Chinese automaker plans to take on the giants with electric cars
The company has unveiled a series of slick hybrids as it prepares to enter the US and European markets in only two years.Shenzhen – From its headquarters in south China, BYD Auto is pursuing a project of staggering ambition: to be in the lead as the world's cars free themselves from their century-old dependence on petrol.
The company, which was founded just 14 years ago and found success making batteries, has unveiled a series of slick electric and plug-in hybrids as it prepares to enter the US and European markets in 2011.
"In the next five to 10 years we will see big changes,” said Henry Z. Li, BYD's soft-spoken general manager for auto exports, in an interview. “Electrification will happen much sooner than people expect."
Whether or not he is right has implications not just for those who have put money in the company -- such as celebrity investor Warren Buffett -- but also for the planet, with China now the top greenhouse gas emitter according to some counts.
The vision at BYD, or Build Your Dreams, is that of a future where electric cars fill the roads and quick-charge stations are as readily available as petrol stations today.
This dream remains a long way off, with big cost and technological barriers ahead.
Only next month will it start delivering the F3DM -- DM stands for "dual mode" -- which can go 100 kilometres (63 miles) on its battery, or 580 kilometres (360 miles) in hybrid mode with gasoline.
The model's initial appeal will be to corporate clients that can afford to buy a small fleet of hybrids and set up special facilities for recharging.
For the private Chinese consumer, the case for a hybrid is less obvious. In order for this market to take off, it is important to build up a critical mass of vehicles that makes charging stations commercially viable.
BYD is in talks with utilities such as State Grid Corporation of China, and they are "interested," said Li, 40. "It's a positive cycle. More electric cars, more charging stations. It's no use asking which comes first, the chicken or the egg. We have to put something out there first."
It may seem like a huge leap to go from carving out a niche in China's embryonic market to aggressively expanding abroad and taking on the likes of General Motors, Chrysler and Ford, which also are exploring electric vehicles.
Some rivals duly voiced skepticism after BYD Chairman Wang Chuanfu told participants at last month's auto show in Detroit that he planned to kick off sales in the United States and Europe in just two years.
The company's relative lack of experience, having been in the auto business only since 2003, may be a disadvantage but its unique history could nevertheless put it in pole position, argued Jia Xinguang, an independent auto researcher based in Beijing.
"BYD has experience in making batteries,” he said. “It's number two in the world for rechargeable batteries. It's got a technological advantage."
Other companies have tried electric cars before -- and failed. But times have changed, observers said.
"The technology has advanced significantly since the electric vehicles of the 1990s," said John Patten, an expert on alternative fuel cars at Western Michigan University. "The political climate is also much more receptive, and is in fact pushing this type of technology, which is environmentally beneficial, so people and politicians don't have to be sold on the benefits."
This goes for China too, where BYD just got a boost from the government in the form of a policy package to help the auto industry through the global economic crisis.
While details are still pending, the company is likely to benefit from a subsidy for clean vehicles, which could cut the 150,000-yuan (21,900-dollar) price tag for the F3DM -- a tag almost double the petrol-powered equivalent.
"It's difficult for people to accept this high premium,” said Li. “That's why government incentives are important."
The company got a different boost in September when Buffett's MidAmerican Energy Holdings said it had agreed to buy 10 percent in BYD Co., the parent of BYD Auto.
"It was a signal to the public that Warren Buffett recognised the battery technology and our future directions,” said Li. “He's a long-term investor."
Until recently, BYD was operating against the backdrop of rapidly rising crude prices. Now oil is plunging, but the company sees it as only a minor bump in the road.
"In the short term perhaps oil prices are up and down, but in the mid-term, long-term it has to go up, because it's a limited resource,” said Li. “We're looking more long-term, not just one to two years.”