The 13th CBU/CAR annual international conference/the 2008 Presidents¡¯ Forum organized by China Business Update, publisher of this magazine, was held on April 16-18 in
The 50:50 equity share requirement may disappear after 2010
Zhang made the statement at the gala welcome dinner on April 16 of CBU/CAR 13th annual international conference in
Speaking on ¡°Perspectives on
As a long-term official with the central government in charge of the automotive sector, Zhang reviewed the phenomenal change of
The future potential of
Asked about if the Chinese government would one day relinquish the current regulation of 50:50 equity share between Chinese and overseas automakers in setting up a vehicle joint venture assembly plant, Zhang reviewed the history of the two automotive industry policies adopted in 1994 and 2004, which mandated the 50:50 equity share requirement.
“The first Automotive Industry Policy was published in 1994,¡± Zhang said, ¡°and by 2004 as China had become a member of the WTO for three years, the government had to revise that policy and issued a new Automotive Industry Development Policy in the same year.¡±
“In the new policy, China gives up the 50:50 equity share requirement on setting up engine and other key component joint ventures. I believe that the 2004 Policy would be valid at most till 2010,¡± Zhang said.
This would be in line, he said, with
Government and association officials agreed in their presentations at CBU/CAR¡¯s annual conference that
Speaking at the 2008 Presidents¡¯ Forum on April 17-18 were Dong Yang, secretary general of the China Association of Automobile Manufacturers (CAAM); Liu Shijin, deputy director of the State Council Development Research Center (DRC); Zhang Ji, deputy director of the Import/Export Office of Machinery and Electronic Products under the Ministry of Commerce; and Xu Changming, director of Economic Research, State Information Center.
A recent study conducted by the DRC, the State Council¡¯s think tank, predicts that market demand for automobiles by 2020 would be 21.84 million units and by 2030 32.42 million, based on an average annual growth rate of 7.1 percent.
The study predicts that the total number of registered automobiles would be 151.7 million by 2020 and 280 million by 2030. Although these are huge numbers, per-capita ownership of automobile in China will still be quite low, according to Liu Shijin, about 100 units per 1,000 people by 2020 and 200 per 1,000 people by 2030 as against 800 units per 1,000 people today in the U.S.
CAAM¡¯s secretary general Dong Yang gave a very simple formula in predicting the future growth of China¡¯s automobile market: adding one million units every year in the next decade.
State Information Center auto analyst Xu Changming believes that the growth rate of passenger vehicle demand in China before 2020 would be 1.5 times that of GDP growth, or an average of 15 percent annually.
“The history of automobile demand in developed countries proves that when the value of R, which is determined by the average vehicle price divided by per-capital GDP, reaches 3, there would be an explosive demand for automobiles,¡± Xu told the conference. Already, the R value in major coastal cities in China has reached around 3, which explains why large numbers of families are buying cars.
Xu predicts that by 2009 or the end of this decade, large number of mid-level income families in China would be able to afford cars.
All panelists believe that in order to maintain a sustainable growth in China¡¯s automobile market, the government must provide a streamlined, coordinated and favorable policy and regulatory environment. Currently the automotive sector is subject to administrations from at least half a dozen different ministries and State level commissions for production license, homologation certification, pricing, sales and distribution, vehicle registration and aftersales service.
The panelists agreed that the recent decision by the National People¡¯s Congress to further reform the central government structure and establish super ministries is a positive step forward in providing better and more coordinated service to the country¡¯s industrial sectors.
“The adjustment in the jurisdiction of government ministries is only one aspect of the recent decision,¡± Li Shijin commented. ¡°More importantly, the decision reflects the central government¡¯s efforts in trying to change the functionality or the role of the government. As the market forces go into play, the government needs to rethink about what it needs to and not to do.¡±
The new Ministry of Industry and Information, said the panelists, promises a more coordinated and effective administration of the country¡¯s automobile sector. MOFCOM¡¯s Zhang Ji said that his ministry is among the first group of ministries in redefining its administrative functions based on the principle of super ministries. ¡°The purpose of the current reform is to increase administrative efficiency and prevent from overlapping government functions,¡± Zhang said.
There is no doubt that the government has a strong role in fostering the development of a country¡¯s industrial sectors. But the panelists also pointed out the important role of the market forces. Over the past 15 years, for example, the government has published two automotive industry policies and numerous regulations in an effort to guide the healthy growth of the automotive sector. But as the market expands, the first Automotive Industry Policy published in 1994 became obsolete after China became a member of the WTO. The second Automotive Industry Development Policy was published in 2004 but it may become obsolete even sooner than the first one due to the rapid changes in the market, the arrival of all multinational automakers and the emergence of aggressive local independent automakers.
“I would like you to notice one fact,¡± Dong Yang told the audience, ¡°that during the 30 years of ¡®Reform and Opening-up¡¯, there have been numerous changes in the central administration of the automobile sector. The interesting thing is, whatever the reasons for the change in the administrative system, whether positive or negative, the automobile sector has continued to grow, by leaps and bounds.¡±
As the automobile industry is becoming an increasingly important pillar industry for China, Liu Shijin believes that China should consider a number of policy choices in preparation for an automobile society. In consumption, necessary regulations must be in place in support of energy efficient and environment-friendly automobiles. In vehicle assembly, entry hurdles in investment and scale set forth by the government have proven unsuccessful and therefore they should focus on safety, emissions, energy efficiency and technical standards instead.
“Fair competition in the market must be ensured so as to improve the efficiency of resource allocation and promote mergers and acquisitions,¡± Liu said. ¡°China¡¯s technology policies must promote innovation and R&D through tax incentives, subsidies and the protection of intellectual property rights.¡±
To better prepare for an automobile society, Liu said China must first reform its energy prices up to the international level, adopt strict but enforceable environmental protection regulations and balance automobile consumption with urban development. Wayne Xing
Building core competitiveness: approaches of JV, State-owned and private carmakers in China
Executives from local Chinese and multinational carmakers agree that competition in the world¡¯s second largest auto market has become one of the fiercest in the world.
They came to this agreement during CBU/CAR¡¯s 13th annual international conference ¨C the 2008 Presidents¡¯ Forum held on April 16-18 in Beijing to discuss Automotive Manufacturing in China: OEM & Supplier Strategies in the Next Decade.
China sold 8.8 million automobiles last year, realizing a double-digit growth for six consecutive years since 2001. Total sales are expected to exceed 10 million units in 2008. With such phenomenal growth, many multinational automakers have set up assembly plants in China plus scores of new local Chinese players have also joined the competition.
Different automakers have taken different approaches in their efforts to enhance their competitiveness and win over customers. Senior executives from State-owned Fujian Motor, private Great Wall Motor, French PSA Peugeot-Citroën and the joint venture Beijing-Hyundai discussed their operational experiences during a panel discussion on ¡°Core Competitiveness of JV and Local Brands in China.¡±
Survival and growth through cooperation
“Fujian Motor has grown over the past 10 years from a small-scale to a sizeable operation thanks to our cross-strait cooperation with Taiwan¡¯s China Motor and international cooperation with leading multinational carmakers such as Daimler, Chrysler and Mitsubishi,¡± said Ling Yuzhang, chairman of Fujian Motor Industry Group Corp.
Located in Fuzhou, capital of southeast China¡¯s Fujian Province across the Taiwan Strait, the small provincial level State-owned automaker took full advantage of its geographical location in setting up a 50:50 joint venture with Taiwan¡¯s China Motor to make 7-11 seat light vans in 1995. By 2003, Southeast Motor realized annual sales of 83,000 units.
In 2006, Mitsubishi Motor, China Motor¡¯s partner took over 25 percent equity share from China Motor in Southeast Motor and the company started assembling the Mitsubishi Lioncel (Lancer).
In 2007 Chrysler and Southeast Motor signed a technology transfer agreement for the latter to assemble the Chrysler Grand Voyager and Dodge Caravan. In the same year, Fujian Motor signed an agreement with Daimler to set up the Fujian Daimler Automotive Co., Ltd. (FJDA) to produce the Benz light bus. Production is scheduled to begin in mid-2009.
“Our past experience shows that we have chosen the right path in trying to develop Fujian¡¯s automobile industry through international cooperation,¡± Ling told the conference.
“As a small-scale local automaker, we should be a student first and learn from experienced multinationals in auto manufacturing before we can venture into developing independent brands,¡± Ling said. ¡°You are welcome to visit our stand at the upcoming Auto China 2008 here in Beijing to find out what we have accomplished.¡±
At the biennial Beijing international auto show, which opened on April 20, Southeast Motor unveiled three independent models: the Dongnan V3 sedan, the Dongnan V5 concept and the Dongnan X1 hybrid coupe concept. The V3 is expected to hit the market in the second half of this year.
“Southeast Motor will continue to cooperate with overseas partners while trying to develop our own brands,¡± said Ling, who is also chairman of the joint venture company. ¡°This will be our strategy for the next decade.¡±
Quality and branding
“It is time for Chinese independent automakers to stress on quality and branding,¡± said Wang Fengying, president of Great Wall Motor Co., Ltd., one of China¡¯s leading independent automakers.
Wang told attendees of the 2008 Presidents¡¯ Forum that most independent Chinese automakers have been trying to expand in scale in recent years, and thus few attached any importance to product quality and brand building. Low cost remains one of the most frequently employed competitive means for many when they try to export to international markets.
“Great Wall has been No. 1 among Chinese brands in both export volume and value for four consecutive years since 2004,¡± Wang said. ¡°Our growing sales and reputation in international markets depend on product quality. Our goal by 2010 is to become a top-quality Chinese vehicle manufacturer in the international market. The three words that best describe our product positioning are quality, quality and quality!¡±
At a press conference on April 20 when Auto China 2008 opened to the media, Wang announced that the goal of her company is ¡°to make top-quality pickups, SUVs and small cars with innovative technology,¡± not low-cost, low-quality vehicles. ¡°We must aim high and develop vehicles for the global market,¡± she said.
Publicly listed at the Hong Kong Stock Exchange, Baoding-based Great Wall Motor is China¡¯s largest pickup and SUV manufacturer and exports to over 60 countries. Last year, Great Wall sold 57,800 units of its CUV Hover alone, up 99.29 percent from the previous year. The company moved into passenger vehicle production last year when it completed construction of a modern assembly plant with an annual capacity of 200,000 units. Currently the company produces the sub-compact GW Peri, Florid and Cool Bear cars and the Cowry MPV.
Multinational carmakers are also confronted with the same issues like the State-owned and private automakers, of how to play out their core competitiveness in the expanding China market.
“PSA Peugeot-Citroën attaches great importance to the China market and we established a special China business unit last year,¡± said Patrick Blain, marketing and product planning director of PSA Peugeot-Citroën China at CBU/CAR¡¯s conference. Blain was speaking on behalf of Claude Vajsman, PSA Peugeot-Citroën China CEO who was traveling overseas.
According to Blain, the Chinese market is unique and Chinese consumers are different from their European counterparts. ¡°By analysis we found that Europeans, especially the French, pay equal attention to styling and the powertrain of an automobile. In China, however, consumers usually put top priority on styling and they are also quite critical about interior trims and comfort,¡± said Blain.
¡°While marketing in China we realized that ¡®romance¡¯ is synonymous with anything French and the styling of the Peugeot and Citroën cars are perceived by the Chinese consumer as ¡®romantic¡¯,¡± said Blain.
But Blain emphasized that PSA Peugeot-Citroën still has to try its best to meet Chinese consumers¡¯ expectations and practical needs. ¡°We need to combine French romance with local Chinese aesthetics in design,¡± he said. ¡°On a basic level there may not be any major difference between the perceptions of a Chinese or European consumer, but there are many essential details that need attention to meet the expectations of the Chinese consumer.¡±
PSA Peugeot-Citroën China now has marketing and product teams based in Beijing and a styling team to be put together soon in Shanghai. The French automaker has one-third French employees and two-thirds Chinese in China.
The French company has a subsidiary, Dongfeng-Peugeot-Citroën Automobile, a 50:50 JV with Dongfeng Motor Corp. founded in 1992. The JV has two factories, one in Wuhan and the other in Xiangfan, both in Central China¡¯s Hubei Province, which assemble Citroën and Peugeot brand vehicles. Employing about 9,000 people, the Sino-French company plans to sell 300,000 vehicles in 2008 and 450,000 in 2009.
Korean brand power
Unlike PSA Peugeot-Citroën¡¯s emphasis on highlighting French romance in styling, Beijing-Hyundai feels the need to improve brand power in addition to optimizing interior production organization.
“Beijing-Hyundai adopts a lean production system and we have a strong competitiveness in internal production organization,¡± said Jae Man Noh, president of Beijing-Hyundai at the CBU/CAR¡¯s conference. But Noh admitted that organizational competitiveness is not enough.
“Although we also have external competitiveness such as pricing and quality,¡± Noh said, ¡°we need to improve in both service and brand power. Beijing-Hyundai lacks efforts in persuading consumers about the quality and brand value of our products. We realize that we have much to do in the area of marketing, brand management and promotion, dealer training, etc.¡±
Beijing-Hyundai was founded in 2002 as a 50:50 equity joint venture between the Beijing Automotive Industry (Holding) Corp. and Hyundai Motor. In little over four years since its founding, Beijing-Hyundai sold a total of 800,000 cars as of June 2007, which was called ¡°Hyundai speed,¡± considered as a miracle for a joint venture in China. But sales demand last year declined significantly forcing the company to twice reduce its sales target from 310,000 units to 290,000 and then to 260,000 only. With the completion of the joint venture¡¯s 2nd assembly plant in Beijing, the company faces a challenge of how to utilize its total capacity of 600,000 units.
Facing a dynamic, diversified but complicated China market, automakers of different backgrounds must position themselves in such a way so as to be able to bring out their core competitiveness, according to the panelists. They must strive to understand this market as well as Chinese consumers and offer quality products with advanced technology at an affordable cost. Alfred Tian
Opportunities & future trend of China¡¯s light commercial and heavy-duty market
With output and sales of China¡¯s commercial vehicle market exceeding 2.5 million units in 2007, of which 700,000 were medium and heavy-duty trucks, China is now the world¡¯s largest commercial vehicle manufacturing country. Adding another two million or so low-speed and three-wheel trucks, annual sales of commercial vehicles would approach five million.
Senior executives from State-owned, joint venture and private commercial vehicle manufacturers offered their views as to how to take advantage of opportunities in the world¡¯s largest commercial vehicle market during CBU/CAR¡¯s 2008 Presidents¡¯ Forum on April 16-18 in Beijing.
DFCV strives to become a global player
“China¡¯s commercial vehicle market has a full potential for growth but is also confronted with challenges,¡± said Huang Gang, vice president of Dongfeng Commercial Vehicle (DFCV), a subsidiary of Dongfeng Motor Co., Ltd. at the conference.
China¡¯s commercial vehicle market still depends much on government policies and regulations, the macro economy environment and the progress of national infrastructure. ¡°We saw a remarkable growth in infrastructure during the past few years,¡± Huang told the audience. ¡°Total length of China¡¯s expressways, for example, exceeded 50,000 kilometers in 2007, with an annual growth rate of over 10 percent.¡±
But in the meantime, the government has also been adopting a series of stricter safety and emission regulations on automotive products. For example, China will implement the State IV emission standards nationally as of 2011, which is now effective in Beijing.
“More players are emerging in the market,¡± said Huang. Prior to 2000, Dongfeng and FAW were the country¡¯s two largest commercial vehicle manufacturers. Over the past eight years, at least 10 new players have emerged in the market. ¡°Competition is becoming fierce and the market is hurt by low-quality products and price wars,¡± Huang said.
“During the past few years, the cost of the raw materials was increased by 50 percent, and the price of steel more than doubled,¡± said Huang, ¡°but because of the price wars we find it hard to raise vehicle prices.¡±
But the good thing is that customers now have more choices as more products are available. ¡°They also have increasingly higher demands for quality and brand image,¡± said Huang. Unlike a few years ago, individual truckers and logistics companies are now more sensitive to performance features than to pricing.
With help from partner Nissan Motor, DFCV is building a brand image of high quality for both Chinese and overseas customers, according to Huang. The company has successfully introduced the QCT, FCT and KPI quality assurance programs from Nissan.
Over the past couple of years, DFCV has launched China¡¯s first Euro IV Kingrun diesel and LNG medium trucks and the Kinland heavy-duty truck for both domestic and overseas consumers. ¡°DFCV¡¯s export sales accounted for 4.6 percent in 2007 and our plan is to reach 10 percent by 2012,¡± Huang said.
Low-speed vehicle maker Wuzheng moves into light truck production
Contrary to DFCV¡¯s decision to no longer make low-end trucks, Wuzheng Group has grown into China¡¯s leading farm truck or low-speed truck manufacturer, with sales in 2007 of 580,000 vehicles (including three-wheel trucks and electric bicycles) valued at ¥7.2 billion ($1.03 billion).
Based in Rizhao, Shandong Province, Wuzheng purchased Hangzhou-based Feidie Automobile in 2005, thus getting the license to make light trucks, SUVs and buses.
“Wuzheng is to make the automotive sector its core business within the next three years,¡± said Jiang Weidong, chairman of privately owned Wuzheng Group at the conference. ¡°But our automotive business will continue to focus, as we have done before with farm trucks, on developing high-quality and low-cost trucks for the rural and suburban markets,¡± Jiang said.
Wuzheng is known for its extremely lean operation and profitability as a farm truck manufacturer. For two consecutive years in 2006 and 2007, Wuzheng was listed by Forbes China as one of the top 100 private companies and No. 1 in terms of return on total assets. Wuzheng does not owe a penny to the banks and never delivers products to dealers without full payment. But the company is known for the quality of its farm trucks. Within the farm truck sector, there is a famous saying about China¡¯s two largest farm truck producers, Wuzheng and Shifeng, both in Shandong Province: ¡°You can hardly afford a Wuzheng, and you can hardly afford fixing a Shifeng.¡±
Since farm trucks became a sector of the automobile industry a few years ago there has been a consolidation, in which most of the 200 manufacturers of the 1970s-1990s period are now bankrupt.
“We are lucky to be able to upgrade our products with better technology and innovation and have identified a niche market based on a comprehensive research and have been able to provide quality but affordable low-speed vehicles for the vast number of rural customers,¡± Jiang said.
“Wuzheng never tried to lower prices in order to attract customers,¡± Jiang told the conference. ¡°From early on our vehicles were made to order. We have won trust from both consumers and our dealers because we make sure that we provide quality products,¡± Jiang said.
Iveco: in China, for China
Just like other multinational commercial vehicle manufacturers who have either set up operations or attempted to enter the China market, Iveco had experienced some difficulties in the past few years. NAVECO, Iveco¡¯s first joint venture in China, failed to achieve its sales plan in the late 1990s.
After some serious analysis of the China market, however, Iveco is fully convinced that China is a huge market with ¡°golden opportunities,¡± said Rudi von Meister, general manager of Iveco China. ¡°We have carefully studied government regulations and the market conditions and believe that we can be successful by working closely with our Chinese partners,¡± von Meister said. ¡°Some multinationals believe that operating in China involves high risks. They have moved too slowly and may have missed the opportunities.¡±
Iveco¡¯s strategy in China, according to von Meister, is to increase production volumes at its joint ventures to satisfy demand from both domestic and international markets. ¡°We have three pillars in support of our China strategies,¡± said von Meister, namely ¡°to grow in the domestic market, to export under both the Iveco and Yuejin brands, and to develop a high-quality supplier base.¡±
In 2006, Iveco entered into a joint venture agreement with Shanghai Automotive Industry (Group) Corp. (SAIC) and Chongqing Hongyan Automobile Co., Ltd. to manufacture heavy-duty trucks and build an engine plant.
“Iveco will introduce new heavy-duty and light commercial vehicles in 2008,¡± said von Meister. ¡°We also plan an annual export of 74,000 units from China in the next three years.¡±
Iveco, a subsidiary of Fiat S.p.A., has been operating in China for more than 20 years. In 1985, it entered into a license agreement with the Nanjing Automotive Industry Corp. (NAC) to produce the Iveco Daily light and medium commercial vehicles. The two sides later formed a joint venture company, NAVECO, in 1996.
Iveco is now the only multinational commercial vehicle maker in China that makes a full-line of commercial vehicles. These include the Iveco light commercial vehicles and vans, Yuejin light and medium trucks and agricultural vehicles, and Hongyan heavy-duty trucks.
“Iveco plans to sell 150,000 units of commercial vehicles annually in three years working together with Chinese partners,¡± said von Meister. Eric Nie
Technology, cost and localization: key factors for success of global Tier 1 suppliers in China
Multinational Tier 1 suppliers agree that the recent rise in the cost of raw materials and labor are posing real pressures on their operations in China.
“The pressure is real and acute,¡± said Dr. Choon T. Chon, president of Delphi Asia Pacific and Delphi China during a Q&A session at CBU/CAR¡¯s 2008 Presidents¡¯ Forum held on April 16-18 in Beijing. ¡°We have been trying to find quality local suppliers in China. In addition, we are also trying to localize design so as to reduce cost. Our bottom line is to ensure our growth margins,¡± Chon said.
Chon was one of three panelists discussing challenges and opportunities of global parts and components manufacturers in supplying competing global and local platforms in China.
Valeo Group China vice president Christian Marsais said Tier 1 suppliers face great pressure from OEMs to cut cost, despite rising cost of raw materials. ¡°As a general rule, multinational OEMs would want the cost of their parts and components 10-20 percent lower than that of their home countries,¡± Marsais said.
“Although local Chinese suppliers offer cheaper products, but for the time being they can only be our potential suppliers because of quality issues,¡± Marsais told the audience. He admitted that for multinational suppliers like Valeo, which are now rooted in the China market for more than 10 years, competition is growing with the arrival of other multinationals as well as the emergence of local players.¡±
Keith Lomason, Magna International China¡¯s executive director, agreed that Tier 1 suppliers are facing tougher challenges of increased cost pressures both upstream and downstream. ¡°Similar to what has been happening in North America and Europe, both OEMs and suppliers in China are faced with the pressure to reduce cost. As a Tier 1 supplier, we normally would like to be given enough lead time from OEMs to work together on reducing cost,¡± Lomason said.
A second challenge for multinational suppliers in China has to deal with not only all international platforms but also platforms created by local Chinese automakers. Marsais said in his presentation that already all of the 18 global platforms with an annual output over one million units are being made in China. While this offers certain benefits such as capacity optimization and flexibility, it also creates standardization and volume risks.
The third challenge is competition from local suppliers and the protection of intellectual property rights. Chon said that although many local suppliers still face issues of quality, some are able to provide good quality parts for OEMs at a cost 30 percent lower than multinational suppliers. ¡°Their product looks even better than ours,¡± Chon said. ¡°And it poses a real challenge for us.¡±
The only way to win over OEMs, according to the panelists, is to provide high quality parts and components with advanced technology at a competitive price. Multinational suppliers have tightened measures of protecting their know-how and IPR, even though they are often confronted with IPR infringement and copying in the aftermarket. ¡°More and more OEMs in China decide to use our products because of our first-rate quality,¡± said Chon.
Asked by the audience to list the three most important factors for success in China, Chon said they are time, speed and knowledge. ¡°Mencius says success depends on time, location and people. In China for a Tier 1 supplier you must come at the right time to the right place with the right knowledge or technology,¡± Chon said.
Marsais said to Valeo, technology, resources and speed are most important. ¡°Valeo is making a great effort in providing localized technology solutions for OEMs in China so as to help our customers develop a multitude of different vehicle products,¡± he said.
To Magna International, the three most important factors are cost, cost and cost. ¡°Ten years ago, the most important element of success was cost and today the same is true,¡± Lomason said. ¡°But human resource is an important factor for the immediate future and technology an important factor for the long-term. You must be able to have a team of engineers to help resolve tough issues of your customers. As a global supplier, you must have the best technology that can meet the requirements of all platforms.¡± Wayne Xing
From DM to EV: BYD¡¯s alternative approach to electric vehicles
After showcasing it F6DM, a dual mode hybrid car, in Detroit and Geneva earlier this year, Wang Chuanfu, chairman of BYD Co., Ltd. and BYD Auto announced at the 2008 Presidents¡¯ Forum that the company would unveil its all-electric vehicle, the e6, at Auto China 2008, China¡¯s largest auto show in Beijing.
The 41-year-old entrepreneur and chairman of the world¡¯s only company that makes both batteries and automobiles told 150 executives from around the world in Beijing that ¡°the era of EV has come¡± with BYD¡¯s R&D efforts to ¡°Build Your Dreams.¡±
According to Wang, batteries for electric vehicles must overcome three main obstacles before they can be commercialized. They must be safe, durable, economical as well as eco-friendly and quickly rechargeable.
Wang told the audience that BYD has made a breakthrough in what he calls ferrous batteries (Fe battery), which have a number of advantages compared with both lead-acid and lithium-ion batteries. Wang claims that his Fe battery does not explode, even if thrown into fire. It has a minimum life of 10 years and can be recharged 2,000 times and still maintain 70 percent of capacity. It does not pollute the environment and can be quickly recharged to 60 percent capacity within 10 minutes. Wang said the Fe battery is also quite affordable, less than $10,000 for the e6 and only half the amount for a F6DM, which is only $4,000-$5,000.
“BYD has mastered the core technologies involved in battery manufacturing,¡± Wang told the audience at CBU/CAR¡¯s 13th annual international conference on April 18. ¡°We have a huge team researching battery technology. We currently have the largest number of people in the world, or close to 400 engineers, involved in battery research, in materials alone,¡± Wang said.
“Our mobile phone lithium-ion batteries rank No. 1 in the world and we are the only company that does not experience any recalls,¡± said Wang. ¡°I believe the Chinese people are neither stupid nor lazy. We are able to accomplish the best as long as we put our minds to it. With our core technologies, we should be able to make the Fe batteries into the world¡¯s most advanced and most competitive batteries, in terms of both quality and cost.¡±
“I am emboldened to declare today that the era of electric vehicles is arriving,¡± Wang announced. He said the e6 would be commercialized in 2009 after the company started to market the F6DM later this year.
The F6DM is a plug-in vehicle which is powered by a Fe battery and a regular gasoline engine, which makes it an EV+HEV. Wang believes that the dual mode will replace the conventional hybrid systems of today and become the most popular driving system in the world before the EV becomes commercialized.
BYD¡¯s F6DM can drive in pure EV mode for 100 km, a normal distance for commuting to work and back home with a full charge. Owners are able to recharge the vehicle overnight using an ordinary outlet. For weekend driving, the regular gasoline engine will automatically kick in after 100 km and the vehicle can travel an additional 330 km on a full tank of gas.
BYD plans to convert all its vehicles, including the existing F3 and F6 and the new F1 and F8, into dual mode. The company is also actively working on exporting its DM models to Europe and North America. Earlier last year, Wang told the media that his e6 would be ¡°BYD¡¯s nuclear weapon, and it may change the world.¡± Wayne Xing
Local design house TJ Innova maps out future competition in China
To Lei Yucheng, chairman of TJ Innova Engineering & Technology Co., Ltd., competition in China¡¯s automobile market is both complex and cruel. It is complex because all of the major multinationals have set up assembly plants and local players have emerged. It is cruel because the current 50 percent market shares owned by joint venture automakers may further decline and China¡¯s future automobile market will be equally divided among three players: JV, private and State-owned.
“Some joint venture automakers are gone,¡± Lei told the audience at CBU/CAR¡¯s 2008 Presidents¡¯ Forum on April 18 in Beijing. ¡°With competition, not every JV assembly will survive. Some may die because of costs,¡± he said.
From the perspective of an automobile designer, Lei believes that for an automaker to survive in China, it must have quality, cost control, innovation and service. A successful company in China must find a balance between low-cost and high-quality.
For a local Chinese automaker without much of a brand equity to survive in a competitive market, it must be able to develop an automobile at half the cost of a South Korean automaker, Lei told the audience, just like the Japanese when they developed their vehicles at 25-50 percent of the cost of Europeans and Koreans at 50 percent of the Japanese.
Likewise a Chinese automaker needs to spend only one-eighths of the investment normally made by a European automaker and their vehicle prices should be between ¥20,000-¥100,000 cheaper than a Western brand in order to survive and compete.
“Currently in China there are five different approaches in automobile R&D,¡± Lei told the conference attendees. The first is the JV approach of getting designs from the headquarters of the foreign partner, which involves a cost of 50-100 million euros. The second approach is defined by such local automakers as Hafei, Changhe, Chang¡¯an and Brilliance-Jinbei to outsource from foreign design houses but unable to pay full cost. The third approach is to conduct in-house design, like what Geely has been doing, with not much experience and professionalism and therefore has little added value and profitability.
The fourth approach is to outsource design from both overseas and local design houses and manufacture vehicles on their own, such as what Great Wall and Jianghuai Auto have been doing. And the fifth approach is to cooperate with design houses to develop vehicle products, such as what BYD has been doing.
“I believe that as competition intensifies, the best approach for local automakers to succeed would be No. 4 and No. 5,¡± Lei said. ¡°The JV approach will have to modify in order to stay competitive. And the 2nd and 3rd approaches would probably phase out.¡±
TJ Innova is