speaking, is still in its fast development stage,
and the demand for autos is still far away from the saturation point. At the same
time, the domestic auto brands have been on the quick rise and their market shares
have been noticeably increasing year over year. The auto production and sales in
China was the largest in the world in 2010 with both production and sales
exceeding 18 million units. The current vehicle population in China is around 114
million, which means that, on average, every one out of 12 persons owns a car.
This number is still far below the level of the developed countries, and indicates
great potential for auto industry in China in the future. The gradual formation and
rise of Chinas domestic brands such as BYD, CHERY and GEELY broke the
monopoly of the joint venture brands such as GM-Shanghai, and led the Chinese
auto industry towards a new paradigm. According to the statistics of the CAAM,
the sales of the domestic auto brands have reached 2.933 million and the market
share of these brands was about 30.89 % in the year of 2010.4 Chinas domestic
auto makers have better understanding about the domestic customers needs, more
flexible design ability to accommodate customers preferences, and stronger cost
management, and thus play an increasingly important role in the market place.
Domestic auto brand manufacturers, as represented by BYD, CHERY and GEELY, continuously increase their investments on R&D and product designs, and
have significantly improved quality and functionality of their autos, gained higher
degree of recognition from the market, and accelerated growth of their sales and
market shares.
Energy saving and emission reduction have been commonly acknowledged in
the car designs, and using new energy undoubtedly is the direction to go for the
further development of auto industry. Ever since 2008, how to develop newenergy-driven automobile has become the focus of the entire global auto industry
with the increased pressure of the soaring oil price, the energy saving and emission
reduction. In order to make the strategic transition for its growth model, the

http://www.caam.org.cn/newslist/a35-1.html

10

The Power of Batteries: The Story of BYD

Chinese government issued a series of policies to support the new-energy-driven

cars. The auto industry has been listed as one of the strategic emerging industries
in Chinas long term plan. For example, in June 2012, the Chinas State Council
released The 12th Five-Year Plan for National Strategic Emerging Industries.
According to this plan, the new energy auto industry will accelerate the R&D on
its core technologies and applications to enhance the industry integration. As
announced by Chinas Ministry of Finance, they plan to inject about 12 billion
RMB every year into new-energy-driven auto industry and remove all the
restrictions on license plate auction, license-plate lottery and traffic control with
new-energy-driven cars. These policy supports and the awareness of general public
about energy conservation and emission reduction will undoubtedly drive the
development of the new-energy-driven auto in China into a new stage.
According to a forecast issued by IIT in Japan, the sales of electric cars, hybrid
cars and plug-in hybrid cars will reach 4 million units in 2015, and 8 million in
2020. In addition, according to a recent research report issued by the China
Academy of Science and Technology for Development,5 the ownership of pure
electric cars and plug-in hybrid cars in China can rise to above 0.5 million by
2015, the moderate/heavy hybrid cars can approach 1 million and the average fuel
consumption of the passenger cars will be reduced to 5.9 l/100 km, and the power
battery production capacity can be nearly 10 billion watts. By 2020, the ownership
of pure electric cars and plug-in hybrid cars can grow to 5 million units, sales of
moderate/heavy hybrid cars will account for 50 % of the sales of passenger cars,
the domestic automobile fuel efficiency can meet the international standard, and
the average fuel consumption of the passenger cars will approach 4.5 l/100 km.
Such huge new-energy-driven auto market will become the determining factor for
the auto companies in competing for their market positions.
Meanwhile, long term demand for electric cars is projected to keep growing
with focus on the second- and third-tier cities in China. Alike to the auto industrys
development in Japan and Korea in the past, its quite promising for Chinas auto
market to remain fast growing in the next 35 years along with the high economic
growth in China. Considering the large population and low ownership per family
in China, the forecasted growth rate of automobile sales can reach 10 % in the next
10 years.6
However, there are some downsides as well for the auto industry in terms of
strict regulations and control on the entry permit, investment, production and sales
for the auto industry in China. On one hand, the development policy of automobile
industry enacted by Chinas National Development and Reform Committee
(NDRC) has clearly stipulated that the initial investment of an automobile factory
should be above RMB 2 billion, the investors own fund should be no less than
RMB 800 million, and the R&D investment could not be less than RMB 500
million. Such huge capital requirement is the main barrier for the new entries.

5
6

http://www.casted.org.cn/en/web.php?NewsID=5327
http://auto.sohu.com/20120712/n348008224.shtml

2.2 Choose a Budding Industry

11

On the other hand, the economy of scale plays an important role in the auto
industry, and it wont be profitable until a certain level of scale is achieved.
Therefore, it is usually difficult for a new company to be able to conduct largescale production and secure the operation funds from day one. In addition, there is
also high requirement for the technology used, and a company may be stuck in an
unfavorable situation if it lacks independent research ability and its core
technology.

2.3 All Movement Starts with Power

Even though BYD is best known today for its new-energy-powered cars, its initial
business line is rechargeable batteries. The market share of the rechargeable
batteries that were made domestically in China has been sustainably growing
during the last several years. Currently, the rechargeable batteries are widely used
in the cell phones, laptops, electric tools and other electronic products. More
specifically, lithium Ion battery has been utilized in mobile phones, laptops and
digital cameras, and nickel cadmium battery has been installed in the electric tools
and electric toys. Of course, the largest application of rechargeable battery is still
the cell phone.
At present, the rechargeable batteries are primarily produced in China, Japan
and Korea. The major producers are Sanyo Electric, SONY and Panasonic in
Japan, and Samsung and LG in Korea. The companies in China, Japan and Korea
pretty much dominate the entire lithium Ion battery market worldwide. In addition
to BYD, there are also some other producers in the Chinese domestic market, such
as China Bak Battery, Tianjin Lishen Battery and Dongguan New Energy. As the
competition intensified, the market share of Japanese producers has been diminishing while China and Koreas shares have been on rise.
The industrys entry threshold, however, has been elevated due to the technology upgrade and increased scale of production. The rechargeable batteries
require high technologies which are needed to ensure the stability and energy
density for battery products. At present, some core technologies can only be
developed by BYD and few large companies in Japan and Korea. New entrants are
confronted with big obstacles if they dont have the access to such key
technologies.
Moreover, it is often those large-scaled electronic product companies that are
the buyers of the rechargeable batteries as well, and they typically demand high
quality for the batteries. The supplier can obtain the opportunity to provide such
high quality products with low cost only if they have large-scaled production and
possess fine quality control system. Therefore, the new entrants will find it even
harder to break into the current market.
Fast development of the downstream industry and stable increase of demand for
rechargeable battery is the trend in the current rechargeable battery industry. Many
portable electronic devices such as mobile phones, personal computers, digital

12

The Power of Batteries: The Story of BYD

cameras, digital video cameras and MP3 have gradually become parts of consumers daily life, and lithium-ion battery has been gradually adopted in these
electronic products. As a result, the demand for lithium-ion battery has been
increasing significantly. Meanwhile, the market share of NI-MH battery and
nickelcadmium cell has been decreasing due to the low energy density. However,
the NI-MH battery market share remained stable due to the demand from the
hybrid cars. In addition, the government policy supports towards the new-energydriven automobiles will further increase the demand of rechargeable battery
including NI-MH battery, because such battery serves a critical role for newenergy-driven cars.
More specifically, there are three factors that BYDs rechargeable batteries
powered the success of BYDs car business. The first one is BYDs independent
research that enabled BYD to develop the lithium iron phosphate battery, which is
a safer, greener, longer lasting, and less expensive technology with a technical
advantage over the NI-MH battery in the operation of hybrid electric vehicles
(HEV) in terms of energy density, power generating, discharge rate, and the
improvement in the acceleration performance, maximum speed and endurance of
cars. At present, BYD has more than 100 lithium iron phosphate battery patents
and more than 90 patent applications.
The second one is the better power generator for the electric vehicle that BYD
produced. The permanent magnet synchronous motor (PMSM) developed by BYD
has bigger power, torque, and lower weight-to-power ratio, with productivity of
560 kw, which can completely meet the requirements of dual-mode electric
vehicles and Blade Electric Vehicles (BEV).
The third one is the synchronized power control system. The integrated power
control system of BYD matches power cell, driving motor and the whole vehicle
system all together. This system combines the hybrid mode and the EV mode, and,
in this way, the goal of going green and environment protection is also achieved
in the sense that cars may only rely on the battery when the cell is full. When
battery is low, however, it will be switched to the hybrid mode and the fuel
efficiency is also raised.

2.4 The Energy of New Energy Industry

At the same time, many attentions have been given to the clean or alternative
energies in general. Concerning on the non-reproducible nature of the existing
energies and environment protection, many countries are looking for a solution of
renewable energy for sustainable economic growth. Solar energy came into peoples attention and got increasing policy support because of its abundance, even
distribution and cleanliness. In addition, it requires relatively low initial investment, and is closer to the end users, which helps solve the problems caused by the
long distance transmission, lower the operating cost, and increase the transmission

2.4 The Energy of New Energy Industry

13

efficiency. Therefore, solar energy has become one of the major trends of future
energy development in the world, including China.
Technically, however, the solar and wind types of energy cannot be integrated
directly to the traditional power grid due to their highly dependence on the
environment and unstable power. For this reason, electric-power storage stations
can help smooth the electricity power provision of solar energy and solve the issue
of instability. In addition, the electric-power storage station can store the energy
surplus and release them when there is a need or shortage. This functionality of
electric-power storage station can adjust and iron out the peaks and troughs in
the electricity demand curve.
According to a forecast released by Pike Research, the market scale of energy
storage stations will increase from USD $1.5 billion in 2010 to $35.3 billion in
2020.7 With the development of the new-energy-generated electricity and smart
grid, the large scale of commercial application of the electric-power storage station
will be accelerated, and this will greatly enhance the development of the new
rechargeable batteries represented by the iron cell. According to the data provided
by the European Photovoltaic Industry Association (EPIA), the installed capacity
of solar energy reached 7,203 MW in 2009, and will reach 0.3 billion MW in
2014, and the sales revenue of solar energy battery will attain $165 billion in
2015.8
Holding the core technology and well maintained government relationship,
BYD has become the leader in the new energy industry in China by making great
effort and progress in the new energy automobiles, solar energy and electric-power
storage stations.
The key for new energy vehicle is the battery which is also one of the most
important factors that customers are concerned on new energy vehicle. The
competition of new energy vehicles boils down to the competition of the batteries.
However, BYD started the R&D on battery technology very early and gained
tremendous early comer advantages. BYD is now a leading electric vehicle maker
in the entire world. In 2008, BYD introduced the hybrid car F3DM which was the
first model not relying upon the professional charging stations, and electric car E6
and electric bus K9 appeared later. BYDs good government relationship also
helped BYD promote and commercialize its electric vehicles successfully. In
2010, BYD sold 1,000 K9 electric bus to Changsha municipal government. In
addition, in 2011, BYD signed a memorandum of understanding (MOU) with the
SMRT Corporation in Singapore, which manages public transportation of Singapore, for further cooperation in the electric buses and taxies, and an agreement
with the DAN Bus Company in Israel to replace the half of its current operating
vehicles with BYDs electric bus, which is also the first time for Israel to have the
full-sized electric bus. Whats more is that the BYDs E6 pure electric taxi running
in Shenzhen has very good performance. On average, every E6 car has been

7
8

Pike Research: http://finance.21cn.com/newsdoc/zx/a/2013/0204/08/20343293_all.shtml

EPIA: http://www.epia.org/home/

14

The Power of Batteries: The Story of BYD

running over 1 year and 100,000 km without any technical defects and the quality
of battery has been tested to be highly stable and reliable. Motivated by the
maturing technology, abundant government subsidies, and the establishment of the
charging facilities, the electric vehicle industry starts to grow fast, and BYD is
undoubtedly the largest beneficiary.
Solar energy is another revenue engine for BYD in its initial fieldrechargeable battery industry. BYD has established a vertical integration of business lines
including poly-silicon, Silicon chip, battery module and packaging. BYD entered
into the solar industry in October 30, 2008 by taking the Solar Cell Project from
the Shangluo municipal government in Shanxi province. This is a multi-phased
construction program for an annual productivity of 1 GW poly-silicon and 1 GW
solar energy. In the first phase of project, BYD had achieved the annual output of
100 MW poly-silicon and 100 MW solar energy in 2010, and in phase two, it had
realized the annual output of 300 MW in 2011. So far, the annual output has risen
to 600 MW and the ultimate goal is to reach 1 GW annually. The businesses of
solar cells and parts have brought revenue of RMB 759 million to BYD. For any
solar energy companies, the core competence would be the energy conversion
efficiency and the conversion cost. As for the energy conversion efficiency, BYD
has a leading edge of 16.5 % of efficiency in the world. Then, for the conversion
cost, BYD adopted the metallurgical method instead of the traditional Siemens
process.9 This helps BYD lower down its cost by 20 %. With the superiority in
cost and efficiency, solar cell has become the important cash cow of BYD.
BYD also did well in the electric-power storage stations. The iron cell of BYD
has an advantage over those traditional lead acid batteries in that iron cells have
high-power chargedischarge property and avoid the problem of instability of
wind energy and solar energy. BYD got the pilot project to build up the electricpower storage stations and the energy conversion system for the China Southern
Power Grid Co. in August 2010. Later, BYD started cooperation with the Los
Angeles Department of Water and Electricity (LADWP) in the project to develop
the renewable electricity power grid in September 2010. BYD also signed a
contract with the Changsha municipal government for a project of a 10 MW
electric-power storage station. With the support of the various level of government
in and outside China, BYD made the steady progress in the commercialization of
electric-power storage stations.

Siemens process referred to a popular process based on the thermal decomposition of

trichlorosilane at 1100 C on a heated silicon rod placed inside a deposition chamber. This
process was developed in the late 50s with reference to the company that carried out its early
development and was abandoned recently due to its high energy consumption and pollution.

2.5 Money Is Power, Too

15

2.5 Money Is Power, Too

BYD became notable not only because it developed a new type of physical power
to energize new types of automobiles and new electronics, but also it presented to
the business community and beyond a great example to utilize the financing to
power its success.
In addition to its historical listing HK Stock Exchange in 2002 with HK$1.6
billion raised, which significantly consolidated BYDs leading position in the
battery industry, and provided BYD with the opportunity to enter the auto industry,
BYD also conducted pre-IPO financing to make BYD not only technically ready
for taking-off, but also financially ready for getting access to the public funding to
support its business expansion.
At the end of August 2008, Warren Buffett was interviewed by Squawk Box
of CNBC and told interviewer that You will see me making abundant investment
in China in favorable environment. Following his talk soon, on September 27,
2008, Buffetts Sino-American Energy Holdings Co. announced buying the shares
of BYD. Sino-American spent $230 million for buying 225 million shares of BYD,
which account for 10 % of the entire BYD outstanding shares.
Buffets PE equity financing is critical for BYDs next step development and
eventual success. It was not difficult to figure out the decline of the traditional auto
industry then and the key for the future development lies in the new-energypowered automobiles. Not only these new types of automobiles are the solution to
the energy safety and environmental protection, but also it represents future cash
cow of the industry. Those who can secure their market positions today will have
much better chance to earn a higher return in the future.
However, the issue is that it will typically take a really long time to see pay-off
for the investment on new-energy-driven vehicles, while the R&D on new-energydriven vehicles usually requires a huge amount of funds. Without sufficient capital
and technological innovation ability, the chance for failure is high in terms of
either R&D, or the commercialization of the innovation. Moreover, back in 2008,
the infrastructure for electricity charge stations in China was not in place yet, and
these new-energy-driven automobiles were just scraps.
However, BYDs financing ability by getting the favor of Buffett totally
changed the game. Buffets injection of his PE equity fund helped BYD obtain the
money needed for R&D, and also made BYD ready for its later gaining the access
to the public funding. Since then, everything happened in BYD was considered to
be aligned with the expectations. BYDs stock price soared for almost ten times in
2009. The USD $230 million of Buffetts investment rose to $2.3 billion and
Chuangfu Wang became the richest man of the year in China.
In addition, a strategic investor such as Warren Buffett not only brought BYD
with financing, but also generated great branding effect for BYD. With Buffets
investment, BYD was known by the whole world overnight. To help BYD gets
publicized, Buffett even recommended BYDs electro mobiles to President Obama
of United States. This soft power truly energized BYD for its full speed journey.

16

The Power of Batteries: The Story of BYD

2.6 Innovation through Imitation

The success of BYD was also largely attributed to its imitation-based innovation model advocated by Chuanfu Wang. As a CEO with engineer background,
Wang requested that all the engineers of BYD should learn how to dissemble cars
first, and BYD even allocates a budget for purchasing these best designed and
made cars such as Benz, BMW and Toyota for the engineers to dissemble, imitate,
and then, possibly innovate. During the course, BYD tried all possible ways to
legally follow the patent protection requirements.
Facing the questions regarding whether BYD was actually just a copying cat,
Chuanfu Wang responded in the following way. It seems to him that, for any
creation of a new product in this world, 60 % is based on public literature, 30 % on
existing samples, the 5 % is on material factors, and only 5 % comes from an
independent R&D. BYD adopted many non-patent technologies and how to mix
these non-patent technologies became BYDs innovation. Patents should be
respected but the dispute for patent issue could be legally resolved. It seems to
him, the imitating-based innovation is not purely copying and its legal.
Based on such a model, BYD has made a great breakthrough on the R&D and
produced a car of model BYD-F3 that is the first model of entirely-domestic-made
car with sales over 100,000 units in China. At the same time, this model significantly reduced the budget for R&D, and hence, reduced the production cost and
made the car more affordable for more potential buyers.

2.7 The Vertical Integration of An Entire Industry Chain

BYD recognized that the imitation-based innovation may help BYDs growth to
certain extent, but cannot help maintain their leading position in the market in the
long run. As Chuangfu Wang stated, BYDs ultimate goal is to build an advanced
R&D platform instead of merely imitating. Indeed, what truly helped build up
BYDs leading position in the market place is its vertical integration across
rechargeable batteries, new-energy-powered automobiles, and new energy industries based on their unique advantages in the battery technology.
BYD introduced the new hybrid car model F3DM to the market on December
15, 2008. F3DM was equipped with the iron cell which was independently
developed by BYD with more than 700 patents that BYD has applied for. Such
iron cell was widely considered a great technology breakthrough, and thats also
one of the reasons why many global companies havent made significant progress
in the electro-mobile industry yet, simply because they havent developed such
advanced batteries.
To the investors, the true attractiveness of BYD is its leading position in several
important new-energy-related industries through the vertical integration based on

2.7 The Vertical Integration of An Entire Industry Chain

17

its advanced battery technology. Rupert Hoogewerf10 once said, Chuangfu Wang
follows the trend in scientific and technology development, innovation in new
energy, and the rising environmental concerns, and thus, created a new pattern in
the auto industry.
Furthermore, the BYDs vertical integration covers a whole industry chain
including energy generation, collection, transportation, charging, electro mobile
parts, and electro mobiles. According to a forecast issued by the World Bank,11 the
market value for the entire automobile chain can reach USD $280 billion by
2020a very promising future for the companies in the industry. And currently,
BYD is the only auto company who has integrated the whole industry chain.

2.8 Can BYD Continue Its Legacy?

BYDs core business lines consist of automobiles, rechargeable batteries and new
energies. As for the automobile industry, as the development of new-energypowered vehicles is heavily dependent upon the build-up of charging stations and
the governments subsidies, so the new-energy-powered cars may not be able to be
popular in a large scale in the next 35 years. Regarding the traditional-energypowered car business, the second and third tier cities in China will become the
main growing markets in the near future. One of the features of this market is its
high level of sensitivity to price, which is definitely a piece of good news to BYD,
because BYD can offer cars with a very affordable price and high performance-toprice ratio. Consequently, the key to capture such market is to design a variety of
different car models and increase the performance ratio.
On the other hand, the new-energy-driven vehicles have gained increased
attentions of the Chinese government, as China has started some quite generous
subsidy policies to stimulate the purchase of new-energy-driven vehicles. It is
expected that Chinas accumulative electric and hybrid vehicles will reach 500,000
units by 2015 and 5 million by 2020. As of June 2010, Chinas central government
has launched trial subsidy programs in five Chinese citiesShanghai, Changchun,
Shenzhen, Hangzhou and Hefei. The program offers a subsidy of up to RMB
60,000 (about USD $9,523.2) to buyers of purely electric vehicles and RMB
50,000 to hybrid vehicle buyers. As a result, with the advanced technology and
well-maintained government relationship, BYDs future in new-energy-driven
vehicle business seems promising.
As for the rechargeable battery business, even though the sales revenue of
BYDs rechargeable batteries has displayed some downturn recently due to the
10

Rupert Hoogewerf, born in Luxembourg, is the publisher of the Hurun Report, a monthly
magazine best known for its China Rich List, a ranking of the wealthiest individuals in China.
As a qualified chartered accountant, Hoogewerf worked for 7 years at Arthur Andersen, before
launching Hurun Report.
11
The China New Energy Vehicles Program: Challenges and Opportunities, World Bank, 2012.

18

The Power of Batteries: The Story of BYD

revenue reduction of its customer companies that generally purchase batteries as

part of their end product purchase from BYD, the sales of lithium battery used in
new-energy-driven vehicles and other usages of the batteries are expected to
drastically increase in the future.
However, the most promising business of BYD seems in the solar energy field.
Because of its advantages in the R&D and manufacturing, BYD will be able to
expand its solar business to the downstream power stations and establish a comprehensive photovoltaic power chain. Given its combined expertise in PV power
station and storage, BYD can provide comprehensive on- and off-grid solutions in
various markets of power storage.
As the first decade of the twenty-first century has revealed, this century will be
a century that are featured by significant technology innovations, including the
ones in the new energies that will power and shape our daily life for the rest of this
century and beyond. Either by his vision, insight, or purely luck, Mr. Wang and
BYD has occupied a very strategically advantageous spot that will allow BYD to
fully capture all the potentials that the century will bring to a firm. To run a
successful business in China today, one needs to have several ingredients of
success in hand: low cost, high technology, adequate capital, industry integration,
well maintained government relations, and powered by new energy. As the story
told in this chapter, BYD is lucky enough to have them all. Therefore, it should be
reasonable to trust Warren Buffets judgment, as proved by the majority of his
previous decisions, and project BYD with an even more gloried future.

http://www.springer.com/978-3-642-44912-3