By on February 18, 2010

Typically, the only reports on China’s BYD involve booming Chinese sales, unproven future products, and Warren Buffett’s investment in the battery and auto manufacturing conglomerate. But these don’t tell the whole story of how BYD has emerged from relative obscurity to publicly announcing that it intends to challenge Toyota to become the world’s top automaker by 2018. Chinese outlet Caixin [via GreenCarReports] attempts to shed some light on BYD and what it takes to rise to the top of China’s massive manufacturing industry, in a piece titled “How Manufacturing’s Mockingbird Sings.” The piece details BYD’s reliance on reverse engineering, the practice of stripping down competitor automobiles and components and copying them, and its extreme (even by Chinese standards) dependence on cheap labor.

According to the report, BYD has hundreds of staff who focus on global copyright law, to facilitate the kind of copying that would almost certainly be illegal outside of China, as BYD gets ready to start selling vehicles abroad. One of China’s best-selling cars, the BYD F3, is so similar to Toyota’s Corolla that many buyers pay an extra fee to have Toyota badges affixed, making the F3 nearly indistinguishable from the real thing. According to one expert quoted in the story, Toyota is likely preparing a suit against BYD.

But copying is not limited to vehicle designs and styling:

BYD delights and frightens suppliers at the same time. Many have discovered that BYD typically makes one or two serious, large orders of models, materials, or components but never orders again. That’s because it just starts making whatever it bought.

By copying designs, BYD is able to build more of its components in-house at a time when major automakers are increasingly outsourcing component design and production to independent suppliers. It’s able to vertically integrate (relatively) profitably because of its reliance on cheap manual labor. For example, its batteries are built by hand, requiring a columnar (rather than boxed) shape, and resulting in far cheaper build costs despite waste rates of 20-30 percent. Per-capita productivity at BYD’s battery plants is reportedly half that of more automated Chinese competitors, but the firm is still able to keep costs lower. This strategy is carried over to the auto business, where the sheer volume of employees (BYD reportedly ended 2009 with 140k workers) is able to build cars cheaper than more automated factories. And where BYD does automate, it often builds equipment itself to keep costs low.

BYD’s defense of its practices: first, the company claims that its Japanese competitors relied heavily on reverse-engineering in their rise to dominance (an argument that conveniently chooses not to distinguish between studying competitors and blatantly copying them without a license). Moreover, the firm say it has six new models coming out, which it claims don’t resemble anyone else’s designs. We will have to see about that one, as another Caixin story details a few of the challenges BYD is facing as it seeks to make its electric vehicles reality (one of which is that the firm is rumored to be building a total of two of its much-vaunted but poor-selling hybrid vehicles per day and that the E6 is still prototype-only). Meanwhile, BYD has itself become one of the most active patent-filing companies in China. All of these questionable practices are easy to justify when you’re coming up from nothing, but transitioning from tear-up-the-rule-book upstart to a status-quo player is never easy.

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18 Comments on “BYD Blasted For Reverse Engineering, Labor Practices, Expansion...”


  • avatar
    Contrarian

    The stripping down and analyzing cars and car parts [reverse engineering] is SOP for all automakers. Some of us have probably been in the “Mona Lisa Center” in Warren at the GM Tech Center in the old days.

    It’s the blatant copying that the Chinese seem to have little problem with. Whether it’s DVDs or automobiles. A cultural thing I guess. Possibly related to living in a country of over 1 billion people. You know there’s an exact copy of you somewhere, too.

    • 0 avatar
      ash78

      The Mona Lisa Center should be the name for Mazda’s design house, because everywhere I go, they’re all smiling at me creepily.

    • 0 avatar
      Ernie

      Ash78 -> SHHHHHH

      Don’t give them *ANY* ideas. They only farked up the Mazda3, CX-7 and CX-9. As long as they leave the RX-8, Mazda6 and Mazda5 alone, we can get along without . . . OH SWEET LORD THEY GOT THE RX-8!!!! NOOOOO!!!

  • avatar
    Mr Carpenter

    The Chinese-British accent sounded pretty um, interesting. The animation of the 3 cylinder engine was even more interesting, being it was upside down (crankshaft at the top) and all 3 cylinders were in sync (which wasn’t the case with the BYD Dual Mode car I saw at the Detroit Auto Show). It was a “running” see-through model cut-away of both the car and engine. (The car was a blatant copy of the prior-gen Honda Accord with different grill and tail lamps, interior alterations).

  • avatar
    pgcooldad

    They make a good point with Japanese practices.

    Honestly, can anyone name me a Japanese inventor. How about a Japanese automotive invention?

    • 0 avatar
      Cammy Corrigan

      Dr Yoshiro Nakamatsu:

      http://en.wikipedia.org/wiki/Yoshiro_Nakamatsu

      And the first successful usage of Common rail technology was done in Japan by Denso:

      http://en.wikipedia.org/wiki/Common_rail

    • 0 avatar
      crash sled

      Back in the day, the US Navy had many headaches from the Japanese Long Lance torpedo, a fearsome creation that nobody else could match back then: http://en.wikipedia.org/wiki/Long_Lance_torpedo

      As for the Chinese, they are building a wall around themselves, and this isn’t a good sign.

      I remember reading years back about the first Toyota engineers arriving in California back in the early 1960′s or so, literally like pioneers, renting some space, cobbling together some prototypes and limping around out on the roads. One day, they pulled up alongside some American beater and managed to pull away from it somehow, and they all high-fived their great success, and toasted the emperor or something.

      Point is, they came over to the outside, outside themselves, and worked from that standpoint. Maybe they copied, but who doesn’t? But good engineering is collaborative, not insular. You share and share alike, and boundaries can’t be rigid. It’s not so much about the patents, it’s something else. It’s being willing to expand your breadth of knowledge, to give and to receive. I think the Chinese wall will eventually truncate them, to their own detriment.

    • 0 avatar
      pgcooldad

      First successful usage (after you copied) is not an invention.

      There is a lot of controversy surrounding Dr Nakamatsu and his “inventions”.

    • 0 avatar
      Michal

      Name a Japanese inventor? Oh that’s easy. You’re probably looking at one of his inventions right now.

      The high efficiency blue LED, by Shuji Nakamura.

      http://en.wikipedia.org/wiki/Shuji_Nakamura

    • 0 avatar
      psmisc

      http://en.wikipedia.org/wiki/List_of_Japanese_inventions

      http://en.wikipedia.org/wiki/List_of_Chinese_inventions

  • avatar
    GS650G

    So if a Chinese company can come up with a small hybrid car why couldn’t GM? Electric motors and belts on the Aura? A 7000.00 dollar hybrid transmission in an SUV that gets 1 more mile per gallon?

    Sure, BYD is a real piece of work for violating laws and treating workers like slaves but at least they know what to build. GM and Cry-fiat don’t.

  • avatar
    George B

    “Honestly, can anyone name me a Japanese inventor. How about a Japanese automotive invention?”

    Ikuo Kajitani, the father of VTEC. Use of two separate high-rpm and low-rpm camhaft profiles improved volumetric efficiency of naturally aspirated engines while also allowing smooth, efficient low-rpm operation.
    http://en.wikipedia.org/wiki/VTEC
    http://asia.vtec.net/hardcore/VTEC/index.html

    Uda Shintaro and Hidetsugu Yagi, inventors of the Yagi antenna.
    http://en.wikipedia.org/wiki/Yagi_antenna

  • avatar
    Disaster

    BYD is the Harbor Freight of the auto industry….or at least the “Chicago Electric” brand that HF sells. Take a look at almost any tool HF sells and you will find it is a copy of a “real” tool from a major manufacturer. The tools are copied by opening them up and then just copying them part for part…with little regard for tolerances and materials. Open up a Chinese copy and you will find scoring marks on bearing surfaces, from crappy machine tools..or ones that don’t get regularly sharpened. In other cases you will find they eliminated a bearing altogether because it saved money. The results are usually tools that perform pretty poorly to begin with and are short-lived. To see the results of such copying with cars one only has to view the crash test for the car BYD submitted to Europe. Scary.

  • avatar
    porschespeed

    @Disaster,

    Just as an interesting aside, not only does Buffet have a stake in BYD but Berkshire Hathaway owns (under the Scott Fetzer umbrella) Campbell Hausfeld tools – the blue crap Chinese tools at Wal Mart…

    From a macro economic standpoint, I’m not a fan of cheap Chinese anything. But, like the average pragmatist who needs an SDS drill around, but not often enough to justify the extra $300 for the Bosch unit, micro econ puts one buying that orange tool at HF…
    And frankly, I have one that’s done a coupla thousand concrete penetrations without a hiccup.

    @pgcooldad,

    Toyota’s current problems aside, the Japanese learned the basis of their quality oriented manufacturing process from an American (Deming). Too bad when he gave the same info to Ford, GM, and Chryco they ignored him.

    While I agree the Chinese are about ‘zero’ on the creativity scale, the Japanese are responsible for way more than you may realize. Mainly tech stuff, but that’s the new frontier.

    From a sociological standpoint, Americans are uniquely enabled and encouraged to invent. Asian cultures place a high value on conformity, and, as such, outside the box thinking is much more of a learned behavior. I’m not saying in ANY way that great inventions have not and will not come from Asia, many already have. What I am saying is that US culture is/was uniquely encouraging to the creative mind and spirit.

    Sadly, US education, cultural norming, and greed slashing R&D budgets, is leading our society straight for the land of “Idiocracy”. And just like in the 50′s with Deming, the Japanese have incorporated creativity into their system….

    Sociologically and culturally, the Chinese still have a long way to go before mass-creativity breaks out across Chins (be thankful for repressive regimes…). Just remember, one can cover a lotta ground rather quickly these days.

  • avatar
    psmisc

    “While I agree the Chinese are about ‘zero’ on the creativity scale”

    I posted this earlier: http://en.wikipedia.org/wiki/List_of_Chinese_inventions

    The Chinese basically stopped inventing when it sank into a century of chaos after the collapse of the Qing dynasty. They only started to catch up after Mao died. They have some distance to cover on the basic science front before they can come up practical inventions.

  • avatar
    Norma

    Yeah, it’s fashionable to twist what’s reported and sing the tune of bashing Chinese automakers. But let’s clear some air and see what the REAL report from Caixin is:
    1. “According to the report, BYD has hundreds of staff who focus on global copyright law”. Actually I’d be surprised if TTAC can actually find a volume international automaker that would have a staff of less than ‘hundreds’ focusing on global copyright law;
    2. According to the report from Caixin, BYD “reverse engineer[s] the luxury car’s [a Merc. S300] electronic control system”.
    Com’on, can anyone show me where can I find the electronic control system of a Merc. in a lowly BYD. LOL.
    I guess, the expensive (and difficult to reverse engineer) part is the software, whether it’s in the ECM, ABS, VSA or those that integrates the operation of the vehicle, not those hardware that one can see, measure and duplicate.


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