EVs in China: Good Morning, Gordon Chang! Did You Sleep Well?

Those who have followed TTAC’s coverage of China’s car electrification plans in general and BYD’s track record in particular will have noticed a degree of healthy skepticism. Actually, we had declared that the electric car only has a chance if you for all intents and purposes outlaw regular cars, as it is the case in Beijing. I have been out there today, and haven’t seen any: If there are no EVs to buy, then none will silently prowl the streets. As far as BYD goes, last March we called them a “down and out car company that should qualify for a handicapped parking sticker.”

Now at last, Forbes’ resident China expert Gordon G. “I hate China” Chang wakes up to the matter and writes:

“Beijing has bet big on electric vehicles. In fact, no government has devoted more effort and money than China’s, as official media likes to brag. Last year, for instance, Beijing announced plans to spend 100 billion yuan—about $15.6 billion—to put 20 million “green” cars on China’s roads by 2020. Now, just a little more than a year later, the country’s leaders are rethinking their decade-long commitment and have yet to release crucial details.”

Gee, we thought you would never notice. And who is suffering from this indecision? Poor BYD and Warren Buffett. Writes Chang:

“All these factors mean BYD will be held hostage to politics in the Chinese capital. Buffett once famously advised others not to invest in things they did not understand. At the moment, it’s hard for Buffett—or anyone else—to understand what will happen to electric vehicles in China over the next few years.”

As if on cue, one day later, today Reuters writes:

“BYD Co Ltd , a Chinese carmaker backed by U.S. billionaire Warren Buffett, reported an 89 percent plunge in first-half net income as government policy changes hurt its auto sales.”

The trouble is that it’s not Beijing’s electric foot-dragging that is hurting BYD. BYD never seriously sold electric cars to the public. What they had sold en masse was an el-cheapo Corolla-look-alike called the F3, which for a while topped the sales charts. The F3 is not an EV, it’s powered by a run-of-the mill gasoline mill, bought from Mitsubishi. That car is getting it on the chin. Says Reuters:

“BYD, 10 percent owned by Buffett’s Berkshire Hathaway ( BRKa.N), delivered 259,915 vehicles during the period, down 19.3 percent from a year earlier. Sales fell 16.8 percent to 27,496 units in July, official data showed … BYD’s F3 sedan was China’s best-selling car brand in 2009 and 2010, but demand for most of its other models, such as M6, S6 and L3, has been lukewarm.”

The policy that supposedly hurts BYD was China’s decision to stop favorable tax treatment for sub 1.6 liter gasoline-powered cars. That however is old hat and it didn’t stop other sub 1.6 liter-heavy makers from bringing in the bacon. Says Reuters:

“The results lagged rivals such as Geely Automobile Holdings which reported a 17 percent earnings rise and Great Wall Motor which more than doubled net profit on improved sales and margins during same period.”

Mr. Chang: BYD is not held hostage to politics. BYD simply could not find another car to copy cheaply. And as far as China’s car electrification plans go, they are as much for real as the EV plans of some other countries.

What did we write – in January – when President Obama announced his goal of a million EVs by 2015?

“Barack Obama finds himself in an EV race against the Chinese. They also want a million EVs by 2015. You think their job is easier, because they just order it, and it will be done?

Ask BYD how they are doing.”