Wednesday, October 28, 2009

Electric Vehicles: China can do no Wrong. Right?

Think Again.

This past week, columnists Anil Gupta and Haiyan Wang published an opinion piece in Business Week that dares to go against the flow. While the rest of the world seems ready to declare China the winner in electric vehicle technology, Gupta and Wang explain why China has no real advantage -- a position with which I agree. They make two important points that are worth highlighting:
  1. Despite the apparent importance of battery technology for cars in the future, batteries are merely one component among many others. The apparent early success of China's BYD in battery technology (which is also questionable) does not mean that BYD is certain to enjoy success in other important factors such as "performance, safety, reliability, comfort, styling, dealership network, service quality, and price". In an article in the Wall Street Journal this week, Norihiko Shirouzu quotes the tech chief of a global automaker who had test-driven BYD's E6 as calling it "half-baked".
  2. First mover advantage ain't what it used to be. Gupta and Wang give plenty of examples in which non-first movers eventually came to dominate an emerging technology, leaving first-movers in the dust.
Gupta and Wang don't dismiss the importance of battery technology, and indeed, BYD seems to have somewhat of an advantage because, after all, they've been a battery company since the early '90s. But when you put the whole package together -- battery, auto body, electric motor, etc. -- BYD's success has been less than stellar. Through the first eight months of 2009, they only managed to sell 100 of their F3DM plug-in hybrids.

They also seem to speculate, as have I before, that Buffet's consolation prize with BYD may very well be the battery technology itself. Even if they cannot manage successfully to assemble the entire package for a mass market, BYD's battery technology -- if it is advanced as they claim -- could be licensed to dozens of global auto manufacturers. Indeed, Volkswagen has already partnered with BYD on battery technology.

I would add to this argument the fact that, among all of the auto specialists and insiders I have interviewed in China this year, I have yet to find anyone who believes that BYD -- let alone any other Chinese automaker -- has a lock on EV technology. They all see it as very experimental, and while they believe China is finally on a level playing field with developed countries in this emerging technology, they all acknowledge that the solution is just as likely to come out of Japan, Europe or North America. (I have yet to interview anyone at BYD, so perhaps this will change once I make it to southern China.)

I don't want this post to be interpreted as attempt to knock BYD. In fact, I admire BYD's CEO, Wang Chuanfu, for his courage and optimism and I wish the company every success. However, I think the rest of the world (i.e., all three people who still read my blog) deserve to read views contrasted with those of non-Chinese speaking foreign correspondents who fly first class, ride in limousines, stay in 5-star hotels, then return home to tell everyone China is the new land of milk and honey and BYD will own the future of electric vehicles.