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Taking the Hard Road Chinese automaker BYD is trying to innovate.
Chinese carmaker BYD is finding it difficult to move from imitation to innovation.
Previously, you had a cheeky sense of pride in the copy, then beat much larger rivals low costs and imitation BYD is one of China's five major automakers in an incredibly short space of time, even inviting a high profile 232 million investment from Warren Buffett Since its attempt to move up the value chain, however, the car manufacturer based in Shenzhen, known for its shanzhai or copycat versions of Marqués best known, was having a difficult time.
First applied to inexpensive cell phones imitation brand produced in South China, shanzhai term has come to refer to a copy of cheap and often poor quality BYD efforts to remove the label shanzhai lay in tatters after a fatal accident in Shenzhen in May year that saw a BYD E6 catch fire after colliding with a sports car Nissan explosion E6 was especially bad news since it was BYD's flagship car market the electric vehicle.
Chinese automaker BYD once promoted itself as a global leader in e-vehicle technology and there are only three made statements that would be the biggest car company in the world by 2025 the Parent Company exports Henry Li, was quoted earlier this year as saying BYD's electric vehicle platform is one of the most advanced in the world Nevertheless, the company is now struggling to compete with other domestic Chinese automakers and even less international car brands he would meet in the developed markets.
BYD's share price has dropped 80 of its 2009 high, and 40 since April 2012, while the commercial version of its electric car was pushed further down the road.
BYD's problems are in many ways related to his efforts to move upmarket, from imitation to innovation vehicles and higher margin Like many other manufacturers of low-end Chinese BYD responded to rising costs quickly trying to develop a respected brand will allow the company to expand its margins and market share you must acquire the capacity to differentiate your brand, otherwise you will be a struggle for commodities at a low price item says Bill Russo, senior adviser at Booz Co, Chinese auto companies firm management consulting are in a war of attrition, and only the strongest will survive.
BYD began operations in Shenzhen, the production of mobile phone batteries to 30 of the cost of competitors like Sony and Sanyo Like many Shanzhai operators BYD initially machines largely avoided in favor of an army of workers from 2011, the company had 178,000 employees in both its automotive operations and battery Ford motor company, however, had 164,000 employees worldwide reaching five times auto sales recorded by BYD.
Controversial, BYD in his earlier years was known for all the reverse engineering of its competitors have done, in an effort to learn the technology and see if they could figure out how to do the same thing cheaper car bestseller BYD, the F3 is similar to the Toyota Corolla he can use parts to it, but sells for half price BYD a basic skill is that they are more willing and more aggressive in copycatting some of the models sold globally, said Teng Bingsheng associate dean and associate professor of strategic management You can call the Graduate School of Business Cheung Kong CKGSB a core competency because they were very good.
BYD didn t, however, eat necessarily in the market share of Toyota vehicles, it copied the BYD cars may look like Toyota, but on the road the F3 didnt match the performance of the car, it mimics a car has a some of the most complex technique of all consumer products, said Russo You can copy the material, but not the sweet stuff Two cars with exactly the same hardware can perform completely differently on the road.
Russo argues that this is why Toyota, unlike competitors BYD battery industry, has not bothered to take legal action against BYD learning to imitate your competitors is something done everywhere in particular countries to expand their markets, but it has not be a negative for the copy of current society in China, people who buy Toyota Camry are not cross-shopping with the F6 another imitation BYD says Russo ago a gray area it is not necessarily bad companies that have their products copied and could enhance their brand.
BYD Shanzhai imitation -style Toyota didn t take the company beyond the cut-throat, low price segment of the automotive market in China There is, however, solid examples of Shanzhai players taking part market competitors they've copied, particularly in the handset market where Shanzhai pushy -style make phones for low income but the market trend-savvy Among the best known examples, the handset looks Gooapple-made Shenzhen strangely to the iPhone 4, but runs the Android system 2 2, and sells for 1,060 RMB against the RMB price tag 4000 iPhone 4.
Navigating his way high-end of the shanzhai space, Tianyu phone maker started making cheap imitations combined to fashion, but has since invested heavily in 3G products cheap chic approach Tianyu allowed him saute- Lenovo and sheep hound of key players such as Nokia and Samsung in terms of mobile phone sales as the sales of the K-touch brand, Tianyu has shown its export sales of intention when he showed his Android phone to mobile World Congress this year Today, Tianyu is a dominant player virtually unrecognizable from its early shanzhai largely due to increased efforts in R & D and brand building, said a Booz and Co report Shanzhai a Chinese phenomenon.
Other winners in the economy shanzhai include QQ, originally a shanzhai version of ICQ, which now controls 75 of the online market-IM China according to data for 2011 released by iResearch, a cabinet Future Cola board has meanwhile spent copying Pepsi and Coca-Cola whose livery of red-white packaging, it most resembles become the third largest player in the market of local soft drinks, just behind Pepsi by 2011 data published by Euromonitor.
Constrained by competition and rising costs to target higher value and world markets, BYD had to change the design of a number of its cars, including the F3 to avoid prosecution in abroad We are working to develop a unique brand identity that we grow to meet our customers' demands, said Sherry Li, a representative of the company we are very proud of our design changes but with changes in design, BYD lost market share, and the F3 is now the best seller 24 inChina, down from first to report a few years ago during the first six months of 2012, sales of the F3 dropped 40, revenue decline more important than any other car in the top 50.
BYD may take some time to regain the momentum in sales when moving from the model shanzhai looking for higher margins BYD is following the same path taken by another private Chinese automaker Geely lambasted by the automotive press World for its Geely GE a Phantom insolent imitation iconic Rolls Royce, among others, who sought to foreign companies to provide expertise in 2007, the company opened a joint venture with manganese Bronze Holdings on which manufactures London black cabs joint venture led to the development of the Englon Geely model mid-range, and the company is in talks with the UK Government to electrify the fleet of London taxis in 2009, Geely acquired Drivetrain International Systems, a developer of bulk transmission, and finally in 2010, bought the Volvo brand from Ford, bringing access to markets mondi to her.
By strengthening slowly knowhow and capabilities, Geely was able to win high-value customers and high margin It took the better part of 10 years to get where they are today, but it pays in terms how their brands carried, said Russo.
BYD slowly reaches the same approach, in part by entering a 50 50 partnership with Daimler-Mercedes partnership is primarily focused on electric vehicles, but according to BYD Li spokesperson, it affects other parts of the business and BYD partnership with Daimler-Mercedes s relocated more than 100 engineers and quality professionals at the headquarters of BYD, she said, we recognized many improvements in our design and production processes with the help of our expert partners estimate that more of such partnerships are the only way that BYD can catch up with its competitors.
BYD need partnerships so they can be technologically competitive, said Teng car manufacturers owned by CKGSB have done this for 30 years, so they have an advantage in the medium and high market But even in the low range, businesses find competitive advantage they need.
The company is claiming that it will reach the market leader status in the next decade, but it reaches the quality of the brand to OEM abroad, according to Sherry Li In other words, they are catching up with two of four major carmakers in China, SAIC and FAW, and are still far from the Japanese, Korean and American brands once the company gleefully imitated.
This new modesty has become the concrete business development The company develops its own powertrain system and mechanize much of its production line, which, according to Chinese media reports, already had an error rate of 20 30.
Unlike many other brands with a shanzhai past, BYD has an ace to play if it can maintain a reputation for innovation in electric vehicles BYD is a household name now, both inside and outside China, and much of this has to do with their electric vehicle business, even if it's not done very well the company sells only electric vehicles, but it gives their company will have a tech company, said Han Xiong, head of the automotive editor at Yangcheng Evening News in Guangzhou and popular blogger on the Chinese automotive market.
This strong brand is an extremely valuable asset to BYD Chinese companies need to develop capabilities that enhance the image of their brand, says Russo The worst thing is to have the technology you can t price, but BYD over-promised and sub-delivery, he added.
Came up with the concept for the first three hybrid vehicles, plug-in product mass before the GM Volt, the fully electric car F3DM BYD released in China two years of world behind, and it is still facing delays with its intended US will release the company and analysts disagree about the amount of delay was due to a lack of supporting infrastructure, compared to gaps in engineering and safety problems.
The industry analysts were bullish on BYD because of its experience in the manufacture of the battery, giving it a potential advantage in the field of electric cars In 2008, Warren Buffett took a 10 to BYD 230 million, praising the company's battery technology and its role first player map in electric vehicles.
Proving innovative reputation can restore the fortunes of BYD Meanwhile, other operators Shanzhai one time can also make moving from imitation to innovation Booz and Co 2012 China Innovation Innovation Survey shows that China Advantage Next 45 of multinationals in five sectors in China have reported that their Chinese peers were equally or more innovative than themselves Chinese companies 38 over 30 multinational companies need business applicants that research needs of their customers and design products accordingly While 53 Chinese companies said they're working with foreign partners on R & D 40 others said they're pursuing their own R D.
By adapting the products quickly to local needs and pockets and invest in R & D and marketing shanzhai path pursued by Tianyu and BYD is broadly similar, however, the future of this model is uncertain now that the government is looking at counterfeiters intellectual property rights, for a more aggressive prosecution of offenders, to encourage competition for innovation in the domestic market and the export ambitions will force Chinese manufacturers more to make a similar choice to that encountered by BYD and Tianyu.
Anyway, there will be space for imitators at low cost in large markets in China low income While labor costs have increased, the key factor in the success of the model shanzhai China's production capacity remain intact Shanzhai handset manufacturers, for example, are still churning out new models in Shenzhen, leveraging an ecosystem of 30,000 highly specialized companies working across the mobile value chain from design to procurement, production and distribution.
Faced with perhaps the most difficult period in its short history, BYD a chance to redeem himself and become a serious global player, if it can prove its ability to innovate in electric vehicles that will be difficult Russo warned that if anything whether Chinese companies are at a disadvantage compared to foreign companies in the development of electric vehicles, because they lack deep engineering experience that comes with decades in the business or not BYD can develop the technology of the battery possible which is the most critical issue here, Teng said so far, it was much more difficult than expected.
Shanz pm firms have exploded in China on the back of cost cutting and aggressive business models, but there is still a significant need for an outdoors experience for companies that want to go global copy can cause you to the technological frontier, but pushing past it requires hard-won experience is the kind of thing BYD needs a lot of fast.
Chinese automaker BYD is trying to innovate, Chinese carmaker tests.