Hype Fades on Electric Cars from China's BYD

· · 8 years ago

Any fears that China’s BYD will quickly dominate the world market for hybrid and electric cars should be put on ice. The company is far off its 2010 sales goals for conventional cars; its stock has fallen about 40 percent so far this year; and production of its electric cars is stuck in neutral.

Why did anybody think that BYD and other Chinese automakers were about to take over global car markets? Let us count the ways:

  • In April 2009, the New York Times ran a front page story outlining how the Detroit Three should start worrying about China’s electric car plans. The Chinese government set out a goal of selling 500,000 electric-drive cars by the end of 2011. (They’re now selling a few thousand per year.)
  • BYD displayed prototypes at major international auto shows. The company made outrageous claims—for example, that its all-electric e6 can travel 250 miles on a single one-hour recharge. BYD said its first car would be available in the U.S. in 2010.
  • Famed investor Warren Buffet invested more than $200 million to acquire a 10 percent stake in BYD. How could the Oracle of Omaha be wrong?
  • In March of this year, the blogosphere lit up with stories about how BYD became the world’s first automaker to offer a mass-produced plug-in hybrid to individual buyers. In truth, the company sold less than 100 units, mostly to government fleets.

China Economic Review today reported that Chinese consumer incentives—approximately $7,300—are not helping with sales of BYD’s F3DM plug-in hybrid. The Shenzhen government bought 14 units in April, 2 in May, and 12 in June. According to the report, the car’s batteries are unreliable, and the company was forced to halt construction of a new factory due to “land use violation.”

Automotive News China [free registration required] reported that BYD hoped to sell 800,000 gas-powered cars this year, but in the first six months of 2010, the company sold only 285,000 units. The publication said that BYD is relying too much on cheap manual labor and copycat vehicle designs. With rising labor costs, its manufacturing operations are getting squeezed.

The reports remind us, once again, to apply a healthy dose of skepticism about any plug-in car until numerous reporters and consumers have taken a successful test drive.

Vaporware, like global warming, transcends international borders.

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