U.S.-Asia Business

The Electric Cars of the Future that You Can Afford

BYD - one of the world’s top sellers of electric cars - looks to make EV’s more attainable.

Stella Li does not lack for confidence, even in the face of many challenges. She is the president of BYD Motors, a Chinese electric vehicle manufacturer that has sold more than 30,000 electric cars this year.

Consider the myriad obstacles that BYD Motors currently faces:

• There's a long line of competitors in the electric-car market. Among them are Tesla Motors Inc.; Faraday Future (which wants to build a $1 billion factory in America); BYD's Chinese rival Zhejiang Geely Holding Group Co.; and all of the world's major auto manufacturers, including Toyota, Nissan and General Motors Co.
• While battery technology has improved, there is still some question whether electric-car batteries can truly deliver the range that consumers demand.
• Thanks in part to the battery challenge, some automotive experts believe it will be some time before electric cars can be made cheaply enough for the masses.

When presented with these potential obstacles, Li appears unfazed. In fact, Li is able to dismiss two of those challenges with one simple explanation.

“We are in a different market than Tesla,” Li says. “Tesla is for rich people. We are for normal people.”

Li's confidence is bolstered by real plans and sales figures. In the United States, BYD has built a factory in Lancaster, Calif., to build electric buses. The facility, which spans more than 500,000-square-feet, opened in May 2013, and BYD already wants to double its size.

The reason BYD has set aggressive goals for its U.S. strategy. BYD attempted to enter the U.S. market in 2010, but retreated to rethink its plans, Li says.

BYD, headquartered in Shenzhen, China, wants to introduce one new product in the United States per year for the next several years, Li says. These could include passenger cars, trucks, and different sizes and styles of buses. BYD is even looking at electric forklifts that could move inventory inside giant warehouses.

BYD already supplies electric buses to U.S. government agencies and private organizations that run their own transit fleets, including the Los Angeles County Metropolitan Transportation Authority and Stanford University's free shuttle service in Palo Alto, Calif. In September, BYD won a contract to supply 800 heavy-duty buses to the Washington State Department of Transportation.

It's also busy in Europe. BYD recently announced a plan to expand its manufacturing operations in the United Kingdom to produce about 200 electric buses per year.

The potential global market for electric vehicles is growing. Global electric car sales rose 40 percent in August to 38,000 units, compared with a year earlier, according to BYD's own projections. BYD says that its Qin model was the world's best-selling electric car in August 2015, ahead of Tesla's Model S and Nissan's Leaf.

In the United States, electric car sales were up 9.3 percent in October 2015, to 10,616 units, compared with October 2014, according to EVObsession. The Tesla Model S was the best-selling model, with 3,133 units sold, followed by the Chevy Volt, the Nissan Leaf and the BMW i3. BYD’s passenger cars are not yet sold in the United States.

Annual sales of plug-in electric vehicles in North America are expected to reach at least 1.1 million units by 2024, according to Navigant Research.

The numbers are small now, but consider that they are starting from essentially zero.

With turbo-charged growth rates like this, it's no wonder that BYD has attracted one of the world's greatest investors. Warren Buffett's Berkshire Hathaway Inc. conglomerate, which owns everything from railroads to the ketchup maker Kraft Heinz Co., has a 10 percent stake in BYD.

BYD has its skeptics. The United States isn't ready to adopt plug-in electric vehicles on a wide scale, especially since batteries don't provide the kind of range consumers want, says Fred Cartwright, executive director of Clemson University's International Center for Automotive Research in Greenville, S.C.

“I would say that, in the U.S. in general, it's going to continue to be slow growth,” Cartwright says. “Unless there are significant changes or improvements, I would expect that it will continue to languish.”

The current low price of gas makes things even worse for the EV market, Cartwright says.

“Look at what people are buying today, because of gas prices,” he says. “They're buying trucks and SUVs.”

Then there's Elon Musk, Tesla's leader. Musk once laughed when a news reporter asked him about BYD, saying, “Have you seen their car? I don't think they have a great product.”

Li doesn't seem to care what Musk thinks. She notes BYD was the world's top seller of electric vehicles in August, even though its sales are primarily limited to China (granted, the world's biggest market).

But BYD will be able to expand globally, in part because of the way it has control over all phases of its manufacturing. BYD makes and supplies the majority of the world’s rechargeable batteries, including most of the batteries used in cell phones, tablets and laptops.

“We integrate all of the key components in-house,” she says. “That makes us more competitive.”

Factors outside BYD's control will also help the Chinese company grow its market, she says. Li predicts that many nations are going to demand the installation of more electric car-charging stations.

“BYD was the first company in the world to introduce the plug-in hybrid car,” she says, “The consumer electric car will become mainstream because of the concerns about the environment.”

BYD isn't the only car company that knows how promising the electric car market is. Japanese automakers such as Toyota, Nissan and Honda have been pioneers in the market. And the German carmakers, which were behind initially, have accelerated their efforts in recent months. BMW, for example, has opened a wind-powered factory in Leipzig, Germany, to build electric cars with light carbon-fiber bodies, according to National Geographic's November 2015 issue.

None of that will matter if these companies can't figure out a way to make the cars affordable for everyone, says Cartwright, who was previously the director of corporate development at General Motors, where he worked on developing GM's EV1 model.

“Being able to pull off a high-volume electric vehicle that's affordable to the mass market has always been the holy grail of the EV industry,” he says. “Nobody has a solution to it yet.”

Li indicates that shouldn't be a problem for BYD. She points out that: BYD is the only company that already has a 10-gigawatt battery in production; it is the market leader in China; and it has recent contract wins to provide hundreds of electric buses in the United States and Europe.