BYD's path to becoming an electric car giant is completely different from Tesla's

Editor's note: When people mention electric cars, they immediately think of Tesla. But in terms of sales volume, BYD is the world's largest. This company, which started out as a battery manufacturer, is determined to become the ExxonMobil and General Motors of the electric transportation era. With the help of policies that prioritize the development of electric vehicles, China will undoubtedly be the country where the electric vehicle revolution will arrive the fastest; but what is less clear is how far and how fast it will spread around the world - and whether BYD will be one of the winners. This article is a feature article written by Matthew Campbell and Ying Tian for Bloomberg Newsweek, and the original title is: The World's Biggest Electric Vehicle Company Looks Nothing Like Tesla

BYD taxis are charging in Shenzhen

In a vast factory hall in southern China, dozens of unfinished vehicles, freshly painted cherry red or dark silver, hang six feet above a spotless concrete floor. Their engines had been installed moments before, but they were still just skeletons, more automotive hopes than real objects. As they drifted down the production line, a sled-like robot slid into position beneath each chassis and slowed down to match its speed.

The robot is carrying a critical payload: a battery about the shape and size of a double mattress, wrapped in a gray plastic bag. Suddenly, a folding lift rises from the skateboard and inserts the battery into the car's chassis. Workers in blue jumpsuits and white cotton gloves, holding rivet guns connected to compressed air by curling red wire cables, nimbly rush to the edge of the battery. Once the battery clicks into place, the lift retracts and rushes its robot master to find a new one.

Americans associate electric cars with Tesla luxury, the unrivaled transportation of choice for the Sand Hill Road crowd. But these newly outfitted vehicles are part of a family of SUVs called the Tang, which retail from about 240,000 yuan and are built for middle-class drivers in China, the world's largest electric vehicle market. Their manufacturer, BYD, has accordingly become the world's No. 1 maker of plug-in electric vehicles. China's shift toward electric vehicles is happening faster than any other country, and BYD is supporting that shift to a degree that has attracted little attention from Musk's company. Founded in the mid-1990s in Shenzhen to make batteries for brick-sized cell phones and digital cameras, BYD now has 250,000 employees and sells up to 30,000 pure electric or plug-in hybrid vehicles a month in China, most of which are not status symbols. BYD's cheapest model, the E1, starts at just 60,000 yuan after subsidies.

BYD's cars, as well as its electric buses, forklifts, utility trucks, cleaning vehicles, and garbage trucks, all run on its own batteries. Its facilities across China can produce nearly 30 gigawatt-hours of electricity per year, more than enough to power every iPhone ever made. Last year, BYD opened one of the world's largest battery factories, covering 10 million square feet, in Qinghai, and in February it broke ground on another similarly sized plant. The empire has made its founder and chairman, Wang Chuanfu, a billionaire. It has also benefited another high-net-worth individual, Warren Buffett, whose Berkshire Hathaway bought a 10% stake in BYD a decade ago.

Even for a country of the highest order, China has embraced electric vehicles at an astonishing pace. Thanks to generous government subsidies and municipal regulations that make owning an internal combustion car inconvenient, expensive, or both in many cities, China accounts for more than half of all electric vehicle sales. Shanghai sold more electric cars last year than Germany, France, or Britain; Hangzhou, a city small by Chinese standards, sold more than Japan. Shenzhen’s 20,000 taxis are almost all BYD electrics, compared with fewer than 20 in New York (regardless of who makes them). There are more than 500,000 electric buses on Chinese roads, compared with fewer than 1,000 in the United States.

Wang Chuanfu

Eager to beat back smog and support a booming industry, the Chinese government is said to be intent on eliminating fossil-fuel-emitting vehicles by a yet-to-be-determined deadline, perhaps 2040. Given the size of its market, Chinese demand is expected to shape the 21st-century auto industry the way American consumers shaped car manufacturing in the 20th century — giving it a leading position in transportation, with all the strategic advantages that brings.

The acceleration toward an electric future is a triumph for Wang, 53, who began calling for mass adoption of electric vehicles more than a decade ago. But it also creates unprecedented challenges for his company. Attracted by China’s vast customer base and clear policy direction, global automakers from Volkswagen to Fiat are introducing dozens of electric models tailored to local characteristics. They are coming at a time when Beijing is scaling back subsidies for buying cars, a move that has an asymmetric impact on manufacturers like BYD, whose products tend to be more affordable. At the same time, the company’s overseas markets are being swayed by a backlash that has been reflected in actions such as the recent U.S. ban on Chinese bus makers from receiving federal funds. Investors are worried: BYD’s Hong Kong-listed shares, which were the best-performing stock on the planet for a period in September 2017, have fallen 18 percentage points over the past 12 months.

Wang and his colleagues are determined to prove the doubters wrong by building an aspiring global brand, something no other Chinese manufacturer has yet done. While they are proud of their company’s pioneering history, they are also acutely aware that being first to get somewhere does not ensure long-term success. BYD may have started China’s electric revolution, but now its leaders must find a way to finish it.

In the early 1990s, Wang Chuanfu was still living in Beijing, a mid-level researcher at the General Research Institute of Nonferrous Metals. His work focused on rare metals essential for batteries and consumer electronics, and as the innovation boom of the Deng Xiaoping era filtered through the government, he began to wonder about the possibilities of the private economy.

He founded BYD in Shenzhen in 1995, when the city was undergoing its legendary transformation from a regional market town to a globally connected metropolis. It's not clear what BYD stands for; the company now says it's an acronym for "build your dreams" and has the phrase engraved on some of its models, but it may be an attempt at retrospective continuity.

Workers in workshop

Wang Chuanfu was a nobody in Shenzhen at the time, just one of thousands of young entrepreneurs trying to get a piece of the global supply chain. But he was also an expert at the moment when batteries were laying the foundation for a fundamental technological change. In the late 1990s, as lithium batteries made laptops and mobile phones commonplace, BYD's low-cost and agile production methods gradually made it and other Chinese companies the supplier of choice, beating out Japanese manufacturers. By the early 2000s, BYD batteries were in Nokia phones, Black & Decker power tools, Dell laptops, and even the ultimate status symbol of the era, the Motorola Razr phone.

In 2002, the company went public in Hong Kong. The following year, BYD bought a majority stake in troubled state-owned Xi’an Qinchuan Automobile. Battery-powered cars were rare at the time, limited to isolated models built to meet California regulations. But Wang saw it as a natural extension of BYD’s core business, believing the deal would “accelerate the development and production of rechargeable batteries for electric vehicles.”

The timeline of automotive products is lengthy, and Wang Chuanfu's influence on BYD Auto (the name changed after Qinchuan was acquired) did not become apparent until after 2008. That year, he released the F3DM, BYD's first mass-produced plug-in hybrid. Although it was technically novel and claimed to have a pure electric range of more than 60 miles, its appeal was almost zero compared to the Tesla Roadster that debuted in my childhood. "We drive faster in our own lane," said Renchezhi, sneering at the F3DM's top speed of 93 mph. This was a setback both in China and overseas. BYD has hardly exported any passenger cars since then.

But as Tesla focused on the midlife crisis market, BYD turned to charging less glamorous cars and setting up infrastructure such as solar panels. In 2009, the company began mass-producing electric buses, and the following year it won an order for 1,000 buses in Hunan Province. Similar contracts followed, and then smaller orders were won in Amsterdam, Frankfurt, Los Angeles, and elsewhere—although the latter order and another in Albuquerque were embroiled in doubts about mechanical problems, causing the New Mexico city to return BYD's buses. In California, there were complaints that workers were paid less than $1.50 an hour. (California regulators have dropped a wage complaint after BYD said it was paying more than the minimum wage, and the company said its cars worked fine in both cities.)

In retrospect, the logic of focusing on large, lumbering vehicles operated by cost-conscious transit authorities is obvious. The typical car buyer cares about things like acceleration, not top speed, since the bus has to stop every few blocks anyway. And range anxiety isn’t a factor with fixed routes. The idea is that getting commuters on electric buses will also help build brand awareness and acceptance of electric vehicles. Plus, the upsell possibilities are numerous: BYD solar generators, BYD energy storage, BYD fast chargers, maybe a few BYD electric forklifts to deliver parts.

BYD’s holistic philosophy becomes apparent when you visit its headquarters in eastern Shenzhen. The final stop on the tour is BYD Road, a six-lane corridor divided by rows of BYD solar-powered streetlights. Some 40,000 employees work on the campus, shuttling between factories and offices on BYD buses. The roads inside the campus are nearly spotless, thanks to frequent visits by BYD road-sweepers. In front of the hexagonal central office building, the company has built a test track and a station for the CloudRail—a prefabricated monorail system designed to carve a green corridor above congested city streets—in case the electric-vehicle revolution fails.