By on July 22, 2010

In most parts of the world, electric vehicles are treated as the second coming of Jesus. Meanwhile in Omaha, Warren Buffett is having doubts whether it was such a good idea to pay $230m for 10 percent of China’s  cellphonebattery/car/EV/appliance/house builder BYD.

BYD’s share price has fallen by more than 40 percent over the past three months, China’s First Financial Daily remarks (via Gasgoo.) Can you guess the main reason for the serious drubbing?

BYD’s “electric cars cannot achieve commercialization in a short term,” said Cao He, an auto analyst with Mingzu Securities Co. That’s Chinese for: Nobody wants them. Even with generous government handouts they are unsalable.  Last month, the Chinese government unveiled a plan to subsidize private purchases of electric cars. BYD’s F3DM plug-in hybrid sedan and e6 electric car are on the list.

In China, the government would give me  50,000 yuan ($7,320) for buying an F3DM hybrid car. I would collect 60,000 yuan ($8,850) if I would overcome my range anxiety and would buy an e6 plug-in. If I would move to scenic Shenzhen, on the other side on the Hong Kong border, the deal would get even juicier: Shenzhen would put another 30,000 yuan ($4,425) on the hood of the F3DM and would incentivize the e6 with an extra 60,000 yuan ($8,850). In Shenzhen, I could collect $17,700 if I would by an e6.  Many people in Shenzhen could live comfortably for several years on that kind of money.

Of course, this creates long lines in front of BYD showrooms and waiting lists not seen since the glory years of East Germany, you would think.

Baloney. Since BYD started selling their F3DM cars to private consumers in March 29, they sold only 14 units sold in April, 2 units in May and 12 units in June.  That’s for the hybrid. Yes, 28 in total.

There are no e6 sales, because none is available. Maybe by the end of the year.

To make matters worse, BYD’s June sales of all cars, including their formerly bestselling F3 car, fell 21 percent from May. BYD may be having a bit of a problem.

China’s First Financial Daily quotes an unnamed “industry expert” who said that mass production of “electric cars is still a long way ahead. Therefore, economies of scale may not be able to work magic in a short time with the high cost of battery packs and inadequate support facilities for electric vehicles.” Do the Chinese know something we don’t?

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7 Comments on “Big Yucky Disaster: Buyers Abandon BYD...”

  • avatar

    I think I see the problem. They’re no diverse enough. All they make is cell phone batteries, cars, EVs (someday), appliances, and houses? This is insufficient. They need to expand their reach into the financial sector, into agribusiness, energy exploration, legal services, forestry, casinos, wine, flatpack furniture, etc.

  • avatar

    Is it just me, or the Chinese market very hit or miss oriented. I keep reading that a particular brand got killed this year, which sounds like a model refresh problem. Yes, Chinese people are brand concious and want the newest, but then again what is the model Jetta/Bora they are selling?

  • avatar

    The commercialization of EVs are questionable even in developed countries with people willing to pay $30-40k for an EV, even with dubious practicality.

    For China, 150,000 yuan, the price of an F3DM, is a massive investment. In the West we look at ~$22k for PHEV to be a bargin, but Chinese look at it as an overpriced F3 and think of all the other ICE-based foreign cars they can buy.

    Furthermore, li-ion batteries are products where raw materials account for a large proportion of battery costs. While BYD does benefit from cheap labor and weak yuan in many areas, acquisition of lithium overseas is more costly then their foreign competitors.

    China does have proven lithium reserves, however they pale in comparison to countries like Chile which undercut them. Here countries with strong currencies benefit most being that lithium sources are severely underdeveloped and would cost start-up capital to secure rights. Which is why Japanese companies, which are at a major disadvantage with a strong yen, are at an odd temporary advantage when it comes to foreign acquisition of lithium rights, which is why they are moving now:

    The major differentiating factor for BYD is their battery manufacturing capability, and I would still consider them a good investment, but it may be beneficial for them if they focused their technical investment to more traditional ICE technology in the near-term as EVs & PHEVs still have at least a decade before it hits the mainstream. And in the Chinese market, where margins are absolutely razor thin, EV/PHEV adoption is even further off.

  • avatar

    BYD is not ready for prime time. The cutaway F3DM that they’ve displayed at the NAIAS had body seam sealant that looked like it was out of a ’67 Dart, and the drivetrain pieces were rough castings with visible hand grinding marks. That they’d display a car like that at such a high profile show says to me that they don’t quite get the concept of quality.

    When I interviewed Don Runkle for the EcoMotors story, he said that one of his favorite engines was the Buick 3800, which I described as the ultimate silk purse out of a sow’s ear. He told me that when he got the team together to redesign the old Buick V6, he got a bunch of Japanese sportbike engines from a variety of mfgs, had them torn down to components, and then set those components side by side with the original GM V6 parts, demonstrating that the sportbike parts looked “like jewelry” compared to the GM parts.

    I think that just as panel gaps demonstrate a commitment to quality, so does the finished look of every component of the car, even the ones that customers rarely if ever see. Why shouldn’t engine parts be elegantly designed? Hot rodders and customizers understand the aesthetic value of dressing up the mechanical parts. So do most global car companies, but I’m not sure if BYD gets that.

    • 0 avatar

      Yes, perhaps, but the idea can be taken too far … no customer (well, almost no) customer will pay a premium for a connecting rod that all other things being equal, costs more because it only looks better… but, generally speaking, the old “if it looks right, it is right” dictum is often true.

      Re. BYD’s sales rate … one potential good outcome is that if the cars fail to live up to expectations, they won’t have many unhappy customers…

  • avatar

    AFAIK most Chinese homes don’t have garages, most cars are parked on the streets or underground parkades. This would make the “plugin” feature of a plugin-hybrid like the F3DM useless. Unless there are decent electric charging infrastructure in place, I just don’t see electric vehicles being viable in China.

    Parallel hybrids on the other hand may have a shot in the short term.

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