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Risk-taker Wang Chuanfu: From batteries to cars

– by Liu Yiding
 
What qualities does an entrepreneur need to have to be successful? The usual answer is business acumen and sweat. But, according to Wang Chuanfu, chairman and president of BYD Co., Ltd., the key is a willingness to take risks.
 
Giving up the “iron rice bowl” to start a private business
Wang Chuanfu was born to a farmer’s family in Wuwei County, Anhui Province, in February 1966. Under the loving care of his parents, he had a carefree childhood. His parents died when he was attending middle school, which left him quiet and determined to study harder. From early on he believed that, as long as he persevered, he could accomplish great things.
 
In July 1987, 21-year-old Wang Chuanfu entered the General Research Institute for Nonferrous Metals in Beijing after graduating from the Central China Polytechnic University, where he majored in metallurgical physics and chemistry.  He worked even harder in the Academy as a graduate student and devoted wholeheartedly to battery research. In just five years, 26-year-old Wang was appointed deputy director of the Academy’s 301 Office and became the youngest section chief. In 1993 Wang was appointed general manager of the Bige Battery Co. set up by the Academy in Shenzhen, China’s Special Economic Zone.
 
At the time, thanks to the rapid popularization of mobile phones, the battery industry was witnessing explosive growth. As a battery specialist, Wang believed that technology was not a problem and that he could turn battery production into a great business if he was able to achieve economies of scale. He made a bold decision: to quit his job and start his own business. This meant giving up the so-called Iron Rice Bowl – employment from the government – and plunging into the unknown terrain of a private business venture. Wang was willing to take the risk, however, believing that the best scenery is found on top of the most precipitous cliff. In February 1995, Wang set up the BYD Science and Technology Co. in Shenzhen with ¥2.5 million ($287,000) he had borrowed from his cousin Lu Xiangyang, an investment manager. With more than 20 employees, the company started making batteries in an old workshop in Shenzhen’s Liantang area.
 
Battery King
It is not difficult to start a business or to turn out a product. What is difficult is to realize maximum output with the least input. This requires vision and a risk-taking spirit, both of which Wang possesses in abundance. 
 
When he recalled the early days of his business, Wang could hardly believe he could have so much courage. At the time, Japan had absolute dominance in the rechargeable battery market. Most domestic factories assembled batteries with imported battery cores. They were barely profitable and had almost no competitiveness. How to change this dire situation? Wang decided to produce the battery core – the vital part of the rechargeable battery that is technology-intensive and highly profitable, using technology he had acquired over the years. Facts show that this was a crucial step Wang took toward success.
 
One day, reading an international battery industry newsletter, Wang Chuanfu found this piece of news: that Japan had decided to stop producing Nickel-Cadmium batteries in its homeland. Wang immediately saw this as a rare development opportunity for China’s battery industry. He decided to start producing Nickel-Cadmium batteries immediately.
 
At the time, a Nickel-Cadmium battery production line in Japan required an investment of tens of millions of RMB yuan. Wang Chuanfu could not afford such a production line. Nor was it available since Japan prohibited its exportation. Therefore, Wang decided to make the key pieces of equipment himself and build a production line on his own. Taking full advantage of China’s abundant labor supply, he divided the production into numerous manual processes to be manned by workers plus some key self-made equipment. With a little more than ¥1 million of investment, he built up a production line able to turn out 4,000 Nickel-Cadmium batteries a day.
 
With a cost advantage that is 40 percent lower than his Japanese counterparts, Wang Chuanfu gradually increased his share of the lower-end battery market. To enter the higher-end market and win orders from big industrial customers, Wang hired talent, bought sophisticated equipment, concentrated on R&D and improved manufacturing technology. As a result, his batteries kept improving in quality. Wang also attended international battery shows and directly contacted such industrial customers as Motorola. With customer base expansion, BYD received increasing orders.
 
In 1996 BYD replaced Sanyo as battery supplier for the DBTEL Group, a cordless telephone maker in Taiwan. Since DBTEL is an original equipment maker (OEM) for Lucent, a telecom giant, BYD had become one of Lucent’s indirect suppliers. In 1997 BYD sold 150 million Nickel-Cadmium batteries to become the fourth biggest producer in the world.
 
At the same time, Wang Chuanfu began R&D for the Nickel-Hydrogen battery and started turning out large quantities of this battery in 1997. Then BYD, which exported half of its products, had to weather the Southeast Asian financial crisis. Wang’s cousin, Lu Xiangyang, invested ¥16.6 million in BYD through his Guangzhou-based investment management company, the Youngy Group. This allowed BYD’s registered capital to increase from ¥4.5 million to ¥30 million. In 1997 BYD sold 19 million Nickel-Hydrogen batteries to become the seventh biggest producer of this battery in the world. 
 
Wang Chuanfu gradually set his eyes on the European, North American and Japanese markets. BYD established its European and North American subsidiaries in 1998 and 2000 respectively. In 1999 and 2000 BYD registered unstoppable growth in these markets and on its list of customers appeared Matsushita, Sony, GE, AT&T and TTI.
 
In 2000 Wang Chuanfu invested heavily in Lithium-ion battery R&D, quickly acquired his own core technologies and became Motorola’s first Chinese supplier of Lithium-ion batteries. In 2001, BYD became the world’s fourth biggest Lithium-ion battery supplier. In the same year, the Chinese upstart was also the world’s second biggest producer of Nickel-Cadmium batteries and third biggest producer of Nickel-Hydrogen batteries. In the year the company reported sales revenues of ¥1.365 billion and a net profit of ¥256 million.
 
Today, BYD is China’s biggest producer of cell phone batteries, commanding a 15 percent share of the world market. It is now competing against Japan’s Sanyo for the title of the world’s biggest supplier of cell phone batteries. At present, BYD ranks first, second and third respectively in the world in Nickel-Cadmium, Nickel-Hydrogen and Lithium-ion batteries.
 
Carmaker
If giving up the Iron Rice Bowl and starting a business of his own was Wang’s first risk-taking endeavor, then deciding to make cars was his second and crazier venture into the unknown. On January 23, 2003, BYD announced acquiring a 77 percent equity share of Xi’an-based Qinchuan Automobile Co. with ¥270 million. Thus, BYD became China’s second privately owned carmaker following Geely Group.
 
In August 2003, Wang Chuanfu surprised the business community by announcing that, together with the Xi’an New and High-Tech Industrial Development Zone and Shaanxi Investment Group, BYD had decided to jointly establish an electric car production line. Investment for the project amounted to ¥2 billion.
 
Wang’s idea is to manufacture China’s and even the world’s best electric car by tapping his technological superiority into battery manufacturing. Wang’s confidence comes from his success in the field of battery production. He believes he can repeat such success in car manufacturing. Wang says he had ample reasons for launching a car project. In three years BYD’s battery production was expected to peak and the company needed another area to expand. And, compared with State-owned enterprises, BYD, a private business, is better positioned to start a new line of business. And for him, China’s huge car market is an irresistible draw.
 
“I am going to devote the second half of my lifetime to making cars,” Wang Chuanfu said.
 
After launching the F3, F6 and F0 family cars over the last three years, BYD announced the market debut of its first plug-in hybrid car, the F3DM, on December 15, 2008. The DM stands for Dual Mode, which refers to a combination of EV (electric vehicle) and HEV (hybrid electric vehicle). It became the world’s first plug-in hybrid electric car mass produced.  
 
In June 2009, Wang Chuanfu plans to launch the world’s first mass produced pure electric car, the e6. So far in car manufacturing, Wang Chuanfu has indeed been making much headway in repeating his success in battery production.
 
Cultivating a courageous team
Wang Chuanfu owes his success to a willingness to take risks and his style of daring to think and act. And success has brought him fame and wealth. But when BYD was listed in Hong Kong stock market, Wang, as its core founder, took only 28 percent equity shares and gave the rest to his team of founders. In 2003 Wang was listed by Forbes magazine as the 13th richest man in China with $328 million worth of assets. And today he is worth a lot more.
 
Personal wealth has not brought any changes to his life. With his wife and his five-year-old son, Wang still lives in a three-room apartment in Shenzhen. He continues to drive an old Lexus. The most expensive item he wears is perhaps an Adidas sports watch, which tells him the real time of many time zones where BYD’s subsidiaries are located.
 
With the growth of personal wealth and corporate expansion, Wang feels greater responsibility and pressure. He says he is now responsible for the livelihood of BYD’s army of workers.
 
“Ours is a public company. We have the responsibility to grow, and grow every year,” Wang said. “Developing an enterprise is like climbing a mountain. Looking for and finding the road to the summit is a learning process. In the process, we should learn to be calm and determined, with eyes set on breakthroughs. The risk-taking spirit brought BYD phenomenal successes in the past. Likewise, for BYD to become a leading carmaker, we continue to need a venturing spirit. And more importantly, we need a corporate team that dares to take risks.”
 Rewritten by Raymond Chen based on the author’s story carried by
Zhonghua Gongshang Shibao or China Industry and Commerce Times

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