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BYD’s Li: Changing image from cheap and cheerful to high tech premium takes time

August 2, 2011

BYD  Co. is the world’s largest producer of mobile phone batteries, but it is better known these days for its cars.  In China, the brand was first associated with cheap, small cars of so-so quality, and more recently with electric vehicles.  BYD would, not surprisingly, prefer to be known as a high-tech firm that produces not just electric vehicles, but premium-brand EVs. And, it would like to tack solar panels and storage devices i.e.  high-tech batteries on to that image.

Here in the U.S., the brand is not well known. But it wants to be known as a high-tech green company that produces—you got it, electric vehicles, solar panels, and high-tech storage batteries.

BYD senior vice president Stella Li and vice president Michael Austin talked with China-EV recently in Los Angeles about BYD’s brand strategy and the challenges it faces.  An edited transcript follows.

China-EV:  BYD is delivering 300 electric taxis to the 2011 International Universiade Games in Shenzhen this summer.

And it already some 50 in another taxi fleet in Shenzhen.

China-EV: But have you started selling your e6 electric crossover vehicle to consumers in China?

Li:  Not yet. All the production is fully booked by the taxis. We plan to begin consumer sales in China in September or October of this year.

China-EV:  You mentioned that you are capacity constrained where battery production is concerned. How will that impact your consumer sales?

Li:  We invested in our battery—the IPO—to  increase our battery capacity.  (BYD raised 1.42 billion RMB, or US $220.7 million at current exchange rates, in an initial public offering on the Shenzhen Stock Exchange in mid-June.)

China-EV:  BYD’s sales of regular cars have taken a hit in China recently—sales were down 24% for the first half of 2011, according to J.D. Power and Associates .  Will that impact your ability to grow your EV operations?

Li:  The sales for BYD … the company is in a transforming stage. In the past we are more focused on pushing the volume. Now we push the … now the focus will be maybe more on green car. In 2013-14 you will see BYD will introduce a different size, a series of EVs.  We will also introduce new Dual Mode  car and at the same time there will be more focus on technology and quality.

Now we are more strict on the car’s quality. Recently you see our launch for the f6 the fit and finish is very different.  In the future you will see everything will be upgraded so you get into the car and it is more like a feeling of a luxury car, a high tech car.

Li says BYD's days of favoring sales volume over quality are gone.

China-EV:  So you are upgrading your internal combustion engine cars as well?

Li:  Yes, so we will be more focused on quality, fit and finish.

China-EV:  Fit and finish has been a huge issue for Chinese cars in the past….

Li:  Exactly, that is the mistake we made in the past. We would push volume, so our quality on fit and finish was not there.  Now we will be more focused on that. Several times we have had an internal review; we talk about how we make it. You know we can make a lot of beautiful parts. All the cars we make, if we only use a small part of our high tech knowledge in building our autos, they will be super high tech.

China-EV:  Yes, you have a high tech imagine but you also build cheap cars. There’s a contradiction….

Li:  That is the mistake we had in the past three years, but when the new guy goes to the market we had to push some volume but sometimes we didn’t focus on bringing the good quality high tech image to the car. Now we are in the transforming stage to make our products to be more high tech.

I will share with you– when is the auto show? We are going to debut our “I”system. The I system—if I am here and my car is in the parking lot, I can call and say “can you unlock?” Then I can tell the car I need a repair and the car can set up the repair appointment. You can do all these
things with the  technology in the new car.  When we introduce the g6 we will have the I system. It’s a very intelligent car.

Austin:   It links a lot of the information in electronic systems to the user. Like is it fully charged, is it not fully charged? How much longer will it take to fully charge? What is the remaining state of charge?

China-EV:  What about your traditional cars?

Li:  They will also have all these high-tech functions. They can plot locations,  you can also send navigation information to other people’s cars. These kinds of cool things are in our I systems.

China-EV:  Nonetheless, earlier this year when sales dropped in China BYD still resorted to price cuts to push cars.  Once you start launching
these new lines of higher tech cars do will BYD still need this tactic?

Li:  We have to deal with that. Chinese people pay a lot of attention to face, and to brand. If they have money, they want to get a foreign brand.

China-EV:  Right,  that is a whole branding issue….

Li:  Now it will take some time for BYD to rebuild our branding to be a high premium car imagine. Then maybe we can improve our sales price.

Recently our s6 was introduced to the China market at only 90,000 RMB. It is an SUV, everyone wants to get that car. So you see this kind of car still sells, but it is starting to change our image.

BYD hopes the S6 SUV will aid the transformation of its image to a more upscale brand

China-EV:  How long do you think it will take to change BYD’s brand image in China from a producer of cheap cars to a high-tech producer of premium brand cars?

Li:  BMW, Daimler, they have 100 years. For good branding, I think it will take 20 years or 30 years. But for this kind of image, we have the best chance for a green car, to introduce a green car with a good status. Also we have had several internal reviews. We cancelled a lot of projects which did not fulfill our new strategy. We need to start to fulfill our product roadmap. So normally this will take three years, so maybe in five years you will see BYD brand car will be totally different than today.

Austin: That is something that will benefit from the Daimler/Mercedes relationship as well.

(BYD and Daimler AG, maker of the Mercedes Benz brand, in May of 2010 formed a joint venture in China to produce electric vehicles. BYD will provide the battery and powertrain technology.)

China-EV:  Are you launching a new brand with Daimler ?

Li:  Yes, it a pure EV brand.

Austin:  And those engineers have relocated to Shenzhen.  There is already cross-pollination going on.

Stella: They have 30 or 40 engineers.

China-EV:  When is the brand due to launch?

Stella: 2013. We may announce the car’s brand name by this year.  Two companies—the JV, so it is taking longer to decide on the brand name. Only one company we can decide by one person. But now it is two people.

China-EV:  What is your main area of responsibility?

Li:  BYD overseas sales. Plus for auto I need to take care of the U.S. market.

China-EV:  What is happening with the F3DM hybrid car in the China market?

Li:  Some sales in China starting in September.  We are now upgrading the new platform for the 2013 models.

China-EV:  What is your sense of the government’s emphasis in China as far as new energy vehicles goes?

Li:  They will not really encourage a hybrid, they will be more focused on EV and PHEVs. They will accept hybrid but the (big) incentive for hybrid is not there.

China-EV:  I just read an essay by Chinese premier Wen Jiabao in Qiushi where he talked about how the BEV technology was not mature and the investment in the sector was not focused.

Li:  I think in China, the government said it would incentivize EV purchases so a lot of EV companies jumped in, they never made a car or battery before. A lot of ebus companies are that way. Then there were several accidents. This has brought confusion to the consumer and a lot of trouble to the government. You know China does things like a swarm of bees. Now they say the government gives you subsidies for EVs, they swarm to invest. They waste a lot of investment.

China-EV:  Is BYD importing any of the technology for its EV, such as the battery management system?

Li:  We delivered 2.2 billion cell phone batteries.

China-EV:  But the strains on a cell phone battery are less than those on a vehicle battery….

Li:  But we have to do lots of tests on the batteries. When you are cooking at home and you drop it in a hot place, you don’t want it to explode, for example. So we have done a lot of extreme testing under extreme conditions on our cell phone batteries.

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