BYD Co., the Chinese automaker backed by Warren Buffett’s Berkshire Hathaway Inc. (BRK/A), said Chinese cars are poised to begin hitting U.S. showrooms by next year.
BYD plans to introduce about four models for its U.S. debut at the end of 2015, said Stella Li, the senior vice president in charge of the company’s U.S. business, in an interview last week in Shenzhen, China. Though BYD wasn’t ready when it earlier sought to enter the U.S. car market in 2010, the company is more prepared this time, she said.
BYD’s ambitions, echoed by companies from Geely Automobile Holdings Ltd. (175) to Great Wall Motor Co. (2333), show how the Chinese are seeking to shake up the U.S. car market as the Japanese and South Koreans did decades earlier. Geely and Chery Automobile Co. have made such predictions as far back as 2005, though they’ve yet to sell their first car in America.
“Entering the U.S. market carries more symbolic meaning to brand building than actually boosting its bottom line,” said Han Weiqi, an analyst with CSC International Holdings Ltd. in Shanghai. “They really need to make sure cars they deliver there have sound quality in order to avoid adverse impact.”
Still, BYD has a track record of planning bigger than what they can actually deliver, Han said.
BYD is returning its sights to the U.S. after billionaire founder and Chairman Wang Chuanfu completed a three-year reorganization 2013, during which he cut the number of dealerships and narrowed losses at its solar business thanks to state incentives.
Restructuring plan
Investors have been receptive to BYD’s turnaround. The company, which focuses on electric cars, saw its shares surge 63 percent to HK$38 in Hong Kong trading last year. During the restructuring, profit tumbled 97 percent because of losses at its photovoltaic business, a decline in global battery demand and a slump in auto deliveries.
Even with last year’s gains, BYD’s share price remains less than half the level of the record HK$85.50 reached in October 2009. That’s still profitable for MidAmerican Energy Holdings Co., a unit of Buffett’s Berkshire Hathaway, which bought 9.9 percent of BYD in 2009 for HK$8 a share. The stock fell 0.7 percent to HK$37.40 in Hong Kong and gained 1.3 percent in Shenzhen to 38.48 yuan, the highest level since Dec. 16.
US market
Technically BYD is already in the U.S. vehicle market, though it sells electric buses to fleet operators, instead of cars to consumers. The company is preparing to begin U.S. production of electric buses in March at its factory in Lancaster, California, according to Li. The company had previously planned to sell its e6 electric hatchbacks in the country by the end of 2010, though that got postponed.
“Back then, we had passion, but we had no brand, no history, no capital and no competitive advantage,” said Li, 43, who spoke at BYD’s headquarters in China’s southern Guangdong province. “BYD has become more fashionable and we have improved our design and safety. We don’t want to compete on price anymore, but on quality and innovation.”
BYD isn’t the only Chinese automaker pursuing the American consumer. Geely, whose parent owns Volvo Cars, plans to export cars developed with the Swedish brand to the U.S. in 2016, Geely Chief Executive Officer Gui Shengyue said in August. Great Wall Motor, China’s biggest SUV maker, doesn’t have any official timetable to exporting to the U.S., said Xu Chengzhi, a company spokesman.
Chinese Calligraphy
In other markets, BYD is targeting to open a factory in Sao Paolo during the soccer World Cup that starts in June to assemble its K9 electric buses, Li said. The company’s e6 electric taxis are in use in Colombia and the U.K. and its buses in California, Canada and Spain.
In China, BYD’s electric buses are used in cities including Shenzhen, Changsha, Xi’an and Tianjin, while 800 of its e6 all-electric cars are used as taxis in its home city.
BYD’s Li said the its new Qin plug-in hybrid will likely be the flagship among models introduced in the U.S. The sedan, named after the dynasty founded by the emperor who unified China, went on sale in Beijing on Dec. 17. At a starting price of 189,800 yuan ($31,400) — before government subsidies — the car features headlights inspired by a Chinese calligraphy brushstroke and goes from zero to 100 kilometers (62 miles) an hour in 5.9 seconds, and can travel 70 kilometers on a single charge in electric-only mode, according to the company.
Separately, Li said BYD has found it easier to sell its battery-powered K9 bus and e6 car overseas than in Beijing and Shanghai, even though the Chinese company has offered free trials, Li said. The company failed to qualify for local incentives in the two cities because it’s based in Shenzhen in southern Guangdong province and the local governments have their own automakers to protect, she said.
Local interests
“It’s disheartening as a Chinese to see how local interests are holding back the adoption of electric vehicles,” Li said. “It’s easier to sell our buses and cars to Sao Paulo, California or Israel than in Beijing and Shanghai. And those places have better air than China.”
Calls to the media department of the National Development and Reform Commission, the lead government agency coordinating the country’s new-energy vehicle policy, went unanswered. The Beijing and Shanghai municipal governments didn’t immediately respond to faxed requests for comment on their criteria for choosing providers of new-energy vehicles.
Missing targets
China has lagged behind its own target to have 5 million alternative energy-powered automobiles by 2020 because of high prices of battery-powered models, concerns over safety and a lack of charging stations. Local governments provide matching subsidies on top of incentives by central government of as much as 60,000 yuan toward the purchase of an all-electric passenger vehicle and as much as 500,000 yuan for an electric bus.
Under a new program unveiled in September, the central government will focus on promoting the use of new-energy vehicles in the three regions anchored by Beijing, Shanghai and Guangzhou using subsidies through 2015, according to a joint statement by the NDRC, finance, science and industry ministries.
Despite the roadblocks, Li said she expects electric-vehicle sales to finally take off this year for BYD after sluggish demand in the past few years.
“The public has moved from doubt to recognition to adoption,” Li said. “2014 will be the year we start to harvest the fruits of our labor.”
