Will Electric Cars Be China's Trojan Horse In America?
Driving from one end of Beijing to the other to take in the Beijing Automotive Exhibition, it's difficult to see why auto executives are so worried that Chinese auto companies will invade our Western markets. Around the capitol city, Buicks, Volkswagens, Audis, BMWs, Hyundais, Toyotas and Hondas far outnumber vehicles from Chinese companies like Geely, Chery, Brilliance, or BYD. Of the top-ten brands in China last year, four were Chinese brands, and those four were all in the bottom five of the list. Of course, the American, European, Korean and Japanese companies leading the pack all manufacture and distribute in China with local partners. Shanghai Volkswagen was the top company, and FAW Volkswagen was number two, with the two combining for 1.378 million vehicles sold last year. Shanghai GM was third with its vehicles sold under Buick, Chevy, Cadillac and Opel brands.
The top selling Chinese brand was BYD, for Build Your Dreams. Today BYD is primarily a battery company specializing in cells for cell-phones and small consumer electronics and tools, but it sold 448,000 vehicles in China last year. Its CEO says he has designs on eventually becoming the world's largest carmaker.
The company, having already shown its cars at the Detroit auto show the last two years, has opened a North American sales office in Los Angeles and says it will hire 150 employees there by 2011. More importantly, BYD says it will begin to sell its vehicles here in the U.S. by the end of this year. Though it has yet to put together a dealer network, the company is in talks with Penske Motor to sell BYD vehicles through some of the company's seven California dealers to start.
Now here's the catch: BYD plans to start by selling electric cars, first in California, then expanding throughout the United States. The company aims to deliver e6 hatchbacks to fleet users late this year, before beginning retail sales in 2011. Powered by BYD's own lithium-ion battery pack, the company says the car has a range of 186 miles and a top-speed of 100 mph.
"By the end of next year, the plan is to offer several models," said BYD Senior Vice President Stella Li, who is managing the company's U.S. operations.
Now there is a learning curve to selling electric vehicles -- just ask GM about the EV1 -- let alone one from a Chinese company. Even established companies, like BMW with its electric Mini, have been just wading into the electric market. The model, pioneered by GM, has been leasing cars under somewhat controlled circumstances, this because of issues surrounding the recharging infrastructure. BYD seems to be intent on turning this cautious approach on its head, hoping to tap into growing consumer interest in green tech to launch not just an electric vehicle line, but also a host of ancillary products.
BYD gained prominence in the U.S. when Warren Buffet invested in the company in 2007. Michael Austin, vice president of BYD America, confirmed that the company plans to launch the e6 this year during The Lux Executive Summit conference on energy storage earlier this month. Austin wouldn't divulge details, but said that BYD plans to use its high-volume auto battery manufacturing as a base to enter the business of solar panels, battery packs, car charging pedestals, efficient LED lighting, and inverters to manage energy flow within a home.
"You will see BYD on a lot of products and technologies," said Austin.
That could be an interesting business model for spreading BYD's brand in the U.S. It is reminiscent of Honda's strategy, which had the Japanese company entering each world market, including the U.S., with scooters and motorcycles before it began selling cars. Today, Honda's brand is seen on everything from cars to snowblowers, lawnmowers, motorcycles and ATVs, and generators.
It all looks good on paper, but the car business in the U.S. is complex. "I'm seeing improvements in BYD's products from one year to the next, but the auto business is very entrenched in the U.S.," said Rebecca Lindland, director of auto industry research for IHS Global Insight, who toured the Beijing show last week. "Companies that have been here a long time -- Volkswagen, Subaru, Mitsubishi, Suzuki -- can tell you how tough it can be to build volume in the U.S."
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