With the Big Three automakers tottering and China’s once go-go car market in reverse, this might seem a bad time for a relative unknown to be launching a new vehicle. Then again, BYD Co. isn’t rolling out any ordinary car.
On Monday, the upstart company best known for making cellphone batteries will begin selling its F3DM -- China’s first mass-produced hybrid electric vehicle. The car is expected to retail for around $20,000 in China and make its way to U.S. shores in 2011.
“For a long time, China’s auto technology was undeveloped,” BYD founder and President Wang Chuanfu, 42, said in an interview Friday at its hexagonal headquarters here. “But our [electric car] technology marks the first time we’re standing as a leader on the world stage.”
Whether that assessment is overblown -- Toyota, Honda and General Motors may certainly think so -- people familiar with Wang said they wouldn’t underestimate him. Since starting the company in 1995, Wang has built BYD, short for Build Your Dream, into the world’s leading producer of rechargeable batteries for mobile phones and laptops, among other products.
Combining its auto and hand-set parts businesses, BYD generated about $3 billion in revenue last year, a 64% increase from 2006, according to a filing with the Hong Kong stock exchange, where the company is listed.
Among those betting on BYD is Warren E. Buffett, who in September bought a 9.9% stake for $230 million. The billioniare investor apparently was impressed with BYD’s green technology and Wang’s record as a manager.
Wang said Buffett’s investment would be of particular help as BYD prepares to enter the U.S. market in 2011 with its electric vehicles. GM plans to introduce its electric car, the Chevrolet Volt, in 2010.
Analysts don’t doubt Wang’s resolve or his company’s technical capabilities; Wang is a metallurgical chemist by training, and BYD spent several years developing the ferrous battery technology for the car, giving it a quicker recharge time and price advantage over the lithium-ion battery used in Toyota’s Prius.
But a better battery won’t ensure marketplace success. And BYD doesn’t have the experience in design, engineering, manufacturing and marketing of its world-class competitors.
“I have faith in [BYD’s] technology,” said Michael Dunne, the Shanghai-based managing director of J.D. Power in China. “What needs to be confirmed is whether they can build reliable, high-quality cars. That’s their challenge.”
BYD got into the car market in 2003, and the F3DM is a modified version of its gas-powered F3 model. The DM in the name stands for dual-mode, reflecting its ability to operate in both full-electric and gas-electric hybrid modes. The electric mode has a range of 60 miles on a single charge.
The conventional F3 sells for about $14,000 fully loaded, and its sales were up 36% this year through October. China’s overall car sales have fallen in three of the last four months.
Toyota has sold only 748 Priuses in China from January to October. The F3DM could be a tough sell as well. “Most Chinese customers would feel that its initial investment is too high and that they won’t start to see a return until after five to six years of use,” said Che Junhong, editor of China Auto Market Report in Beijing.
BYD could, however, get a boost from the Chinese government, which is keen on developing cleaner energy as well as supporting domestic companies that could become powerful players in the world and lead the way in improving China’s economy. Wang says he expects to sell 10,000 electric cars next year. The first batch will go to government entities, says Paul Lin, a marketing department manager at BYD’s auto subsidiary.
In Shenzhen, Lin led a visitor through BYD’s museum, where glass cases display phone casings, keypads, liquid crystal displays and other electronic components, while another hall shows car parts made at the company’s 19-million-square-foot car factory.
That is a long way from Wuwei, a poor farming town in An Hui province where Wang was born and grew up with five brothers and two sisters.
In 1995, Wang borrowed about $300,000 from a cousin and opened a workshop in Shenzhen with 20 people to make cellphone batteries. Today, BYD managers say that one-third of all cellphones in the world are powered by its batteries. The company employs more than 130,000 people, including 10,000 engineers.
In recent months, BYD has taken its lumps with others because of the global financial crisis. Its stock price has fallen 75% from a year ago, and orders for batteries and other cellphone parts have fallen.
“Of course, nowadays we have a very big challenge in the market, but that’s mainly for traditional vehicles,” Wang said. “As a new energy car manufacturer, we believe we’re going to create our own market.”
Wang’s goal: to be the world’s largest car manufacturer by 2025.