BYD is changing its business structure to meet market challenges 05-11-2017

China-based BYD has announced to separate its automobile electronic division from the rest of operation to meet market challenges for its AEV business. The company, which is often called the Chinese Tesla, is one of the largest battery storage and AEV sellers worldwide and expending its operations overseas to meet rising demand.


 


China’s largest alternative energy vehicle (AEV) and power battery storage manufacturer has announced to separate its automobile electronic division and let it run independently from the rest of the operations, as a response to a more challenging market situation in the AEV and battery market.  


The division is mainly manufacturing Lithium Iron Phosphate as well as ternary Li-ion batteries. With the separation, the management aims to be the biggest supplier for all automobile enterprises in this market.  


According to market intelligence firm CCM, the separation of further divisions in the near future is also likely, as the enterprise is changing the nearly self-sufficient business style to a more market orientated one. After all, the company was able to be almost completely self-sufficient in its battery technology and AEV production, only depending on imports of anode materials and battery separators. The company even owns lithium mines to have access to the very raw material for its batteries.  


Three points are the main reasons for the company’s decision to separate its operation, according to CCM.  


A big challenge for BYD nowadays is the new policy of China to support high energy density per unit battery usage in domestic markets. The company’s LFP li-ion batteries are not meeting the requirements for the high demand, which forces the company to innovate in new advantages of ternary li-ion batteries. New capacity is already being built, in order to achieve 10GWh ternary li-ion batteries in the year 2017.  


According to BYD, the vehicle business is restricting the development of its battery business. That is, therefore, a problem, because in general a battery business is seen as a higher value than a vehicle business. This is due to the big advantage the battery business of BYD has towards the competitors in China’s domestic market, while the AEV business is facing some problems and challenges nowadays.  

 



 

What’s more, BYD used to successfully grab a fair portion of China’s AEV market shares by means of business coordination, but the drawbacks of its business model revealed with the further clarity of industrial technical route and gradual standardisation of product modality. Moreover, the company goes nowhere in supply chain management and quality control, which is of no avail to its business promotion. In addition, due to its bulky business system, costs of labour and production face enormous pressure.  


Build Your Dreams (BYD), a fierce competitor of Tesla in the AEV market has delivered the first 60 feet long electric bus into the USA, equipped with a battery pack of 547 kWh. This comes after the company already sent a complete fleet of electric trucks to California earlier this year. The bus can seat up to 60 people and BYD claims a range of 275 miles on a single charge with full charging completed in two to three hours. While BYD is a Chinese company, it has a heavy vehicle division in California, where it manufactures electric buses and trucks at its Lancaster Factory.  


Despite from America, the company sees the biggest overseas market in Europe. Therefore, an electric bus factory is already planted in France, with plans to build another factory in Europe as well. According to the management, the company aims for a market share of about one-third in Europe’s bus and coach market in the next five years.  


Notably, BYC is seen by many as the Tesla of China. After all, there must be a reason that large-scale investor Warren Buffet is one of the company’s main investors. In fact, the company the company sold the most electric cars in 2016, even surpassing 100,000 units.  


Furthermore, another car manufacturing giant has announced to play a huge role in the AEV market. The world leading cars seller. German Volkswagen, announced a huge investment recently, which is aiming to build and sell more than one million electric cars by 2025. BYC and Tesla are keeping an eye on this new large competitor in the world’s AEV market.  


About CCM

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets.  


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