BYD Electric Vehicle Will Enter Market Next Year

Published on December 2, 2009 by Rebecca | This story has been viewed 1,474 views

In the past month, Chairman and CEO of BYD Co. Ltd. Wang Chuanfu gained both fame and wealth. On November 5th, he was titled as “The Richest Man in China” by “Forbes”; BYD F3 ranked first in the monthly car sales with the number of 30,008. However, Wang also bore great torment behind the dazzling picture.

Compared to the hot F3, the market of its electric vehicle F3DM is much gloomier, whose sales volume is only 100 since entered market 11 months ago. F3DM was scheduled to sale to ordinary consumers in September, but the plan is still in the air by the end of October. What’s more, during Shanghai Auto Show, Wang had promised Science and Technology Dep. Minister Wan Gang that BYD would export several hundred of electric vehicles E6 to the U.S. in 2010, whose price is slightly more than $40,000. But Wang might fail to keep his word in the U.S. market in such a short period of time, because it is really difficult for BYD to produce so many durable electric cars. Wang Zidong, the director of Power Battery Testing Center of China Northern Motor Vehicle Research Institute, said the biggest problem was the low quality.

In addition, in the past year, BYD had purchased more than 200 tons of lithium iron phosphate from Tianjin STL Energy Technology Co., Ltd., which cost more than 30 million RMB. However, large-scale car manufacturers were still reluctant to place massive orders, since they were not sure about the quality of this so-called “star products” F3DM.

China Auto Sector analyst of Credit Suisse Andre Chen predicted that BYD would sell 415,000 cars this year, 650,000 next year, and reach millions in 2011, so BYD might need as much as $3 billion in technology and new equipment investment from now to 2011. That means BYD need to raise substantial funds to maintain the current growth, which has a high requirement of cash flow. Despite BYD had limited models, and relies excessively on F3, Wang was still duty-bound to increase the orders three times, and signed purchase and sales contracts with two factories in Shenzhen and Xi’an, which included 16 production lines and nearly one hundred large equipments.

Because of cash pressure, Wang also planned to list on Shenzhen Stock Exchange, and issue new shares of less than 1 million shares for lithium-ion battery and automotive research and development. Earlier, due to the bad performance in capital market, this planned circulation had been reduced by 55%. A report of Morgan Stanley had maintained the “underweight” of BYD, for the new business would not become a driving force for valuation in short-term due to its lack of support from the government.

To make things worse, China also lags behind in the development of the new energy vehicle market. Science and Technology Dep. Minister Wan Gang said, “If the supporting facilities are unable to be synchronous, it is hard to say the development of market has taken shape. Technological breakthroughs don’t mean the possibilities of commercial implementation.” One of the focuses is how manufacturers of electric vehicles negotiate with State Grid who is with absolute monopoly about charging station.

Shenzhen Post Rebecca Contributes to the Story.

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