.

SOM 5370 Technology and Innovation Management Fall 2013

Project BYD Auto Cliff Cheung Jason Yeung Justin Allen

Wonsky Chan Helen Ching Joseph Man Matthew Tam
. 2. BYD 2 http://www.youtube.com/watch?v=OxMVRta1gaw
. 3. Warren Buffett Invests in BYD In 2008, Buffett invested

US$230 million to buy BYD Auto at HK$8 per share. In

the following year, the price increased to HK$80 per share.
What attracts Buffett?
http://www.marketwatch.com/story/warren-buffett-looksto-electric-car-in-byd-stake 3
. 4. THE STORY OF BUILD YOUR DREAMS 4
. 5. Technology Based and Innovation Oriented The

manufacturing of cars starts with manufacturing of

talents, then tools, and then cars. -- Chuanfu Wang,
Founder and CEO of BYD Wang announced that BYD aims
to be the number 1 automaker in China by 2015 and
number 1 in the world by 2025, reflecting Wang's great
ambition for the company. 5
www.wikinvest.com/stock/BYD_Company_(HKG:1211)
. 6. COMPANY BACKGROUND BYD Business BYD POWER 6

http://www.byd.com.cn/views/home/indexe.htm BYD AUTO

BYD ENERGY
. 7. Business Performance of BYD BYD Annual Report 2012

Automobile is half of the revenue

http://www.byd.com.cn/views/home/indexe.htm Battery
revenue is ~10% 7
http://bydit.com/doce/investor/CorporateReport/AnnualRep
ort/AnnualReport2012/
. 8. China Policy Circular of the State Council on Printing and

Issuing the National Plan for Fostering Capacities for

Innovation During the Twelfth FiveYear Period (

 )
Government Policy to support & subsidize the industry.
Direct Government funding for research into hybrid
electric vehicles. Subsidies of US$8,800 per alternative
energy vehicle purchased by bus companies, taxi
operators and state agencies. Catch the Wave!!
. 9. The BYD Geography They are building up their international

footprint. Revenue growth in US, Europe and India in

2012 vs 2011 xxx 9
. 10. BYD Products M6 - The first multi-purpose vehicle Variety

F3DM - the worlds first dual mode electric car Fuel

Vehicles Hybrid eCars eTaxi eBus E6 - The
worlds first pure EV taxis 10 K9 - pure electric bus
. 11. Good Enough Quality Acceptable appearance, quality

and performance Specification Top speed: Quick Charge

50% capacity in 10 minutes Range 11 100 mph (160 km/h)
122 miles (200 km)
. 12. SUCCESS FACTORS 12
. 13. Technological & Process Innovations Technology

Innovation Worlds first manufacturer of mass-produced

plug-in hybrid vehicles using IronPhosphate rechargeable
battery: BYD F3DM. Proprietary technology = fuelefficiency gains Automotive Production Innovation Labour
intensive production rather than capital intensive
Manufacturing process decomposed into simple jobs =
high-quality components Benefit: cost-savings due to large
inexpensive Chinese labour pool 13
. 14. Strategic Innovations Alliances: Partnerships & Contracts

= Network Effects Allow Trial Usage for Renters Car rental

market June 2010 BYD Auto signed agreement to sell cars
to Budget Rent a-Car in Bahrain. Experiment and Feedback

Airport Transport BYD supplies Schiphol Airport a new fleet

of electric buses to transfer passengers Enhances Image
14 Reduces Maintenance Costs Improves Air Quality
. 15. Strategic Innovations Alliances: Partnerships & Contracts

= Network Effects Public Transport: Buses Transport

Authorities onboard. Los Angeles: BYD Supplies fleet of 25
buses as part of Transport Authoritys Clean Air Bus
Project. Similar ventures across Europe & Americas:
Poland, Finland, Denmark, Spain Canada, US, Uruguay
Israel 15
. 16. Strategic Innovations Alliances: Partnerships & Contracts

= Network Effects Public Transport: Taxi Shenzhen Taxi

fleet & Trials in Hong Kong of E6 car 16
. 17. Strategic Innovations Alliances: Joint Ventures = Network

Effects 50:50 JV to make electric buses (K9) for Bulgarian

energy company: Bulmineral. BYDs first overseas JV. 50:50
JV. BYD Auto and Daimler AG: Shenzhen BYD Daimler New
Technology Co., Ltd 17
. 18. Strategic Innovations Certification Public Transport:

European Certification (Promotes same-side positive

effects) Granted Whole Vehicle Type-Approval European
coverage. Does not require certification from individual
member countries. 18
. 19. Platform Characteristics Product variety - manufacturing

and selling of a wide range of their own vehicle lines

Consumers and Public / Private Transport Corporations
Infrastructure (e.g. charging station) Costs and revenues
on both sides of the platform Whole product solution (1)
Addresses a new market (luxury cars) (2) Addresses an
existing market (Private consumers) (3) Addresses a resegmented market (eTaxi & eBus) 19

. 20. Network Effects Strong Same-side Network Effects Easy to

provide infrastructure to Airports and Bus / Taxi Depots

Weak Cross-side network effects Private consumer market
is lagging in comparison due to the lack of infrastructure
Catch 22 problem for BYD Produce EVs or Charging
Stations first - Which will trigger the network effect? High
switching costs to change from gasoline vehicles
Infrastructure & Ecosystem are Key 20
. 21. Complementary Services Evidence of Ecosystem? BYD

Charge Station Mobile Apps Distance Availability

https://itunes.apple.com/us/app/byd-charge/id557491810?
mt=8 21
. 22. Challenges to Overcome Lack of Government Support

BUT highly dependent on Government Racing to form

alliances to lock in partners to beat the competition
Potentially disruptive innovators: Online Electric Vehicles,
hydrogen fuel cell vehicles, solar power vehicles Highly
dependent on providing supporting infrastructure who
else will? Charging stations Production facilities for global
market Battery and car service centres Critical for
consumer adoption 22
. 23. SUGGESTIONS FOR BYD THE FUTURE 23
. 24. First and Fast Mover BYD is among the first to R&D electric

vehicles Move FAST - Already signed agreement with

foreign organizations and governments Have network and
connections not only in China but oversea countries 24
. 25. Bridging Early Adopters and Mainstream Segments BYD

has strong incentive to race for scale to win through

Stronger network effects Higher switching costs
Infrastructure is key to adoption Locking in marquee
car manufacturers through JVs is key to network effects.

Needs to assess consumers (money-side) sensitivity to

quality and cost.
http://www.chinaanalysis.com/opinion/2011/04/the-bydway-of-production-emerging-but-incomplete/ 25
. 26. 12-Ways of Innovation Offerings Platform Success

Innovation eBus, eTaxi EV from Battery and Auto products

Subsidize and provide charge stations in HK EV for green
vehicles Recommendation eTruck, eVan Evolve high power
eBus to commercial vehicle Financial package of Charger
for domestic EV driver Safety, Battery Weight, Duration,
Speed Charge, Battery Swap, Battery Cost Customer
Experience Value Capture Success Innovation Cloud Keys,
Charge Station Apps Capture Government Subsidies
Recommendation Alliance with Internet giants - Supply
Chain Success Innovation Recommendation Success
Innovation Recommendation 26 Source parts from all
supplier Battery as own products R&D with Universities
Crowdsourcing R&D, C&D China as a stepping stone for
entering the World; LA plant for US market Further
commercial vehicle - Innovation being executed currently
by BYD; - Recommend innovation activity to BYD;
Organization Processes Labor Intensive in China
Process Decomposition Office at different regions
Automate production process in LA and Europe Presence
Customers Solutions - Networking Commercial vehicle,
Selling to Government Align with government for building
infrastructure Brand JV, Denza Airport eBus eTaxi
Formular-e
. 27. Improvement Safety & Quality Quality and Safety

Three BYD e6 passengers killed in a taxi car clashed in

May 2012 at Shenzhen.