Date
15 December 2017

BYD’s sweet homecoming and how it’s happening

It looks like Shenzhen-based electric car maker BYD Co. Ltd. (01211.HK) is off to a good start this year thanks to its Qin {秦} hybrid sedan.

Since its debut at the end of last year, the car has been racking up impressive sales, resulting in a rare shortage and creating pent-up demand. In January, it was the best selling new energy car in the country.

With almost 8,000 orders for the mid-sized vehicle, BYD’s assembly lines have been humming around the clock.

That’s not all.

In February, BYD won orders for its e-bus from Dalian, Nanjing and five other local governments. Between them, the two cities will buy 2,450 e-buses, media reports say.

Dalian wants half of its new taxis to be emission-free. Nanjing is planning a taxi company with a fleet of 400 BYD e6s.

BYD is driving back into the domestic market with a vengeance after years of battling regional protectionism. Its frontrunner status as a developer of e-vehicles did little to boost domestic sales, forcing it to turn to overseas markets where it finally found success.

BYD chief Wang Chuanfu {王傳福} made sure that success filtered back to China and he lost no time leveraging a change of heart by local authorities.  

Backed by new money, the carmaker will build plants in Dalian and Nanjing to assemble e-buses in exchange for orders.

Also, the company has a 51 percent stake in a joint venture with Guangzhou Automobile Group Co. Ltd. (02238.HK) to make e-buses in the affluent coastal city.

BYD is benefiting from the central government’s increased efforts to clean up the filthy air after smog blanketed large parts of China earlier this year.

The initiative has helped fuel sales to private buyers, with Qin and the e6 eligible for subsidies from the municipal governments in Beijing and Shanghai.

These subsidies, with matching contribution from the central government, range from 63,000 yuan (US$10,189) to 108,000 yuan. In addition, BYD buyers are exempt from the car license plate lottery, meaning their allocation is assured, state news agency Xinhua reports.

In the next three years, Beijing is expected to set aside a quarter of its new car plate quota — 170,000 out of 600,000 — for emission-free vehicles. Moreover, the central government’s subsidy scheme will be extended to 2015.

The subsidies differ from one car brand to another but homegrown cars have priority. In all cases, car buyers come away with substantial savings.

For instance, Qin sells for 189,800 yuan to 209,800 yuan but the buyer ends up paying just 119,800 yuan to 139,800 yuan in Shenzhen after subsidies. That makes Qin half as expensive as a Toyota Prius or a hybrid Camry.

One wonders how much more Wang will have to spend in his “money for market” approach. BYD will be on the hook for 3 billion yuan in its Nanjing plant alone, but as long as it brings in sufficient orders, it will be a worthwhile investment.

BYD had operating revenue of nearly 53 billion yuan last year, up more than 12 percent. 

Wang calls this stage of BYD’s corporate fortunes an inflection point. Can a full-throttled run toward market domination be far behind?

– Contact the writer at [email protected]

RA

 

EJ Insight writer

EJI Weekly Newsletter

Please click here to unsubscribe