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Toyota and BYD–China NEV regs make for interesting bedfellows

July 23, 2019

BYD has long been loathe to share its battery technology with other automakers. Of course, some would say that is not a huge loss as BYD doesn’t have the best battery technology around.  There have been rumblings of change at BYD of late, however. When I interviewed BYD Auto Sales Co. vice general manager Li Yunfei in Shenzhen in March for my China’s NEV Future report for Wards Intelligence (buy a copy to read the interview!), he told me BYD was going to “open our product to other automakers.”  He also predicted that BYD would have more than 20% of the EV battery market by 2020.

BYD transformer

BYD Transformer in lobby of BYD Shenzhen plant

 

 

I am still skeptical that it can do that, but the recent announcement that Toyota and BYD are cooperating to produce BEVs and batteries validates that a tiny bit more.  For those of you who don’t obsessively follow the China NEV market, on July 19, Toyota and BYD announced they would be cooperating to develop battery-electric sedans and “low-platform SUVs” as well as batteries. The vehicles will be badged Toyota and the plan is to have them on the market in China before 2025. Nothing more on the battery plan.

The rationale for this partnership was given as: “To curb global warming, both BYD and Toyota seek to reduce CO2 emissions by promoting the widespread use of BEVs. To accomplish these goals, both companies believe there is a need to put aside their rivalry and collaborate; therefore, the two companies have agreed to jointly develop BEVs.”

That sounds very nice, but we all know these two need each other. I, for one, think BYD has more to gain from this partnership.

Sure, Toyota has been a BEV skeptic, touting its hybrid and fuel cell technology. That has put it behind in the BEV stampede. But it must produce BEVs in China to meet CAFC and ZEV quotas (for Toyota, much more a ZEV issue).  Its partnership with BYD serves the same purpose as Ford’s with Zotye though I’d argue that Toyota got a far superior — but perhaps more argumentative — partner. With BYD, Toyota can produce lower-priced BEVs to serve that segment of the market in China.  Conveniently, BYD already has decent BEV technology. But I don’t know how much Toyota will build on that versus trying to come out with something new and better. Given time constraints, the new and better approach may not be possible in the near term, so it will just go for better.

Toyota is also hedging its bets with the BYD partnership. It already has a supply agreement with CATL, which has superior battery technology. But as my friend Tu Le at Sino Auto Insights pointed out, CATL has partnered with a lot of foreign and domestic automakers. It is already producing lots of batteries. So, it will scale up faster, reducing the cost of the battery more quickly. Meanwhile, BYD and Toyota can work on building a  battery together.

I asked the PR folks at BYD in Shenzhen what form the cooperation will take. “A final conclusion has not been reached; it will be discussed in the future,” they said.  A final conclusion  not been reached on where the BEVs will be manufactured. No info was available on how the decision to produce a sedan and a low-platform SUV was arrived at.  So it seems this partnership is in the incipient phase.  There are likely answers, but maybe both sides haven’t agreed what they are yet! 

As I mentioned, I think BYD is will get the most out of this partnership.  BYD produces some nice buses, and its passenger vehicles, both electric and ICE, have improved.

BYD Tang BEV in EV dealership

BYD Tang in dealership

But let’s face it, BYD will benefit from some Toyota production technology. Toyota isn’t exactly known for its super-stylish design language, but a Toyota will run forever and be basically problem-free.  BYD has that new design center – it can help with some stylish design language for the Toyota-BYD BEVs.

Tu pointed out another potential big benefit – BYD could gain access to Toyota’s distribution system in the U.S.  BYD totally blew its first effort to set up a distribution network and sell passenger BEVs here but having the Toyota name hovering around the BYD logo won’t hurt.

I will be interested to how the two firms work together. Wang Chuanfu is kind of a control freak, I think, though he is also a super smart businessman who has given up control when it really counts, such as the Volvo acquisition. Meanwhile, Toyota probably wants a lot of control, as well.  If they set up a manufacturing JV, will Toyota get a majority share? I think not. Betting on 50/50.

China has that “same bed, different dreams” saying.  Will be fun to see if Toyota and BYD are having the same dream.

 

 

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2 Comments leave one →
  1. July 23, 2019 3:28 am

    EV-less Toyota gains legitimacy by partnering with the top EV maker in a market, and an emerging industry, that Toyota currently agonizes about most. And Toyota, which has tied its fortunes to fuel cell tech, will convince BYD to switch its priority from BEV to FCV along the way.

  2. July 26, 2019 9:24 pm

    I am in doubt re: Toyota “convincing” BYD to change its priorities. Priorities in China are policy-driven. The central government is already talking more about FCVs. Thanks for the reminder that BYD also has that to gain from a tie-up with Toyota.

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