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Exciting times for BYD


Yes, I am one of the hundreds of thousands that have placed their deposit for a Tesla Model 3 even prior to the launch. Once the actual concept was revealed, I became even more excited. I'm getting used to the front end and know they will work on the interior dash. Other than that, every aspect of the concept was fantastic. I remain cautiously optimistic that Tesla will be able to execute and deliver a similar looking vehicle with similar specs for around $35,000 in a reasonable time frame. There are plenty of articles about Tesla Model 3 that we won't get into it here.

We are also seeing some great progress with the 2nd generation of the Volt that continues to get rave reviews. There is still a large debate about the benefits and/or necessity of a gas engine. Leaf is improving with more range to come. VW with their Diesel fiasco will likely go all in on electric vehicles as well with their family of brands.

The purpose of this post is to call attention to a brand that most people have not heard of... BYD (Build Your Dreams). BYD is a Chinese manufacturer and is actually the largest EV manufacturer in the world. They are the Tesla of China with less panache but greater scale. They seem well in tune with consumer demands and have continued to improve with each model launched. I'm especially excited by their latest Tang model which is a plug-in hybrid SUV. Seats 7, all-wheel drive, zero-to-60 in 4.9 seconds and a MSRP of 251,300 Yuan (US $38,672). The Tang SUV is quite an impressive package. With 9,221 units sold in Q1 of 2016, the Tang model sold over twice as many as their popular e6. Their roadmap includes several other SUV's to be released next as well.

Similar to Tesla, BYD has figured out that electric vehicle focused consumers (for this article, I'm generalizing EV, PHEV) not only care about efficiency but also about performance, design and functionality. It is not enough to lead in just a single category as consumers are incredibly demanding today.

BYD has been talking about entering the US market for quite some time. They currently have US offices in Los Angeles and Chicago but have not seemed to make much progress in actually bringing cars to the US. I would love to see more competition in the US for innovative electric vehicles however, for BYD, they face numerous challenges:

  • Made in China: This is the biggest issue they face. I sometimes personally get annoyed with the anti-China sentiment. Most of our products are from China our kids are adopted from China and Taiwan. I've worked with hundreds of great Chinese factories over the years. Yes, I've seen bad ones and they still exist but we don't do business with those. Bad companies exist in all parts of the world including the USA. (have you visited the garment district in NY?). Many of the highest regarded quality products such as Apple, Coach, Prada and countless more. The main culprit for low quality from China actually comes from the buyers insisting on lower and lower prices and turning a blind eye to quality control. I get the multi-decade negative perception that has been built and realize that great quality from China is the exception not the norm. This will be a big hurdle for BYD to overcome. In fact, it may even be necessary for BYD to build a US factory for final assembly right here in the US similar to most other brands.
  • Service: How will cars be serviced? Will parts be readily available? Will I have to drive 200 miles for service? These are all critical questions that must be answered. The typical answer may be to follow the long established dealership model and open regionally and expand over time. This is a huge investment that is antiquated and being disrupted by the likes of Tesla as we speak. BYD could follow the retail model of Tesla with occasional service center locations and remote service but this too is incredibly expensive to build out and without billions of debt and equity capital being poured in may be prohibitive. Another option may be to actually partner with an established brand. This is the least prohibitive route short term but may lead to problems long term as relationships inevitably sour or become competitive. An interesting solution might be to rethink service centers entirely. Imagine a destination service center somewhat similar to current gas stations. They could offer expert service on all makes of EV's, offer car washing, paid car charging, convenience store products and maybe even dining. These could actually become profit centers which would ease expansion capital. Imagine a cool place to hang out while charging or getting service.
  • Sales & Distribution: Many would argue that a dealer network still adds value. While there is some truth to that, it is also true that the majority of people hate haggling. Companies like Tesla, Carmax, Autozone, etc. are changing this approach. As a smaller, unknown brand without a large physical presence, BYD will need to rely on direct-to-consumer sales. Heavy focus on social media, influential reviewers, online marketing and even direct mail can supplement broader brand marketing and PR efforts. BYD can somewhat follow the highly successful path of Tesla while being even more inclusive to journalists and media. I don't see any reason that in our current day and age, you could not go online, configure your vehicle to exact specifications and have it delivered in 4-5 weeks to your doorstep. People told Michael Dell that no one would every buy a complex product like a PC without an educated sales rep guiding their purchase in person. BYD (Build Your Dream) is also a perfect name for an online configurator for buying your car.

Those are just some of the main challenges facing BYD or any other auto brand trying to enter the market. The costs are huge and incumbents well entrenched. I would love to see an innovative brand like BYD push the boundaries of the entire sales cycle even beyond what Tesla is doing. Tesla is already paving the way for new brands by fighting states to support the direct sales model. I won't hold my breath waiting for BYD but it would be great to see greater competition with electrified vehicles beyond compliance cars. The future of EV's will certainly be interesting to watch as it unfolds in front of our eyes.




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