BYD Auto - The Innovation of the Electronic Vehical Business


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An HKUST group project about the Innovation Management of BYD on the Electronic Vehicle business.

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BYD Auto - The Innovation of the Electronic Vehical Business

  1. 1. ISOM 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. 2. BYD 2
  3. 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? 3
  5. 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
  7. 7. Business Performance of BYD BYD Annual Report 2012  Automobile is half of the revenue  Battery revenue is ~10% 7
  8. 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 (《國務院關於印發「十二五」國家自主創新能力建 設規劃的通知》)” • 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. 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. 10. BYD Products M6 - The first multi-purpose vehicle Variety F3DM - the world’s first dual mode electric car  Fuel Vehicles  Hybrid  eCars  eTaxi  eBus E6 - The world’s first pure EV taxis 10 K9 - pure electric bus
  11. 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. 12. SUCCESS FACTORS 12
  13. 13. Technological & Process Innovations Technology Innovation World’s first manufacturer of mass-produced plug-in hybrid vehicles using IronPhosphate rechargeable battery: BYD F3DM. Proprietary technology = fuel-efficiency 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. 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. 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 Authority’s Clean Air Bus Project. Similar ventures across Europe & Americas: Poland, Finland, Denmark, Spain Canada, US, Uruguay Israel 15
  16. 16. Strategic Innovations Alliances: Partnerships & Contracts = Network Effects Public Transport: Taxi Shenzhen Taxi fleet & Trials in Hong Kong of E6 car 16
  17. 17. Strategic Innovations Alliances: Joint Ventures = Network Effects 50:50 JV to make electric buses (K9) for Bulgarian energy company: Bulmineral. BYD’s first overseas JV. 50:50 JV. BYD Auto and Daimler AG: Shenzhen BYD Daimler New Technology Co., Ltd 17
  18. 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. 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 re-segmented market (eTaxi & eBus) 19
  20. 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. 21. Complementary Services – Evidence of Ecosystem? BYD Charge Station Mobile Apps  Distance  Availability 21
  22. 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
  24. 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. 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. 25
  26. 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. 27. Improvement – Safety & Quality Quality and Safety  Three BYD e6 passengers killed in a taxi car clashed in May 2012 at Shenzhen.  Safety concerns on electronic vehicles. 27
  28. 28. Improvement – Battery Performance Different geographic needs and concerns  Brussel traffic department STIP declined to buy BYD electronic bus in Mar2013. " The electric buses have beautiful technology , but it's pretty too premature to say that we will switch on electrical equipment as the autonomy of the battery is not sufficient on the Brussels slopes and cobbles to ride around. “ 28
  29. 29. Continuous Innovation Battery Technology Trends  Cheaper  Smaller & Lighter  Fast Charging  High Power 29
  30. 30. Continuous Innovation BYD should try different innovation in their products and test the acceptance level of the market.  Self charge e-Bus  Wireless inductive charging 30
  31. 31. Continuous Innovation Battery Swapping  Quick but costly  How BYD can acquire and use this technology? 31
  32. 32. R&D and Crowdsourcing  BYD already joint R&D with universities in Beijing and Shanghai.  They have their own team.  Crowdsourcing Competition  Technology breakthrough  Recharge Time  Energy Density  Customer experience, convenience, usability and comfort  Connect & Development (C&D) 32
  33. 33. Prepare for the Disruptive Innovation  Solar Electric Vehicle  Hydrogen fuel-cell Vehicle  Ethanol powered Vehicle  Nitrogen  Self-charging vehicles  May not be as popular as electric auto at the moment  Market is not big enough  Not yet BYD’s business?  Will be good enough one day and overtake the market?  Which one shall R&D bet on?  Crowdsourcing competition 33
  34. 34. Subsidise the platform Subsidise the charging stations and provide charge meters to make them as popular as petrol stations.  BYD built 37 charge stations in HK when launching eTaxi in 2013.  Park & charge  Car Park and Shopping Mall  Government Street Park-meters  Residential Charging Station Manufacturers 34
  35. 35. Financing Home Charger Tailored Financial Package  Grow the buyer side – subsidies the car buyers "We're making it easier, we're making it convenient, we're making it part of the way we live." 35
  36. 36. Marketing and Sports Events  Promote Brand  Participate the Formula E or even sponsor a team  Globally promote brand image  R&D and test high performance e-racing technology’s adoptability by daily household or commercial usage 36
  37. 37. New Market Segment  Commercial Vehicle  E.g Trucks, Vans  Blue ocean of EV  Ride on the eBus technology 37
  38. 38. Huge Potential Less Competition  Comparing Car and Truck Market  3.3% of truck market is not small.  Less competition than car market Total Truck Unit Sales: 125 K Estimation : 125K x 3.3% = 4.1 K 38
  39. 39. Cost Effectiveness  Manufacturing Plant in California  80% made in US as policy for US bid  More costly if labour intensive the same way as in China  R&D to automate and improve process 39
  40. 40. BRIGHT FUTURE? 40
  41. 41. Market Growth Raising Sales in 2012  High competition without dominating player  Market is growing.  EV grows even faster than HEV 41
  42. 42. The ancestor of Electronic Vehicle  Electric Vehicle in 1904  Not commercialize d due to cost  Not as price competitive as the Ford fuel vehicle All depending on  Marketing  Platform  Grow the Demand It is all about business! 42
  43. 43. Q&A 43
  44. 44. Appendix : Government & Platform • Cheaper vehicle tax and other monetary incentives for consumers that switch to hybrid cars • Support in the form of backing the required infrastructure for charging electric vehicles • Boosting appeal by promoting the monetary incentives for consumer adoption of hybrid electric • Taxing oil corporations so that petrol prices increase and thus, consumer demand for hybrid vehicles also increases 44