BYD Company Limited: A Case Review

By: Atty. Christine P. Carpio-Aldeguer, DBA

Graduate School of Management, Pamantasan ng Lungsod ng Maynila

March 31, 2010


Introduction

BYD Company Limited (HKG: 1211) is engaged in two core businesses: the IT
parts business, which consists of rechargeable battery and handset component production,
and the automotive manufacturing business. BYD had revenues of 26.8 billion RMB
(US$ 3.92 billion) in 2008.
Since its founding in 1995, BYD has grown to become the second largest
producer of rechargeable batteries by volume in the world after Sanyo at 285 million
units in 2008.
1
The company's success in the rechargeable battery business has been its
unique business model. Instead of using fully automated production lines like its
competitors in Japan and Korea to manufacture batteries, BYD has implemented a
manufacturing line that breaks down the production process into simple jobs performed
by workers, thereby replacing a conventionally capital intensive business model into a
labor intensive one, which is cost effective for the company due to the availability of
cheap labor in mainland China. The company's sales of rechargeable batteries and
handset components increased 10.7% to 18.1 billion RMB (US$ 2.65 billion) in 2008.
2

BYD was founded by Wang Chuan-Fu, a former Chemist and government
researcher, in Shenzhen, China in the year 1995. Wang's business model for BYD was
to make use of qualified engineers and the large inexpensive Chinese labor pool to make
quality components at low cost. This business model initially employed a labor intensive
strategy that was and continually is supplemented by the deployment of self-designed and
self-produced equipment in the production line. In 2003, BYD expanded operations to
include automobile production, which has become the company' s fastest growing

1
-- CLSA Analyst Report for BYD 17 Sept 2009 Selected Financial Data.
2
-- BYD Annual Report 2008 Selected Financial Data.
2
segment, averaging 140% growth in sales from 2005 to 2008.

In August 2007, 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.
BYD's operations span across nine production bases in China with the largest
sites located in Guangdong, Beijing, Shanxi and Shanghai. The company employs over
130,000 people with branches and offices established in the Americas, Europe, Japan,
South Korea, India, Taiwan, Hong Kong and other regions.

All production work is
performed in BYD's Chinese locations. The company's branches located outside of China
are primarily responsible for sales and marketing of its products.

The company has three
business segments: battery and related products, mobile handset components, and
automobiles and related products.
BYD has gained global recognition from a substantial investment made by
Warren Buffet's Berkshire Hathaway (BRK) subsidiary MidAmerican Energy Holdings
Co. of $1.8 billion in 2008. The investment gave Berkshire Hathaway a 10.98%
shareholding of BYD

and contributed to a boost in BYD's stock price from HK$8 per
share in September 2008 to a max of HK$88.40 in October 2009.
A case article entitled Warren Buffet Takes Charge
3
has been released by
Fortune Magazine last April 13, 2009. This article discusses in detail why Warran Buffet
invested 10% stake at BYD for a quarter of a billion dollars. This article shall be the
proponents subject of review.






3
-- Marc Gunther, Warren Buffet Takes Charge, Fortune CNN.com, published on April 13, 2009.
3
Facts of the Case
In the early year of 2008, Charlie Munger, Warren Buffets friend and a long time
partner of Bershire Hathaway suggested to Buffet that they invest in BYD, an
obscure Chinese battery, mobile phone, and electric car company.
According to Munger, BYDs entrepreneur Wang-Chuan Fu is a combination of
Thomas Edison and Jack Welch - something like Edison in solving technical
problems, and something like Welch in getting done what he needs to do.
David Sokol, chairman of a Berkshire-owned utility company known as
MidAmerican Energy, went to China to visit BYD.
In mid September 2008, an announcement was made where Berkshire Hathaway
bought 10% of BYD for $230 million
Berkshire Hathaway thinks BYD has a shot at becoming the world's largest
automaker, primarily by selling electric cars, as well as a leader in the fast-
growing solar power industry.
Wang Chuan-Fu started BYD (the letters are the initials of the company's
Chinese name) in 1995 in Shenzhen, China. A chemist and government
researcher, Wang raised some $300,000 from relatives, rented about 2,000 square
meters of space, and set out to manufacture rechargeable batteries to compete
with imports from Sony and Sanyo.
In the year 2000, BYD had become one of the world's largest manufacturers of
cellphone batteries. The company went on to design and manufacture mobile-
phone handsets and parts for Motorola, Nokia, Sony Ericsson, and Samsung.
Wang entered the automobile business in 2003 by buying a Chinese state-owned
car company that was defunct. Wang knew very little about making cars but
proved to be a quick study. In October 2003, a BYD sedan called the F3 became
the bestselling sedan in China, topping well-known brands like the Volkswagen
Jetta and Toyota Corolla.
BYD has also begun selling a plug- in electric car with a backup gasoline engine, a
move putting it ahead of GM, Nissan, and Toyota. BYD's plug- in, called the
F3DM (for "dual mode"), goes farther on a single charge - 62 miles - than other
4
electric vehicles and sells for about $22,000, less than the plug- in Prius and much-
hyped Chevy Volt.
Today BYD employs 130,000 people in 11 factories, eight in China and one each
in India, Hungary, and Romania.
BYDs U.S. operations are small - about 20 people work in a sales and marketing
outpost in Elk Grove Village, Ill., near Motorola, and another 20 or so work in
San Francisco, not far from Apple. BYD makes about 80% of Motorola's RAZR
handsets, as well as batteries for iPods and iPhones and low-cost computers,
including the model distributed by Nicholas Negroponte' s One Laptop per Child
nonprofit based in Cambridge, Massachussettes. Revenues, which have grown
by about 45% annually during the past five years, reached $4 billion in 2008.
Wang wanted to be in business with Buffett for two reasons: to enhance the
brand of BYD and open doors in the U.S.. However, Wang would not let go of
more than 10% of BYD's stock.
By 2002, BYD had become one of the top four manufacturers worldwide - and
the largest Chinese manufacturer - in each of the three rechargeable battery
technologies (Li-Ion, NiCad, and NiMH), according to a Harvard Business
School case study of the company. Wang stresses that BYD, unlike Sony and
Sanyo, has never faced a recall of its batteries.
BYD can afford to hire skilled engineers because their salaries are only about
$600 to $700 a month; they also get subsidized housing in company-owned
apartment complexes and low-cost meals in BYD canteens and basically
breathing, eating, thinking, and working at the company 24/7.
BYD stands for Build Your Dreams. In order to sustain its lead, BYD will
never rest and is always open for improvement.



5
Problem Statement
BYDs Chairman and entrepreneur Wang-Chuan Fu intends to penetrate the U.S.
market in terms of its sale of autmobile, with emphasis of introducing its plug- in hybrid
electric vehicle (F3DM Dual mode) and its all-electric vehicle (E6). Hence, Wang
agreed for Warren Buffet to invest 10% in its company. This case article review
primarily aims to provide solutions on how BYD will penetrate and to create brand
awareness to the U.S. market, with emphasis of introducing its plug- in hybrid electric
vehicle and all-electric vehicle models.
Specifically, it seeks to answer the following questions:
1) What is the current market situation in the United States in terms of:
1.1 Market share of existing automobile industry
1.2 Sales of private vehicles
1.3 Market share of plug- in hybrid electric vehicles and all-electric
vehicles
1.4 Sales of plug- in hybrid electric vehicles and all-electric vehicles
2) What are the different problems that may be encountered by the company
BYD in penetrating the U.S. Market?
2.1. sale of its plug- in hybrid electric vehicle (F3DM dual mode)
2.2. sale of its all-electric vehicle (E6)
3) What are the different market development strategies that may be employed
by BYD in order to penetrate the U.S. Market?
3.1. plug- in hybrid electric vehicle (F3DM dual mode)
3.2. all-electric vehicle (E6)
4) What conclusions and recommendation which may be derived from the case
article review?
6

Statement of the Objectives
The proponent intends to achieve the following objectives for this case article
review:
1) Create brand awareness to the U.S. market through niche marketing.
2) Within the year 2012, BYD Automobile will increase visibility in selected
areas of the United States, particularly the state of California


Areas of Consideration
I. Opportunity and Issue Analysis (Internal Environment)
Background of BYD and Warren Buffet
In 1995, BYD was established.
In July 1996, BYD passed ISO9002 authentication.
In 1998, BYD EU Branch was set up.
In December 1998, BYD passed ISO9001 authentication.
In 1999, BYD USA Branch was set up.
In 2000, BYD became Motorolas first Chinese Li- ion battery supplier. He
studied Sony and Sanyo patents and took apart batteries to understand how they
were made, a "process that involved much trial and error," he says. (Sony and
Sanyo later sued BYD, unsuccessfully, for infringing on their patents.)
In 2000, BYD Japan Branch was established.
In 2001, BYD Korea Branch was established.
In 2002, BYD became Nokias first Chinese Li- ion battery supplier; in May 2002,
BYD passed QS-9000 authentication.
7
In July 2002, BYD Company Limited (1211-HK) was listed on the Hong Kong
Stock Exchange, creating the highest IPO price record among 54 H stocks. In the
same year, BYD ranked No.1 among Asia Money 2002 Best-Managed
Companies and was named 2002 Best Medium-Sized Enterprise IPO Project
by Asset Magazine. The successful IPO of BYD was an important landmark in
both Asian and global financial markets.
In September 2002, Shenzhen BYD Li- Ion Company Limited won Motorola
Excellent Supplier Award.
On January 22, 2003, BYD acquired Shaanxi Qinchuan Auto Company Limited
and established BYD Auto Company Limited and set up its Xian production base
after building a new plant of 1 million m2 in the Xian Hi-tech Development
Zone.
In 2003, BYD acquired Beijing Jichi Car Module Company Limited (covering an
area of 200,000m2). In the same year, BYD set up its Shanghai BYD Industrial
Park (covering an area of 560,000m2) in Shanghai and moved its car sales
headquarters to Shenzhen, thereby developing a layout to service the entire
country: east Shanghai, south Shenzhen, west Xian, and north Beijing.
On April 16, 2005, BYD Auto announced the formal offline of its first new car,
F3, in Xian. At the same time, a new production base with a capacity of 200,000
units per year was formally established.
From April 2005 to February 2006, BYD F3 won 68 various awards within 10
months, including New Car Award, Best Popularity Award, and Most
Expectable Car in the Shanghai International Auto Show, as well as the most
valued Best Price-Performance Car Award in the 2005 Chinacars Annual
Billboard.
In June 2006, BYDs pure electric carthe F3e--was successfully developed.
Powered by Fe-batteries using ET-POWER technology, F3e realizes zero
pollution, zero emission and zero noise, with a range of up to 350km per charge,
thus symbolizing BYDs pure electricity vehicle technology reaching a leading
8
position in the world.
In 2006, Ukraine started to import BYD car products in large quantities. The first
batch of 200 F3 cars represented the first time that Chinese cars have ever been
imported to the Ukrainian market.
BYD Auto participated in the Beijing International Auto Show in 2006 with the
first ever Chinese hard-top convertible sports coupethe BYD F8; the worlds
first ET-Power carthe F3e; and BIVT technology engines that BYD researched
and developed independently. This powerful combination from BYD triggered a
great storm of excitement at the auto show. On November 27, BYD F8 won the
Best Chinese New Car Award at this auto show.
In September 2006, BYD Micro electronics passed Nokia MOSFET supplier
authentication.
In January 2007, BYD F3 sales quantity exceeded 10,000 units per month,
representing for the first time a Chinese car brand that has ever entered the
10,000 club with a single car model. In addition, the F3 became one of the four
giants in the medium-class car market (together with Elantra, Excelle, and
Family brands).
In April 2007, BYD F6 won Best (China) New Car Award, Best Shanghai
Vogue Award, and Best Car Design Award.
On July 30, 2007, BYD F3R was put on the Chinese market.
On June 18, 2007, the 100,000th F3 was produced in Xian, marking an
aggregated production quantity of 100,000 units of the medium- class model
within just 20 months starting in September, 2005. This also marked a sales
record (100,000 units) among national independent car brands (within the shortest
time on record).
On August 9, 2007, BYD Auto held the BYD Auto Shenzhen Modern Production
Base Completion & F6 Offline Ceremony in Shenzhen, symbolizing BYD
Autos strategy to enter the medium- high-class car market being put into practice.
During the ceremony, BYD Group President Wang Chuanfu announced two major
9
goals for the group that shocked the automobile industry and the media world:
become No.1 in China in 2015 and become No.1 in the world in 2025.
Warren Buffet is known as the investor with 'the Midas Touch'. Buffet is the
most successful investor alive -- the only member among the Forbes' list of the
world's richest people to have earned his fortune entirely through investing. He
is the primary shareholder, chairman and CEO of Berkshire Hathaway. He is
consistently ranked among the world's wealthiest people and currently the third
wealthiest person in the world as of 2010
Human Resource Advantage and Business Model at BYD
In place of the robotic arms used on Japanese assembly lines, which cost
$100,000 or more apiece, BYD actually cut costs by hiring hundreds, then thousands, of
people. To control quality, BYD broke every job down into basic tasks and applied
strict testing protocols. Deploying the armies of laborers at BYD is an officer corps of
managers and engineers who invent and design the products. Today the company
employs about 10,000 engineers who have graduated from the company's training
programs - some 40% of those who enter either drop out or are dismissed - and another
7,000 new college graduates are being trained. Wang says the engineers come from
China's best schools. "In China, people of my generation put work first and life second,"
says the CEO Wang, whose wife takes responsibility for raising their two children. His
engineers investigate a wide array of technologies, from automobile air-conditioning
systems that can run on batteries to the design of solar-powered streetlights. Unlike most
automakers, BYD manufactures nearly all its cars by itself - not just the engines and body
but air conditioning, lamps, seatbelts, airbags, and electronics.
The company itself is frugal. Until recently, executives always flew coach. The
last time BYD executives traveled to the Detroit auto show, they rented a suburban house
to save the cost of hotel rooms.

10
Leadership style
Transformational leaders are those who inspire followers to transcend their own-
self- interests and who are capable of having a profound and extraordinary effect on
followers. BYDs entrepreneur Wang-Chuan Fu can be best described as a
transformational leader.
To better understand the leadership style of Wang-Chuan Fu, let us describe him
applying John Maxwells 21 Irrefutable Laws of Leadership. We shall describe Wang
by discussing which of the 21 Irrefutable Laws of Leadership is applicable
The Law of Solid Ground
In this principle, trust is the foundation of leadership. To build trust, a leader
must exemplify competence, connection and character. Character makes trust possible,
and trust makes leadership possible. In the Law of Solid Ground, a leader puts what is
best for his followers and the organization ahead of his personal agenda.
Shortly after BYD went public, Wang did something extraordinary: He took
approximately 15% of his holdings in BYD and distributed the shares to about 20 other
executives and engineers at the company. He still owns roughly 28% of the shares,
worth about $1 billion.
The Law of Buy-in
People do not at first follow worthy causes. They follow worthy leaders who
promote worthwhile causes. In this principle, people buy into the leaders, then the
vision.
This principle was utilized by Wang in order for Warren Buffet to buy a 10%
stake at BYD. One of the rules of Warren Buffet is not to invest in something which
you do not understand. Buffett may not understand batteries or cars, or Mandarin for
that matter. Drive, which enticed Buffet to invest in BYD through its leader, is
something that needs no translation.
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The Law of Priorities
Wang leads on a worldwide scale. With his strong leadership and ability to
focus, he knew that the greatest success comes only when you focus your people on what
really matters. "They're basically breathing, eating, thinking, and working at the
company 24/7," says a U.S. executive who has studied BYD.
The companys attention to costs is one reason that BYD has made money
consistently even as it has expanded into new businesses. Each of BYD's business units
- batteries, mobile-phone components, and autos - was profitable in 2008, albeit on a
small scale. Overall, net profits were around $187 million. BYD, which is traded on
the Hong Kong exchange, has a market value of about $3.8 billion. That is less than Ford
($7 billion at the beginning of April), but more than General Motors ($1.3 billion).
In addition. Wang typically works until 11 p.m. or midnight, five or six days a
week. What he really learned ever since childhood is to put work first and life second.
The Law of Sacrifice
Leadership means setting an example and Wang certainly does not live a very
lavish lifestyle. He was paid about $265,000 in 2008, and he lives in a BYD-owned
apartment complex with other engineers. His only indulgences are a Mercedes and a
Lexus, and they have a practical purpose: Wang takes their engines apart to see how they
work.

Technology / Research and Development
BYDs engineers investigate a wide array of technologies, from automobile air-
conditioning systems that can run on batteries to the design of solar-powered streetlights.
Unlike most automakers, BYD manufactures nearly all its cars by itself - not just the
engines and body but air conditioning, lamps, seatbelts, airbags, and electronics. For
12
Wang, he owns a Lexus and a Mercedes Benz all for a practical purpose: he takes their
engines apart to see how they work.
By reason of its concentration on research and development, the company has
already developed a nontoxic electrolyte fluid with the goal of making all its
manufactured batteries 100% recyclable. Currently BYD will be using lithium ion
phosphate battery for its F3DM and E6 models which BYD claims that is it a major
breakthrough.
Currently, BYD researchers are on to their next big idea, a product they call a
Home Clean Power Solution. It is essentially a set of rooftop solar photovoltaic panels
with batteries built in to store power for use when the sun is not out, all to be designed
and manufactured by BYD.
BYD is built on technological know- how who will never rest to achieve a major
breakthrough.
Distinct Competitive Advantage
BYD has a proactive and visionary Chief Executive Officer, Wang Chuan-Fu
whose brilliance can be compared to Thomas Edison and management style which can be
compared to Jack Welch of General Electric.
Sustainable Competitive Advantage
BYD has an impeccable reputation for quality and innovation (being ranked as
8th most innovative company in the world by BusinessWeek and the 16th most
innovative company in the world by Fast Company) and with a rapid growth rate within
such a short period of time.
Penetration of BYDs automobiles in the U.S. Market
The main goal of BYD is to penetrate and create brand awarenes of its
automobiles in the U.S. market. In the year 2010, BYD plans to penetrate the U.S.
13
and introduce its electric vehicles, the hybrid F3DM dual mode and its all-electric E6
models.
BYDs all-electric vehicle E6 model

The BYD E6 pictured above is the model that is expected to go on sale to the
United States consumers in the year 2012 and BYD has models testing in the US at the
time of writing. The car itself is a 100% electric vehicle and is said to be capable of 200
miles on a single charge, there are some caveats though, the initial price is said to be in
the region of $40,000 USD which is a big price for an unknown chinese brand and
positions the E6 at a price point of over $10,000 USD more than the all electric Nissan
Leaf, the Toyota Prius, the Chevy Volt and the hybrid Hyundai Sonata.



14

BYDs dual mode F3DM

The F3DM (as photographed above) could go 63 miles on its battery or 360 miles
in hybrid mode with gasoline, with a top speed of 90 miles, and could accelerate from 0-
60 in 13.5 seconds. BYD said that the F3DMs electricity cost was about a quarter of the
cost of a comparable gasoline-powered car.
15


The above figure indicates the total revenues incurred by BYD in terms of its
current products being sold [.e. Automobiles (55%), handset components and assembly
services (33%), rechargeable batteries and related products (12%)] per region. In the
United States alone, BYD generated revenues amounting to 1,407,205 RMB
($206,065.00) in the year 2008. The United States scored the lowest in terms of revenues
for BYD because the latter has not yet offered automobiles in the United States.




16
BYD (Internal Strengths) Weight Rating Weighted
Score
Second largest manufacturer of rechargeable
batteries in the world (including U.S.)
0.10 4 0.40
Reputation for quality (battery manufacturing)
and innovation
0.15 4 0.60
Warren Buffet (most influential investor in the
world) owns 10% of the company
0.05 4 0.20
Proactive and visionary leadership /
Management Style
0.10 4 0.40
Growth rate 0.10 4 0.40
Technology / Research and Development 0.10 4 0.40

Internal Weaknesses Weight Rating Weighted
Score
A new entrant in the U.S. Market in terms of
sales in automobiles
0.20 1 0.20
Reputation for quality (automobile
manufacturing) for the U.S. Market.
0.20 1 0.20

Total (including strengths) 1.00 2.80
Using the IFE (Internal Factor Evaluation) Matrix, BYD has a total weighted
score of 2.80 indicating that the firm is above average in its overall internal strength.
However, there is a need for BYD to improve its weaknesses if it plans to become the
No. 1 automaker in the world by 2025.
II. Current Marketing Situation (External Environment)
Effects of the 2008-2010 automotive industry crisis in the United States
In the latter half of 2008, a global-scale recession began to affect the economy of
the United States. The impact of the recession contributed to declining automobile sales
and a widespread automotive industry crisis. There is intense debate regarding the
content and approach to a massive United States auto industry bailout and restructuring.
Such a bailout may involve financial and other concessions from a variety of
17
stakeholders, such as management, employees, labor unions, dealers, suppliers,
stockholders and bondholders.
Many note that the crisis occurred mainly as a result of bad business practices of
the Big Three U.S. automakers (namely Ford, GM and Chrysler). Analysts point out that
Asian companies that manufacture automobiles in the U.S. are not experiencing similar
problems.
4
A December 22, 2008 New York Times article stated, "For the most part, the
so-called auto transplants foreign-owned car companies with major operations in the
United States have deep pockets and ample credit, and they are not facing potential
bankruptcy like General Motors and Chrysler."
5

The US Big Three was first weakened by the substantially more expensive
automobile fuels
6
linked to the 2003-2008 oil crisis which, in particular, caused
customers to turn away from large sport utility vehicles (SUVs) and pickup trucks,
7
the
main market of the American "Big Three" (General Motors, Ford, and Chrysler). The
US automakers also suffered from considerably higher labor costs than their non-
unionized counterparts, including salaries, benefits, healthcare, and pensions.
8

The support given to General Motors and Chrysler by the Obama Administration
is widely unpopular, with an April Washington Post poll finding that 41% of Americans
approved of the actions.
9

In President Obamas joint address to Congress in 2009, Obama stated that:
"We will invest fifteen billion dollars in technologies like...more
efficient cars and trucks built right here in America. As for auto industry,
everyone recognizes that years of bad decision- making and global
recession have pushed our automakers to the brink. We should not, and
will not, protect them from their own bad practices. But we are committed

4
-- If You Like Michigan's Economy, You'll Love Obama's , Wall St. Journal, September 13, 2008;
Detroit: Same Old, Same Old, National Review, November 16, 2008.
5
-- Foreign Automakers in the U.S. Cut Back, The New York Times, December 22, 2008.
6
-- Uncertainty in U.S. auto industry puts pressure on suppliers, International Herald Tribune.
September 19, 2008. Retrieved 20 November 2008.
7
-- Gas prices put Detroit Big Three in crisis mode. Associated Press , June 1, 2008. Retrieved 20
November 2008.
8
-- Praet, Nicolas Van, "Caw Girds For War," Financial Post, Retrieved: January 12, 2009.
9
-- Byron York, "Will the GM bailout be Obama's tipping point?". Washington Examiner, June 1, 2009.
18
to the goal of a re-tooled, re- imagined auto industry that can compete and
win. Millions of jobs depend on it. Scores of communities depend on it.
And I believe the nation that invented the automobile cannot walk from
it."
10

Developments of the Electric Car Industry in the United States (2009)
The electric car industry was poised to take a giant leap forward. Brand new
start-ups as well as established automakers were jumping into the electric car, hybrid
retrofitting, and batterymaking industries. Funding for these projects continued to come
in, despite the troubled fortunes of the car industry in general in 2008 and 2009.
Large-scale transformation of the automotive industry from oil dependence to
reliance on electricity would require tremendous changes in manufacturing and
marketing. In addition, the success of the electric car depended on the construction of a
massive infrastructure of charging stations that would allow electric car owners to charge
or swap out their batteries. These charging stations could be simple boxes with electric
outlets located in peoples garages or on the street next to parking meters. They could
also be similar to gas stations with employees and service stations. Plugging into the
electricity grid meant that utility companies had to be partners as well, and in 2009 they
were just beginning to work with car companies, exploring ways to ensure that car
owners could get enough electricity at an affordable price. Another challenge was that
many people around the world, for example in China, lived in apartments without
garages, and so would be reliant on public charging stations.
Although it was unclear exactly what role the U.S. government would play, in
2008 it had begun talking about the energy crisis in earnest response to both skyrocketing
gasoline prices and a national mood that favored decreasing the U.S.s dependence on
foreign oil. These discussions included debates about offshore oil drilling, and included
plans for providing subsidies and other incentives for electric vehicle owners and
manufacturers. When President Barack Obama entered office in 2009, he made energy
independence one of his core issues, and his administration allocated billions of dollars

10
-- "Business | GM reports massive quarterly loss". BBC News. February 26, 2009,
http://news.bbc.co.uk/1/hi/business/7912544.stm. Retrieved May 1, 2009.
19
to promote electric vehicle manufacturing and development of advanced batteries for
those vehicles.
The Role of the U.S. Government in Shaping the Electric Car Industry in 2009
When he came into office, President Obama set a goal of having 1 million electric
cars on the road by 2015.
11
By September 2009, there were already multiple efforts
underway. The U.S. Department of Energy had a $25 billion direct loan program, called
the Advanced Technology Vehicle Manufacturing Loans Program, to develop electric-
powered cars and improve battery technology. Big recipients included Ford ($5.9
billion), Tesla Motors ($465 million), and Nissan (1.6 billion). The money for Japan-
based Nissan was allotted for building batteries and electric cars in Tennessee.
In addition, in August 2009, President Obama awarded $2.4 billion from the
American Recovery and Reinvestment Act to push forward electric car manufacturing in
the United States; $1.5 billion of that went to U.S.-based manufacturers to produce
batteries and battery components, and to expand battery recycling capacity; $500 million
went to U.S.-based manufacturers to produce electric drive components for vehicles,
including electric motors, power electronics, and other drive train components; $400
million was set aside for purchasing thousands of PHEVs and electric vehicles for test
fleets, and for installing electric charging infrastructure.
12
The grants were to cover 48
projects in over 20 states.
13

Recipients of this money included General Motors ($241 million) for their plug- in
hybrid the Volt; Compact Power, an affiliate of LG Chem ($151) for production of cells
for the Volt; Ford Motor Company ($30 million) and Chrysler ($70 million). The
administration also committed $11 billion to upgrade the nations power grid to prepare
for introduction of electric vehicles in the U.S., and allocated an additional $15 million to

11
-- Eric Mayne, Future Shock, Wards Autoworld, June 2009.
12
-- Depart ment of Energy press release, August 5, 2009,
http://www.energy.gov/news2009/print2009/ 7749.ht m
13
-- White House press release, President Obama Announces $2.4 Billion in Grants to Accelerate the
Manufacturing and Deployment of the Next Generat ion of U.S. Batteries and Electric Vehicles , August 5,
2009.
20
explore the purchase of alternative power train vehicles such as electric vehicles for the
General Services Administration fleet.
14

On the consumer side, government incentives existed for buying fuel-efficient
cars. As part of the American Recovery and Reinvestment Act, customers received a
$7,500 consumer tax credit for the purchase of an Electric vehicle or plug- in hybrid.
There were similar incentives in place for other alternative fuel vehicles, such as natural
gas or methanol, and for fuel cell vehicles.
15

The government also passed a cash for clunkers program in June 2009, which
provided government incentives of $3,500 to $4,500 to consumers who traded in older,
less fuel-efficient cars for new, more fuel-efficient ones. The program was extremely
popular, with the $1 billion allocated for the program running out within two months.
Congress subsequently allocated an additional $2 billion for the program. However,
there was no mandate in the cash for clunkers program that the new vehicles had to be
conventional or plug- in hybrids or electric vehicles. Therefore many observers felt that
the program, as it was implemented in 2009, was primarily a short-term economic
stimulus measure, rather than an effort to promote the electrification of cars.


National Program to substantially reduce greenhouse gas emissions for automobiles
and power plants.

On April 1, 2010, the Obama Administration issued its final regulations
establishing a unified national program to substantially reduce greenhouse gas emissions
and improve fuel economy from light-duty vehicles for model years 2012-2016 for the
United States. At the same time, California issued its amended greenhouse gas
regulations which provide that compliance with the national program will be deemed
compliance with the California standards. This national program is through the efforts
of the Environmental Protection Agency (EPA) EPA and the Department of
Transportations National Highway Safety Administration (NHTSA) that will

14
-- Eric Mayne, loc. cit.
15
-- Joseph Smith, Energy Saving Tax Breaks for the 2006 Tax Year, Locumlife, February 2006.
21
dramatically reduce greenhouse gas emissions and improve fuel economy for new cars
and trucks sold in the United States.
This National Program will apply to passenger cars, light-duty trucks, and
medium-duty passenger vehicles. They require these vehicles to meet an estimated
combined average emissions level of 250 grams of carbon dioxide per mile, equivalent to
35.5 miles per gallon (MPG) if the automobile industry were to meet this carbon dioxide
level solely through fuel economy improvements. Together, these standards will cut
greenhouse gas emissions by an estimated 960 million metric tons and 1.8 billion barrels
of oil over the lifetime of the vehicles sold under the program (model years 2012-2016).
The following automotive car companies and associations have signified their
intention to commit to the National Program:
1) Association of International Automobile Manufacturers
2) Alliance of Automobile Manufacturers
3) BMW
4) Chrysler
5) Ford
6) Honda
7) Toyota
8) Daimler
9) GM
10) Mazda
11) Volkswagen
In light of this turn of events, there has been a pending bill known as The American
Power Act. Its formal proposal reignites the prospect that the United States will take real
action this 2010 to reduce dependence on oil and produce more American-made power
and clean energy jobs. Among its key provisions are:
Strong goals for reducing carbon emissions and protecting the climate
22
Significant consumer protections against cost increases, and
Provisions to ensure environmental safeguards of any domestic energy
production.
On a final note, the Obama Administration finalized greenhouse gas rules for big
factories and power plants on May 13, 2010, giving momentum to the troubled climate
bill in the Senate. Starting next year (2011), the Environmental Protection Agency
(EPA) rules would require large power utilities, manufacturers and oil refiners to get
permits to operate or prove they are using the latest green technology to cut emissions
when building new capacity. US President Barack Obama has pushed the EPA to roll
out emissions rules where polluters could face more stringent future climate regulations
if the climate bill (The American Power Act) fails. "It's long past time we unleashed our
American ingenuity and started building the efficient prosperous clean energy economy
of the future," EPA Administrator Lisa Jackson said. The EPA said the new rules will
cover nearly 70 percent of U.S. emissions from stationary sources.

The role of the government of the Peoples Republic of China
In China, municipal governments in 13 test cities were offering up to $8,800 in
subsidies to taxi fleets and local governments for hybrid and all-electric vehicles.
Subsidies for private purchases were to be added later in 2009. The goal was to put
60,000 low- fuel-consumption vehicles on trial. The subsidies were up to $7,300 for
hybrid cars, $8,800 for pure electric cars and up to $36,000 for hydrogen cars. These
vehicles had to be approved for mass market by Chinas industry.
The Chinas State Council (Chinas cabinet) enacted the Automotive Industry
Revitalization Program, which allocated $1.5 billion over three years to be spent on new
energy vehicles, technology upgrades, and dedicated parts and components. Other goals
of the program were to help independent vehicle brands, and push forward independent
innovation and industry consolidation. China felt that its automotive industry, including
the electric vehicle industry, would be more competitive with a few strong players rather
than many smaller companies.

23
China also had a program similar to the United States cash for clunkers. Older
vehicles that did not meet certain environmental standards could be traded in for newer
vehicles with a subsidy attached. For rural residents, the government gave a 10 percent
subsidy to those replacing aged cars or three-wheeled vehicles with vehicles that had
engines of 1.3 liters or less, or small trucks. In early 2009, the government increased the
budget for these subsidies from 150 million to $900 million.
China saw the opportunity to capture its own growing market as well as to export
cars, which it believed it could make more cheaply, to the rest of the world.

Labor in the U.S. Auto Industry
Ever since 1980 and 1981, literally hundreds of thousands of people in the U.S.
Auto Industry have lost their jobs; communities dependent on the industry have suffered
devastating losses in employment and financial resources; and large facilities have
permanently closed. The Big Three Companies (Ford, General Motors and Chrysler)
went bankcrupt because of the following reasons:
1) Pressure from auto parts suppliers, which is coming from China.
2) These companies had union leaders who negotiated pension and other benefits
with management, which worked well for decades and it was assumed that
this would work eternally, without regard for changing times. In effect, these
companies, Ford and GM, had to pay benefits and compensation, even when
they were in decline and workers were also no longer contributing any thing
which added to their woes.
3) Increased penetration of the market by foreign manufacturers, especially from
Japan, Korea and China.
4) The US automakers have dominated the US market for almost a century
without a single rival, during which they little changed and whatever they
made was sold any way with no open mindedness for possible improvement.
16

Right now, the workforce in itself the people who design, monitor, maintain,
operate, assemble, inspect, supervise, coordinate and place should play a significant

16
-- US Auto Industry Decline: Lessons from Ford and GM, American Chronicle, July 4, 2006.
24
role, not only in the traditional concerns of productivity and cost but also to the quality
and performance of the vehicle.
17

In the laws of California, the minimum wage for workers is $8 an hour.
The United Auto Workers (UAW), is a labor union which represents workers in
the United States and Puerto Rico. It is founded in order to represent workers in the
automobile manufacturing industry. Headquartered in Detroit, Michigan, the union has
about 513,000 active members and more than 575,000 retired members in approximately
800 local unions, which negotiated 3,100 contracts with some 2,000 employers.
18

One perception is that the UAW is to be blamed for the automotive industry crisis
of 2008-2009. This viewpoint cites union workers' higher wages and more generous
benefits compared to those working at non- union Japanese auto plants in the U.S. as one
of the primary reasons for the poor competitiveness of the Big Three. In a November 18,
2008, New York Times editorial, Andrew Ross Sorkin clamed that the average UAW
worker was paid $70 per hour, including health and pension costs, while Toyota workers
in the US receive $10 to $20 less.
19
The UAW asserts that most of this labor cost
disparity comes from legacy pension and healthcare benefits to retired members, of
which the Japanese automakers have none. Nor is it clear that labor costs, which are
approximately 10% of a car's total cost, were the decisive factor in the decline of
American automakers. The Big Three already sold their cars for about $2,500 less than
equivalent cars from Japanese companies, analysts at the International Motor Vehicle
Program say.

According to the 2007 GM Annual Report, typical autoworkers earn a
base wage of approximately $28 per hour. Following the 2007 National Agreement, the
base starting wage was lowered to about $15 per hour.
20
Detroit, Michigan is known as
the Motor City of America housing the Big Three Automobile Companies (Ford,
General Motors and Chrysler).
UAW Management granted concessions to its unions in order to win labor peace,
a benefit not calculated by the UAW's many critics.

The UAW has claimed that the

17
-- The Competit ive Status of the U.S. Auto Industry: A Study of the Influences of Technology in
Determining the International Industrial Competit ive Advantage, The National Academies Press,
www.nap.edu., 1982.
18
-- www.uaw.org.
19
-- Andrew Ross Sorkin, A Bridge Loan? U.S. Should Guide G.M. in Chapt er 11, New York Times,
November 18, 2008.
20
-- General Motors Corporation 2007 Annual Report.
25
primary cause of the automotive sector's weakness was substantially more expensive fuel
costs
21
linked to the 2003-2008 oil crisis which caused customers to turn away from large
sport utility vehicles (SUVs) and pickup trucks,
22
the main market of the American "Big
Three" (General Motors, Ford, and Chrysler). In 2008, the situation became critical
because the global financial crisis and the related credit crunch significantly impaired the
ability of consumers to purchase automobiles.
23
Worst, the Auto Bailout package for the
Big Three Automobile companies was rejected for Senate approval. The talks in the
Senate broke down at the last minute over Republican Senators' insistence to have labor
rates put on "parity pay" with non-labor employees at foreign car makers.
24

As of April 1, 2010, membership at UAW has plummeted bringing it to its total
membership at 355,000 already. This is the lowest level ever since the late 1930s.
UAW Vice President Bob King said in an interview that unionized workers each
gave up $7,000 to $30,000 per year in concessions to General Motors Co., Ford Motor
Co. and Chrysler Group LLC as the companies ran into financial problems and in 2008.
The union, he said, made tremendous sacrifices that helped all three automakers through
a crisis, working with company management to make the automakers competitive.
25

In February 2009, as one of his first duties in office, President Obama signed an
executive order that authorized federal executive agencies to use project labor agreements
(PLA) on federal construction contracts with a total cost of $25 million or more. The
order also revoked President Bushs prior ban on mandatory PLAs, an action Bush had
taken after congressional hearings produced evidence that PLAs were discriminatory
against open-shops and non-union workers, increased costs on most projects and were too
often vehicles for abuse . When the American Recovery and Reinvestment Act was
passed only days after Obamas order, agencies were encouraged to mandate PLAs for all
stimulus projects.
26


21
-- Jim Tankersley, No Easy Road For US Auto Industry, Los Angeles Times, April 9, 2009.
22
-- Gas Prices Put Detroit Big Three in Crisis Mode, Associated Press, June 1, 2008.
23
-- Bill Vlasik, Hazardous Conditions for the Auto Industry, New York Times, October 1, 2008.
24
-- Martin LaMonica, Auto Bail Out Package fails in Senate, CNET News, Dece,ber 12, 2008.
25
-- Tom Krisher, Union Leader: Workers Must Gain if autos recover, Associated Press, May 11, 2010.
26
-- Liberty Chick, Californias Class Warfare: PLAs Union and Non-union Workers against Each
Other, Andrew Breitbart Presents BIG GOVERNMENT, posted on December, 2009,
26
Recently, skepticism of PLAs has increased under closer scrutiny of stimulus
project awards, and more business journalists have been examining current
unemployment numbers, looking at whos getting jobs from stimulus projects, and at the
relation of such issues to unionization statistics, as well as reporting on potential abuses.

Type of Industry: ELECTRIC VEHICLE (EV) or ALTERNATIVE TO FOSSIL
FUEL CAR INDUSTRY:
a) all-electric vehicle
b) plug-in hybrid electric vehicle (PHEV)
An all-electric vehicle (EV), also referred to as an electric drive vehicle, is a
vehicle which uses one or more electric motors for propulsion. It is powered by long-
lasting battery and electric motor.
A Plug-in hybrid electric vehicle (PHEV), plug-in hybrid electric vehicle
(PHEV), also known as a plug-in hybrid, is a hybrid vehicle with rechargeable batteries
that can be restored to full charge by connecting a plug to an external electric power
source. A PHEV shares the combination of both a conventional hybrid electric vehicle,
having an electric motor and an internal combustion engine. Most PHEVs on the road
today are passenger cars, but there are also PHEV versions of commercial vehicles and
vans, utility trucks, buses, trains, motorcycles, scooters, and military vehicles.
Size of Industry
In 2009, the U.S. had about 250 million cars on the road, 40,000 of which were
electric vehicles. Most of these had a range of 20 miles, a speed of 25 miles per hour,
and were generally used for fleet applications, checking parking meters, and transporting
people and clubs across golf courses.

27
Structure and Dynamics of the Industry
Porter Framework for the electric vehicle industry in the United States (as of 2009)

The above illustration indicates that there is a large opportunity for the all-electric
car industry to enter the U.S. market, now that there are laws passed in order to regulate
greenhouse gas emission (i.e. Carbon monoxide and carbon dioxide coming from
emission of fuel-engine vehicles) in automobiles and reconsidering solar energy as an
alternative form of charging batteries for electric vehicles. An alternative of putting up
an assembly plant in the United States may also be considered provided it complies with
standards of greenhouse gas emissions. Only one electric car (TESLA Roadster) is
outside the market. However, the threat of new entrants (such as the BYD E6 model) is
strong because of the Roadsters expensive price at approximately ($109,000).
There will be a problem in case battery charging stations or battery supply
stations may not be in place when electric cars will be sold in the U.S. That is why
establishment of these battery charging stations and battery supplies should already be in
New Entrant
BYD (E6)
Nissan (Leaf)
Mitsubishi (iMiev)
Think (Think City)


Suppl iers:
Charging/ Service St at ions
Ut ilit ies (electricity
generat ing indust ries)
Bat t ery Makers/Suppliers
Office Equipment
Dist ribut ors
Office Supplies
Dist ribut ors
Furnit ure Dist ribut ors
St affing
Manufact uring engineers
R&D Scient ist s and
Engineers

COMPETITOR
TESLA (Roadster)


Customers
Indi viduals: Professionals
Entrepreneurs, Employees,

Industries: Government
Agencies, hotel companies,
Schools / universities, retail,
Service, other
Manufacu\turing industries.


Availability of
Servicing stati ons
Hybrid vehicles
Plug-in hybrid
(BYDs F3DM,
GMs Chevy Volt)
Mild hybrid

Affordable
Commute
Bicycle
Substitutes
28
order to cater to the needs of the all-electric vehicle industry. As of today, battery
charging stations are not yet in place, despite government efforts to provide subsidies for
establishment of battery charging stations and conversions of some companies from fuel
stations to electricity charging station.
In addition, battery makers, the same as battery charging stations, are sluggish as
an industry provider. Although partnerships have been made for creating battery supplies
for the new entrants, these battery suppliers and makers must already be in place to
prepare for the release of electric vehicles ready for mass production. Nevertheless,
use of plug- in hybrid vehicles (also an alternative to fuel-engine vehicles) may be an
alternative substitute in case there is shortage of battery charging stations.
There is a large opportunity of potential customers in the U.S. Market. Hence, it
is now ripe for BYD to enter. However, there is also a threat for the U.S. market not to
buy Chinese automobiles because of Chinas previous image and reputation for quality
and manufacturing toxic products. In order for China (BYD), to successfully enter the
U.S. market, it must provide an an affordable electric car which is safe to drive and
provides affordable maintenance, with provisions for charging stations and battery
supply.
The key external factors mentioned in the next page are based on the reported
environment scanning as mentioned above.






29
BYD (Key External Factors)
Opportunities
Weight Rating Weighted
Score
Laws related to the reduction of the
greenhouse gas emission
0.10 4 0.40
Government subsidies and benefits for the
Electric Vehicle Industry
0.10 4 0.40
Markets untapped 0.10 1 0.10
Unemployment rate in the automobile industry 0.10 1 0.10
Lack of direct competitors in the market 0.10 2 0.20

Threats Weight Rating Weighted
Score
United Auto Workers Union 0.10 1 0.10
Rivalry among the Big Three Automobile
companies (Ford, GM and Chrysler)
0.10 1 0.20
Perception of American consumers on the
products manufactured in China
0.10 1 0.10
Labor Standard Laws in the United States on
wages and other monetary benefits
0.10 1 0.10
Lack of infrastructure for the Electric vehicle
industry.
0.10 4 0.40
Total (including strengths) 1.00 2.10
Currently, BYD has a total weighted score of 2.10 indicating that the firm is
below average in pursuing its strategies that capitalize on external opportunities and
avoiding threats.





30
Competitor Fact Sheet for U.S. Sales (2009)
The illustration for the next page provides the Competitor Fact sheet for electric
vehicles that have concrete plans to sell its products to the U.S. Market. It will be
observed that the initial model is to install charging mechanism within the buyers
residences. Battery makers and/or suppliers are not yet in place until after five years.
It will be noted that BYD has an edge in battery supply as it has its own business
model to supply affordable lithium- ion phosphate batteries to its buyers. In addition,
BYD is already putting up solar powered charging mechanisms ready for availability
upon release of its F3DM and E6 to the U.S. market.
Finally, the illustration will also indicate that BYD has to comply with the safety
standards for road and highways as approved by the U.S. Department of Transportations
National Highway Traffic Safety Administration. Otherwise, BYD auto products cannot
be sold in the U.S. (Sources: green.utoblog.com; www.caradvice.com.au; gm-volt.com;
BrighterEnergy.org)

Key Success Factors
In summing up the external factors and potential competitors and subsitutes, the
following constitutes the key success factors critical to the success of the electric vehicle
industry:
a) Affordability
b) Safety
c) Convenience and low cost services


ITEMS TESLA Think BYD BYD GM Nissan Mitsubishi
Country U.S. Norway China China U.S. Japan Japan
Vehicle Roadster Think City F3DM E6 Chevy Volt Leaf i-Miev
Type All-electric All-electric Plug-in hybrid All-electric Plug-in hybrid All-electric All-electric
Retail Price to be sold in
the U.S. $109,000 $20,000 $21,900 $40,000 $40,000 $25,280 $30,000
Cost for the Battery
Energy Storage System Battery Pack
$36,000 with life span of 7 years.
Battery replacement for $12,000
today to be delivered after 7 years
Lease batteries for $80-$90per
month; $1,000 KWh with a 10-year
warranty
Rechargeable and
100% recyclable with
battery pack having life
span of 2,000 cycles
(16 years); $500-$900
KWh warranty in 10
years
Rechargeable and
100% recyclable with
battery pack having life
span of 2,000 cycles
(16 years); $500-$900
KWHr warranty for 10
years
$600/KwHr or
$7,500 warranty for
10 years
Installation cost for charging
station is $2,200; Lifecycle
ownership cost for five years
is $28,180 which is the cost
of the vehicle, cost of the
electricity and the cost of the
charging station; $375/KWh
or $9,000;
$340/KWh with life
expectancy of 10 years or
150,000 miles; The cost to
completely charge is $2 per
charge
Charging Speed
Requires overnight charge of top-
up electricity
Can fully charge in 7
hours and charges
50% in 10 minutes
Can fully charge in 7
hours using 220V and
charges 80% in about
15 minutes
Re-charge batteries
from a 110V outlet
in about 6.5 hours
Home charging at will
require 220V to charge fully
for 8 hours or 80% charge
for 30 minutes
Takes 14 hours for a full
charge on a 100 volts and 7
hours on a 200 volt
industrial outlet
Top Speed 201 km/hr (125mph) 105 km/hr (65mph) 90 mph 160 km/hr 120 mph 145 km/hr (90mph) 130 km/hr (81mph)
Nominal Range
393 km (244 miles) 210 km (130 miles)
100 km all-electric
range; 580 km on a
single battery charge
and a full tank of
gasoline (360 miles)
300 km (186 miles)
40 miles for a
battery charge; 483
km on a single
battery charge and
a full tank of
gasolinte (300
miles)
161 km (100 miles) 160 km (99 miles)
Best Features
Basic Safety features with Theft
deterrent mechanism and PIN for
security; seatbelts; airconditioning;
power windows and locks Cruise
control; Leather seats
Basic safety features with
seatbelts; surpasses all European
and US requirements; Power
steering, central locking, electric
heater and electric windows and
mirrors, air conditioning, a pre-heat
timer electrically heated
widescreen; full length sunroof;
Radio CD with MP3, USB,
bluetooth, a navigation and
multimedia system, alloy wheels,
roof rack and 2+2 child seats
Battery can re-charge
using a normal
household outlet; Solar
power charging
system; Basic Safety
features with air bags
and ABS with
electronic brake force
distribution;
Production of Iron
battery are completely
recyclable and nor
harmful emissions
during production;
Battery can re-charge
using a normal
household outlet; Solar
power charging
system; Safety features
with air bags and ABS
with electronic brake
force distribution;
Production of Iron
battery are completely
recyclable and nor
harmful emissions
during production;
Battery can re-
charge using a
normal household
outlet; Solar power
charging system
Basic safety features A/C
outlet, Stereo, power
steering and windows, Blue
tooth; AM,FM CD
(WMA/MP3 US Interface for
Ipod and other MP3 player;
rear camera; great storage;
5-door family sedam with
seating for 5 (3 child seats fit
at the back of seat; Cruise
control; With lease plans at
$349 a months for 36
months with $1,999 deposit
Standard safety features
with twin air bags; ABS with
EBD, ISOFIX; child seat
mounting; Personalization
programs which allows
buyers to specify the
exterior color and they can
opt for items such as floor
mats made from
biodegradable bamboo
fiber; Can be recharged
from a regular home socket
Required service Centers
Provides anit-freeze charge every 5-7
years)
Needs charging stations but still
unavailable
Can be independent of
any charging station;
Needs gasoline station
which can hold 2
gallons of gasoline
Can be
independendent of
Charging stations
Needs gasoline
station; can hold 3-
12 gallons of
gasoline
Installation of Leaf's
charging dock station at your
home through Nissan's
charging equipment vendor
(Aerovironment) at $2,200
Can be indepdendent of
charging station
Highway Certified and
Crash Tested EV Yes Yes No No No No No
COMPETITOR FACT SHEET
Assumptions
The weights given by the proponent for this case article review for purposes of
developing the Internal Factor Evaluation (IFE) Matrix and the External Factor
Evaluation (EFE) Matrix as mentioned in the earlier part of this report are assumed.
However, the proponent used her sound judgement and discret ion for placing weights
based on available data.
We are also assuming that the competitors as mentioned in the Competitor Fact
Sheet are Start- ups as there is no stable foundation yet for the battery charging stations
and battery production industries, with the exception of TESLA which already has
available service station for anti- freezing of batteries every 5-7 years. Although there are
already incumbent automobile manufacturers in the United States, such as TESLA,
Mitsubishi, General Motors and Nissan-Renault, we will assume that all of the car
manufacturers that are considered potential competitors by BYD for purposes of market
penetration and market development in the United States as of this date are still
considered Start-Ups.
Finally, a recent information was gathered where BYD had already selected Los
Angeles to be its U.S. base after reviewing offers in other California cities. Beyond that,
company Chairman Wang Chuan-Fu said the firm plans to emphasize green energy
efforts, including the development of low-cost solar panels for houses.
27
BYD expects to
hire 150 employees throughout 2010 and 2011 as it rolls out its fleet of vehicles (models
F3DM and E6) to California markets before expanding throughout the country. The
headquarters for BYD will be located in LAs downtown business district. Among the
green energy technologies on display at the new facility will be vehicles, solar panels,
energy storage systems and advanced LED lighting products. The building will also

27
-- Rick Orlov, Chinese auto, solar firm BYD chooses LA as its US headquarters,
ContraCostaTimes.com, posted April 30, 2010.
33
house BYDs research and development arm, which will adapt current versions of its
vehicles on sale in China for the U.S. consumer market.
28

To lure further BYD, the city of Los Angeles promised to buy some of the
companys electric vehicles, including buses; to streamline the approval process for
installing charging stations in garages; to make it easier for people to install charging
stations in their homes and to display a BYD car at LAX, according to the Wall Street
Journal. BYD and KB Homes, the big homebuilder, announced that they would build
homes together that not only include solar panels on the roof but batteries in the garage
so that the owners can enjoy solar-powered electricity even when the suns not shining.
This is a big deal, as the Sunpluggers blog reported: Off- grid solar owners for many
years have used battery banks to store their generated electricity for later use, but the plan
for the KB Home development smack in the middle of a grid-tied suburban subdivision
could help alter the trajectory for adoption of both solar electricity and plug- in
vehicles.
29

On May 1, 2010 during the 2010 Bershire Hathaway shareholders meeting, an
announcement was made that 5,200 models of BYDs electriv vehicle products will be
carried to the United States to satisfy the fleet requirements. Sale of the vehicles will be
done in 2012.
30

The above recent development will be considered as a foundation or basis to
formulate and develop strategies for BYD for purposes of penetrating and developing
brand awareness in the U.S. Market.



28
-- Jack Nerad, BYD Takes its Dreams to Los Angeles, WFXS: Driving Today, posted on May 12,
2010.
29
-- Marc Gunther, Warren Buffets BYD: Revving up, fast, theenergycollective.com, posted on May 16,
2010.
30
-- Interview of Patrick Duan of BYD American Company by Bill Moore of EV World Video
Productions.
34

Alternative Courses of Action
A SWOT analysis is a tool in determining the companys strengths and
weaknesses, exploiting the different opportunities which the company might face and
thinking of ways in order to ward off the possible threats that it may face.

It tends to present alternative courses of actions that will be the basis for the
various strategies that will be utilized for the BYD in penetrating and creating brand
awareness for the U.S. market. The strategies should address the following issues:

How can the company overcome its weaknesses to ward off the threats it faces?
(WT Strategies)
How can the company utilize its strengths to ward off the threats it faces? (ST
Strategies)
How can the company utilize its strengths to exploit the opportunities it faces?
(SO Strategies)
How can the company overcome its weaknesses to exploit the opportunities it
faces? (WO Strategies)


















35

Opportunities (O)
Laws related to the reduction of
the greenhouse gas emission
Government subsidies and
benefits for the Electric Vehicle
Industry
Markets untapped
Unemployment rate in the
automobile industry
Lack of direct competitors in the
market
Threats (T)
United Auto Workers Union
Rivalry among the Big Three
Automobile companies (Ford,
GM and Chrysler)
Perception of American
consumers on the products
manufactured in China
Labor Standard Laws in the
United States on wages and
other monetary benefits
Lack of stable infrastructure
for the electric vehicle
industry
Strengths (S)
Second largest
manufacturer of
rechargeable batteries in
the world (including
U.S.)
Reputation for quality
(battery manufacturing)
and innovation
Warren Buffet (most
influential investor in the
world) owns 10% of the
company
Proactive and visionary
leadership / Management
Style
Growth rate
Technology / Research
and Development
SO Strategies
Build a manufacturing plant for
batteries, (S4,
S1,S2,O1,O2,O3,O4))
Build an assembly plant in the
U.S. but batteries will be
manufactured in China
(S1,S2,S3,S4,S5,S6,O1,O2,O3,O
4)
Import cars to U.S.
(S4,O1,O2,O4)
Seek government funding for the
sale and/or import of the EVs
and/or its parts (O1,O2,O3,S3)
Conduct market study of the
needs and wants of potential
buyers (S6, O1,O2,O3)


ST Strategies
Join car manufacturing
organizations for networking
and benchmarking
(T1,T2,T3,T4,T5,S1,S2,S6,S3
)
Enter into MOUs with other
autmobile companies and/or
infrastructure providers
(S1,S2,S3,S4,S6,T5)
Provide intensive training for
potential employees to be
recruited in the U.S. with
emphasis on establishing a
culture of improving the
economy of the U.S. rather
than encouraging benevolent
capitalis m to employees
(S4,S6,T4,T1)
Join trade shows
(S1,S2,S3,S4,S5,T3,T4)
Provide a reasonable growth
potential opportunities for
employees to be recruited,
without concentrating on high
salary or monetary benefits
(T1,T4,S3,S4,S5)
Weaknesses (W)
A new entrant in the U.S.
Market in terms of sales
in automobiles
Reputation for quality
(automobile
manufacturing) for the
U.S. Market.
WO Strategies
Seek Highway certification and
crash tested EV accreditation
(W1,W2,O1,O2,O5)
Pass U.S. safety standards
(W1,W2,O1,O2,O5)
WT Strategies
Create a pool of highly
qualified and skilled
employees having passed
rigid examination
(W1,W2,T3)


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Analyses
In summary, the following areas of consideration should be taken in account of
providing possible recommendations for the case article review:
1) The unemployment rate and losses of jobs in the automobile industy has really
affected the entire economy of the United States leading to an automobile industry crisis
from 2008-2010.
2) The passage of the National Program to reduce the greenhouse gas emission in
the United States will provide a significant impact on the establishment of electric
vehicles in the United States.
3) The United States government is firm in implementing President Obamas
program in putting an end into the greenhouse gas emissions which will eventually
alleviate the countrys oil crisis being faced today.
4) Labor standards in the United States may also play a signifant role in terms
molding the countrys automobile industry. Labor in the United States is high, hence,
outsourcing from different countries like India, China and the Philippines are alternative
courses action being utilized by some entrepreneurs in the United States. In addition,
quality, not quantity, should be the primordial concern of automobile manufacturers,
without taking into consideration the monetary benefits that will be received by workers
in the meantime. That is why he United Auto Workers Union must work hand in hand
with automobile manufacturers in order to bridge the gap between management and
capital if there is an intention to move on and make the United States a better place to live
in.
5). Currently, the U.S. market do not have any faith on Chinese manufactured
products due to Chinas image in the past for manufacturing defective and toxic products.
There is a need to shift the mindset of the U.S. market if Chinas BYD would want to
penetrate the U.S. market.
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Issues / Concerns
The proponent shall address the analyses of the Case Art icle by answering the
issues below:
Issue #1 What is the best course of action to be followed in the following variables?
1.1 BYD imports the assembled electric vehicles to the United States.
This option will not generate enough jobs for the United States and it wil only
provide jobs for sales and marketing. In addition, transportation cost for importing the
vehicles will be more expensive.
1.2 BYD imports the technology to the United States, manufacture the
batteries and assemble the electric vehicles in the United States.
This option will generate enough jobs for the United States for assembly, battery
manufacturing, sales and marketing. However, the labor cost for this option will be
expensive as compared to labor cost in China
1.3. BYD makes the parts (including the batteries) in China and establish
merely an assembly plant in the U.S.
This option will create enough jobs for the United States for assembly of parts and
sales. This option will also provide education and immersion of American culture for
BYD. Transportation cost will be cheaper as you can import the batteries or spare parts
in bulk with minimum payment of import tax than importing hundreds of thousands of
vehicles. Labor cost for the manufacturing of batteries will be cheaper as this will be
manufactured in China. Only the assembly will be done in the U.S.
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The best course of action is: 1.3 BYD MAKES THE PARTS (Including the
Batteries) IN CHINA AND ESTABLISH MERELY AN ASSEMBLY PLANT IN THE
U.S.
The following are its advantages:
It is cost efficient in terms of taxes on imports of vehicles;
It will create enough jobs in the U.S.
Hiring and utilizing American talent for assembling parts will provide education
and immersion of American culture for BYD.

Issue #2. Where will BYD locate the plant?
Recent developments have already transpired that BYD has chosen Los Angeles,
California to be the headquarters for BYD for its sales and assembly of car parts. Initial
target market will be the State of California.

Issue #3. What are the different strategies which BYD will employ to create brand
awareness and pentrate the U.S. Market?
Market Research Strategy
A market research study may be conducted within the target area where the
products will be sold.
Predatory Marketing Strategy
1) Meetings with government agencies which can provide potential buyers
for the electric vehicles.
2) Advertising and PR Blitz (i.e. print ads and write ups about the product,
engage in TV guestings, press release about the product).
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3) Emphasize on the corporate customers (i.e. government agencies, hotel
industries, transportation companies, schools/universities, other service-oriented
industries.
4) Roadshow Tours for specific towns and cities in the State of California
5) Joining in trade shows
6) Accepting invitations for speakerships in universities to introduce electric
vehicles as a new technology to wait for.
Partnership Strategy
1) Partnerships with companies with potential qualities for providing
infrastructure to the EV industry.
2) Partnerships with governmental organizations, business organizations, social
clubs and various automobile professional organizations for possible benchmarking of the
current market structure of the United States.
3) Partnership with entities specializing in providing payment system services for
charging batteries.

Product Development Strategy
1) Establishment of charging infrastructure and facilities in convenient stores and
other charging stations.
2) Establishment of a solar power system that can be installed in the household
for charging electric vehicles at the lowest cost.



40

Conclusion
It is admitted that the foundation of the electric vehicle industry is not yet stable.
Battery manufacturing, car assembly, and even establishment of charging stations and
utilities have to be completed in order to make the electric vehicle industry positive for
release in the market.
Nevertheless, we should take into consideration that the government of the United
States and China are exerting firm efforts to make sure that the electric car industry be
stable within the year 2015. That is why BYD is taking the big leap in penetrating the
market for a technologically advanced and environmental friendly product, a plug- in
hybrid vehicle and an all-electric vehicle, all with the end in view of saving the
environment and becoming the worlds No. 1 car manufacturer by 2025.
The United States is the best place to sell BYDs products. That is BYD took the
opportunity of allowing Warren Buffet to invest in its company, that is to penetrate the
U.S. market and go global.
However, we should not leave the possibility that problems that may occur.
Labor cost in the United States is more expensive than China. Let us not also forget the
involvement of the United Auto Workers Union which alleged to be responsible to the
downfall of the automobile industry in the United States from 2008-2010. Impression of
the American people about Chinese manufactured products is also a big threat for BYD.
That is why quality, not quantity, should be the primordial concern of BYD.
But on the brighter side, let us not forget the big dream of BYD in becoming the
No. 1 Car Manufacturer in the whole world. BYDs entrepreneur Wang Chuan-Fu,
having the brilliance of Thomas Edison and the management style of Jack Welch, is a
competitive advantage which will make BYD go forward.

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References


David, F. (2003), Strategic Management: Concepts and Cases, 9
t h
edition, Pearson
Education, Inc.

Maxwell, J. (1998), The 21 Irrefutable Laws of Leadership, Thomas Nelson Publishers.

Gunther, M. (2009), Warren Buffet Takes Charge, Fortune CNN.com.

Burgelman R. and Schifrin D. (2008), The Global Electric Car Industry in 2009:
Developments in the U.S., China and the Rest of the World, Stanford Graduate
School of Business.