BYD“Build your Dreams”

Group 10Valentina Iacuitto

Xiao Ya ZhouRoberto ToscanoWen shuo Hua

Chun ZuoRodolfo GuarinoVito Margiotta

1. BYD - Company Overview2. PEST Analysis3. Industry Analysis4. Market Analysis5. Competitors Analysis6. Company Analysis7. Conclusions8. Recommendations

PEST

“Chinaʼs Government is supporting electric-car

technology more than any other country on earth”

Kevin Wale, head of GM China group

PESTPolitical

• January – February 2009: the Chinese government approves the "Adjustment and Vitalization Plan for Auto Industry”

• June 2010: Green Car Subsidy Trials starts in five pilot cities. Subsidies of up to 60,000 RMB ($8,784) for purchasers of pure electric vehicles and plug-in hybrids

• 2010: According to the local government, Shenzhen will have 24,000 electric vehicles and 12,750 charging stations by 2012

PESTPolitical

Government investment in electric car industry

(billions of dollars)

17

5

In the next 10 years, Chinese government will grant 100bn RMB to support new energy cars

China

USA

PESTEconomical

2005 2006 2007 2008 20090

2

4

6

8

10

12

14

16

5.97.34

8.98 9.67

13.64

Total China Vehicle Sales 2005-2009, in Million Units

Sales

23%

• 2009: 13.7 million motor vehicles manufactured in China, surpassing Japan as the largest automobile manufacturer in the world

PESTEconomical

• 2010: China's share of the global electric vehicle market will grow from 2.7% this year to 35% by 2020

• China: 19% world population but less than 1% of world oil reserves2009

• 2010: China invests $34.6 billion in wind, solar, and other green energy products

CHINA – CARS PER 1000 INHABITANTS:

40

USA – CARS PER 1000 INHABITANTS:

675

PESTSocial

• The average age of Chinese car buyers is 35 compared with 50 in the U.S. and Europe

• According to a recent survey, 60% of Chinese respondents show a strong interest for electric vehicles

• Electric mileage and reliability of new energy are main concerns for buyers of NEVs

• 98% of urban Chinese are concerned with climate change, among which 69% are willing to change their living habits

PESTTechnological

• Main technologies: hybrid, electric, fuel-cell • Worldwide increases in the price of petroleum caused

automakers to release hybrids (e.g. Toyota’s Prius), now a core segment of the automotive’s future

• The future of battery electric vehicles depends primarily on cost and availability of batteries with high energy densities, power density, and long life

• The rare element dysprosium is required to fabricate many advanced electric motors and battery systems

PESTTechnological

Residential7% Commercial

3%

Transporta-tion55%

Industrial35%

Global Daily Oil Consumption Breakdown (by application, 2007)

ResidentialCommercialTransportationIndustrial

Total Consumption = 85 million barrel / Day

“I think everyone is going to be surprised at how fast this is going to unfold. In ten years China will

be a 100% electric vehicle market”

Shai Agassi, founder and Ceo of Betterplace.

INDUSTRYANALYSIS

2005 2010 20200

100

200

300

400

500

600

700

800

900

24 45128

675

840 870

Per capita car ownership2005-2020(exp)

(owners/1000persons)

ChinaUSA

TRENDS

1980 1990 2000 2009 2015 2020-30

20

70

120

170

220

2 615

64

140

217

Number of Vehicles on Road1980-2020, in Million Units

Fore

cast Fo

reca

st

TRENDS

TRENDS

• In the next decade, powertrain is available and accepted as alternative energies

• Among them, electricity driven powertrain is the most significant trend

• By 2050, EV and Hybrid EV will account, according to International Energy Agency, for almost 50% of the total market

TRENDS

By 2020, it is expected 25% of new cars could be EV around the world, and China EV market could reach 6 million

2008 20200

1000

2000

3000

4000

5000

6000

7000

1

5600

300

Chinese EV Market Growth (2008 vs 2020 forecast,

in thousands units)

Hybrid EV

Electric EV

5.900

28,1%

0,2%

% Chinese EV/Global EV

2008 20200

5000

10000

15000

20000

25000

1000

20000

Global EV Market Growth (2008 vs 2020 forecast,

in thousands units)

Hybrid EV

Electric EV

O,9%

24,7%

% Global EV/Vehicle

21.000

570

TRENDS

SUPPLIERS

THREAT OF ENTRY

BUYERS

SUBSTITUTES

COMPLEMENTS

INDUSTRY RIVALRY

PORTERANALYSIS

• Capital requirement• Government and legal barriers

• Economies of scale• Absolute cost advantage• Product differentiation

• Access to distribution channel• Retaliation

NEW ENTRANTS

Power battery suppliers• Price sensitivity• Bargaining power

Electric motor suppliers• Price sensitivity• Bargaining power

SUPPLIERS

Dealers• Price sensitivity• Bargaining power

Private customers• Price sensitivity• Bargaining power

Government Fleet buyers

BUYERS

Substitutes-short distance• Gasoline cars• Electric bicycles• Motorcycles• public transportation• Traditional taxi

Substitutes: long distance• Train SUBSTITUTES

INDUSTRY RIVALRY

VW

Toyota

GM

Hyundai

Honda

Nissan

Chery

FAW

Geely

BYD

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

Chinese market share

20092008

COMPLEMENTS

SUPPLIERS

LowRelativepower

THREAT OF ENTRY

BUYERS

SUBSTITUTES

COMPLEMENTS

LowThreat of

entry

HighRelevance

High price sensitivity&

High bargainingpowerHigh

threat

INDUSTRY RIVALRY

Highrivalry

FierceCompetition

MARKET

HORIZONTAL

SEGMENTATION

Competitor Analysis

V

O

L

K

S

W

T O Y O T A

G

N

B

DC H E R Y

G

E

E

L

TOYOTA

V

O

L

K

S

W

T O Y O T A

G

N

B

D

Hybrid world leader: 7 hybrids models, 2 million hybrids vehicles sold so far, bestselling model (Prius)

Strategy

Objectives

Strengths

Weaknesses

Predictions

A hybrid version for every model in the early 2020s - “Sustainable mobility”, products with sustainability at the core

The most significant sales volume (2 million hybris vehicles sold so far) - First mover in the hybrid market with a 15-year R&D program

Focus on hybrid - Lack of strong relationship with Chinese government

More effort on R&D - Hyper competition on a price base – Stronger presence in China (e.g. FAW joint venture)

Toyota

V

O

L

K

S

W

T O Y O T A

G

N

B

D

VOLKSWAGEN

C H E R Y

Volkswagen focuses on efficiency in terms of fuel consumption and co2 emissions (e.g. BlueMotion)Strategy

Objectives

Strengths

Weaknesses

Predictions

By 2018 electric cars comprise 3-5% of its fleet - at least one model on the market by 2012

Strong presence in China, market-share leader (16%) – R&D and know-how on engine efficiency

VW doesn’t offer any model with core NEV technologies - Lack of strong relationship with Chinese government

Focus on NEV for differentiation - Hyper competition on a price base – Stronger presence in China (e.g. FAW joint venture)

Volkswagen

V

O

L

K

S

W

T O Y O T A

C H E R YG

N

G

E

E

LB

D

CHERY

Chery offers 5 electric models (A5BSG, A5ISG, A3ISG, QQEV, M1EV) – Partnership in swap infrastructure with Betterplace

Strategy

Objectives

Strengths

Weaknesses

Predictions

“Safer, More Energy Saving and More Environmental-Friendly” – Find solution to the lack of infrastructure

Largest independent manufacturer - access to foreign advanced technology – best industry quality certification – worldwide presence (USA)

Focus on EV, still not on Plug in cars or Hybrid – lack of relations with Chinese government compared to other domestic manufacturers

Focus on other sustainable technologies - Hyper competition on a price base – Further collaboration with foreigners -

Chery

V

O

L

K

S

W

T O Y O T A

G

N

B

D

GEELY

C H E R Y

G

E

E

L

Geely/Volvo

2 electric models in the Chinese market - In March 2010, currently developing plug-in, all electric models (e.g. C30 DRIVe)

Strategy

Objectives

Strengths

Weaknesses

Predictions

Focus on developing cars that are entirely free of emissions – exploit Volvo’s IP assets

Access to Volvo’s know-how - world presence – Goldman Sachs’ $330m investment – EV and hybrids models

Small domestic market share – will Volvo be a profitable investment?

Leverage Volvo’s brand awareness - Hyper competition on a price base – Expand world presence of production and distribution

COMPANY ANALYSIS

“If I had a car like that in high school, I would have had a lot of dates with girls.”

Warren Buffet

RESOURCES

Tangible

CAPABILITIES

Intangible Human

Financial

RESOURCES

Tangible

CAPABILITIES

Intangible Human

• Plants and Equipment - Xi’an, Shenzen: 500,000 units/year Bejing : car and battery moulds

• Laboratories

• Proving Grounds

Physical

• Zhabuye Salt lake Lithium mine

RESOURCES

Tangible

CAPABILITIES

Intangible Human

• Technology and Patents– BYD ET Power Technology– BYD Dual Mode – Softwares

• Culture• Reputation and Brand - Warren Buffet - Brand awareness

% of surveyed people that recognize the brand as an EV’s producer

RESOURCES

Tangible

CAPABILITIES

Intangible Human

• From 20 employees (1995) to more than 160,000 employees (2009).

• 10,000 engineers graduated from the company’s training programs and 7,000 graduated from the best Chinese schools.

• Engineers’ salary : 600$/700$ per month > roughly 10 times lower than that of an American’s one.

RESOURCES CAPABILITIES

RESOURCES CAPABILITIES

• Focus on young graduates• BYD’s welfare system

RESOURCES CAPABILITIES

• Reverse Engineering• Offensive and defensive actions on the intellectual property rights

RESOURCES CAPABILITIES

• High level of vertical integration

RESOURCES CAPABILITIES

• Revolutionary labor intensive approach

RESOURCES CAPABILITIES

• Subsidies for advertising• Low entry cost for BYD’s dealers

COMPETITIVE ADVANTAGE

Financial assessment of BYD’s competitive advantage

- Reverse engineering- Economies of learning

- Easy access to China’s Lithium biggest mine

- Process Innovation- Non unionized and low cost

labor force- Location advantage

- Culture- Brand awareness- Electric mileage- Easiness of use

- Vertical integration

DRIVERS OF UNIQUENESSCOST DRIVERS

Sustainableresources

Sustainablecapabilities

Competitive advantage

Competitive advantage

Sustainablecapabilities

Competitive advantage

CONCLUSIONS

“It was fantastic, I am amazed by the

quality of the vehicle”.

Bill Gates

BLUE OCEAN

Price Design & Accessories

Security standard

After-sales

Env. impact

ElectricMileage

Easinessof use

BYD

TOYOTA

CHERY

High

Low

3 FUNDAMENTAL ELEMENTS OF A BLUE OCEAN STRATEGY

•Focus

•Divergence

•Compelling tagline

3 FUNDAMENTAL ELEMENTS OF A BLUE OCEAN STRATEGY

•Focus: emphasis on environmental respect,

electric mileage and easiness of use

•Divergence: BYD’s value curve stands apart from

domestic & foreign competitors

•Compelling tagline: “Build Your Dreams”

RECOMMENDATIONS

Buffet asked Wang how BYD would sustain its lead.

“We will never, never rest” Wang replied.

HYBRID

VOLKSWAGEN

INFRASTRUCTURE

Q&A..

Thank You!

Q&A..

Thank You!