Gregory Speicher's List: BYD

• BYD is an amazing company. It was started by a chemist and government researcher named Wang Chuan-Fu in 1995 (same year as Yahoo) to make rechargeable batteries, which it learned to do very well. Within a few years, BYD’s batteries were cheaper and just as reliable as those made by industry giants ony and Sanyo. Then Mr. Wang, as he’s known, got into the automobile business by buying a failing state-owned carmaker. BYD’s conventional gas-powered cars are selling well these days in China, and his electric plug-in electric model looks like it will come to market with a longer range and a lower sticker price than the new Toyota Prius much-hyped Chevy Volt. As if that were not enough, I’m hearing now that BYD is on the verge of a breakthrough in the solar power business and that the company has big plans to make rechargeable batteries at a utility scale to store energy from intermittent, renewable sources like wind and solar. Today, BYD employes 130,000 people in 11 factories, either in China and one each in India, Hungary and Rumania.

• Here are three reasons why I think BYD will become an important company in the not too distant future.

   

  1. BYD’s engineering prowess. Depending on whether or not you count trainees, BYD employs between 10,000 and 17,000 engineers and it’s constantly recruiting the best graduates from China’s engineering and technical schools. The Shenzhen manufacturing region, where the company is headquartered, is known for cheap unskilled labor, but BYD’s competitive advantage derives from its cheap skilled labor. “They are the top of the top,” Mr. Wang told me, when I visited BYD last year. This is a company that has already invented new processes (the way it makes batteries) and products (the battery in its electric car) and it is focused on innovation. Innovation appears to be Mr. Wang’s personal passion.
• 2. BYD’s forward-thinking management. David Sokol is a student of management—he wrote a little book on the subject called “Pleased But Not Satisfied”—and he was impressed with Mr. Wang’s thoughtful and purposeful approach to building his company. So was I. Not many entrepreneurs evolve into effective leaders of global companies with 100,000 or more employees. This fact didn’t make the story, but I was interested to learn that BYD is working with the Hong Kong outpost of Business for Social Responsibility. Unlike some of its domestic competitors, BYD wants to adopt best practices in health and safety as well as find ways to empower its people to improve the company. Jeremy Prepscius, the Asia director for BSR, told me: “What makes them unique is that you have a Chinese company, a big one, that recognizes the value of continuing to evolve its internal culture, and recognizes that it is not just a top-down command-and-control culture…They are somewhere between an old state-owned Chinese enterprise and a modern Japanese company like Toyota.” Sokol told me that Mr. Wang seeks his ideas and criticism whenever they meet. Perhaps surprisingly, many CEOs have the confidence to act that way. On the downside, it’s hard to know whether BYD has a strong bench of managers behind Mr. Wang.

• 3. China’s commitment to clean energy. Much as I admire the Obama administration’s energy and environment team, there’s no way that the U.S. government is going to help U.S. car companies and battery makers as much as the Chinese government is going to help BYD. As Keith Bradsher of The New York Times reported in a page-one story earlier this month:

   

  Chinese leaders have adopted a plan aimed at turning the country into one of the leading producers of hybrid and all-electric vehicles within three years, and making it the world leader in electric cars and buses after that.

   

  The government will make direct grants to automakers (as we do, of course) and also provide “subsidies of up to $8,800 are being offered to taxi fleets and local government agencies in 13 Chinese cities for each hybrid or all-electric vehicle they purchase.”

2 more annotations...

• A small building complex powered by rooftop solar panels and eight windmills is Wang Chuanfu's favorite venue for meeting fellow executives at BYD.

  The two-villa compound at BYD's Pingshan base in eastern Shenzhen is known as the company's Future Village – a zero-emissions model for independent electricity production and storage.

  The village is also a model for a key venture tied to BYD's future business plans. Power generated on site from the sun and wind is stored in a unique, BYD-made power-saving unit slightly larger than a refrigerator. All of its solar panels, wind turbines, water purifiers and silicon storage cells were built by BYD as well.

  Future Village points to the fact that BYD, under chairman and founder Wang, is quickly moving beyond batteries, IT equipment and carmaking. The company is now using its successful, low-cost, vertically integrated enterprise model for a major foray into renewable energy.
• Future Village suggests the real money will be in energy storage units, according to the general manager of Beijing-based research firm Dragonomics, Arthur Kroeber.

  Not coincidentally, Buffett's MidAmerican Energy Holdings has started using BYD's battery package system at an energy storage station in Oregon.

  Kroeber thinks BYD's core competitiveness lies in batteries rather than automobiles.