BYD

"In 2020, I could have picked up face masks that were branded Foxconn (the world’s largest electronics contract manufacturer), BYD (the world’s largest electric vehicle manufacturer), or JD.com (China’s second-largest e-commerce platform). Companies retooled some of their production lines to get into the masks and money business. Chinese conglomerates rarely hesitate to go after the core business lines of others. Huawei, for example, expanded from making telecommunications infrastructure equipment to tread on companies like Xiaomi, which makes smartphones. And both have now leapt into the automotive business. This sort of expansion is driven both by the fiercely competitive market environments and by government subsidies that make it easier for companies to try their hand at making new products."

"The results of the Chinese government’s unceasing interventions in the economy are at best ambiguous. [Economic studies have shown](private://read/01k3jwt46q240aq6fe12mqkyr0/16_Notes.xhtml#_idTextAnchor378) that the recipients of Chinese subsidies have, on average, lower productivity growth. Xi’s aggressive promotion of industry has triggered trade wars with not just the United States but also many developing countries as well. China’s tech successes are no convincing demonstration that a wise state can plan the future. When the state shoves its weight around—forcing foreign companies to hand over technology, showering a favored sector with subsidies, injuring a firm while elevating another—it is often far from being helpful. The forced technology transfer agreements meant to prop up China’s state-owned automakers instead robbed their need to invest in their own innovative capacities. China’s automotive successes come from companies like privately owned BYD, which had no foreign partners, after the entrance of wholly owned Tesla forced the company to raise its game."

"Although Wang Chuanfu's 35 billion yuan is clearly behind last year's 43 billion yuan by Huang Guangyu, it is still 2 billion yuan more than this year's runner-up, the Zhang Yin family. This total does not even include the valuation of his unlisted shares. However, in 2007, Wang was ranked 78th on the rich list with a wealth of 8.5 billion; in 2008, he fell beyond the top 100, ranking 103rd with a wealth of 6 billion. His rise to the top has once again turned the public's heated attention towards this new richest man. The main reason for the significant increase in Wang Chuanfu’s fortune from last year’s 6 billion to this year's 35 billion can be attributed to BYD’s phenomenal stock market performance over the past year."

"BYD was founded in 1995 and is a private high-tech enterprise. At the beginning of its establishment, BYD had only 20 employees and was virtually unknown in Shenzhen, a city filled with many enterprises. However, unexpectedly, 14 years later, it developed into a high-tech private enterprise listed in Hong Kong. Now, BYD has built nine major production bases in Guangdong, Beijing, Shaanxi, Shanghai, and other places, covering nearly 7 million square meters in total area, and has branches or offices in the United States, Europe, Japan, and other places, with a total of more than 130,000 employees and total assets of nearly 35 billion yuan."

"On September 29, 2008, Buffett's investment flagship Berkshire Hathaway announced that its subsidiary MidAmerican Energy had signed a strategic investment and share subscription agreement with BYD. According to the agreement, Buffett would purchase 225 million shares of BYD at HK$8 per share, approximately 10% of BYD's shares after the offering. This was Buffett's first long-term strategic investment in a Chinese private enterprise, and he also became BYD's largest overseas shareholder. Amidst a global financial turmoil and the continuous shrinkage of equity investments, the "Stock God" Buffett chose to invest in BYD, the deep implications of which are worth pondering."

"On August 2007, during the BYD F6 launch ceremony, Wang Chuanfu made a surprising statement: "The future belongs to hybrid and electric vehicles, not gasoline cars. BYD plans to become China's number one car manufacturer by 2015 and aims to exceed 10 million sales by 2025, surpassing Toyota to become the world's number one.""

"⁠ In 2009, BYD planned to launch pure electric vehicles, realizing the dream pursued by the global automobile industry 20 years ahead of schedule. Without a doubt, BYD’s rapid success is like a financial fairytale, and the creator of this fairytale is the public’s view of a “technology fanatic,” BYD’s leader—Wang Chuanfu."

"Third, having his own core technology. This rich man, who became wealthy through technology, did not neglect his pursuit of technological advancements for the sake of commercial profit. He spent most of his time in the research institute, mastering all technical details of BYD. An employee of BYD described Wang Chuanfu: “He does not need to show off to be seen as a role model by his employees. Everyone in the company can feel the strong ‘Wang style.’ He is not just a boss but also a spiritual leader.” It is said "technology reigns supreme"; in the automotive industry, if you do not focus on R&D and technological upgrades, even if you can capture part of the market with one or two models in the short term, it is difficult to remain at the forefront through automotive generational changes."

"In 2003, BYD entered the automobile industry by acquiring Xi'an Qin Chuan, beginning its journey in the development of national independent brand automobiles. Starting from manufacturing batteries and transitioning to automobile manufacturing, BYD was clearly playing the role of an outsider. However, BYD took advantage of the reputation of "independent intellectual property rights" and the acquisition of Qin Chuan Automobile to gain a first-mover advantage relative to other newcomers."

"When talking about why he was optimistic about BYD, Buffett pointed out that he was deeply impressed by Wang Chuanfu's past management achievements. After Buffett's investment, BYD's stock price began to rise rapidly, soaring all the way beyond 60 Hong Kong dollars, with Buffett's investment yield exceeding 500%. The stunning upward trajectory not only made Buffett hugely profitable but also turned Wang Chuanfu into an influential figure in the industry."

"BYD started by manufacturing nickel-cadmium batteries for mobile phones. It has moved from nickel-cadmium batteries to nickel-metal hydride batteries, and then to lithium batteries, following a development path from low-end to high-end."

"Currently, BYD owns two major industry groups: IT and automobiles. Its main customers are top-tier international communication industry clients such as Nokia, Motorola, and Samsung. As a global leader in secondary rechargeable battery manufacturing, BYD's IT and electronic components industry has covered all core components and assembly business of mobile phones, with market shares of nickel batteries, lithium batteries for mobile phones, and mobile phone keypads leading globally."

"On September 27, 2008, the famous American investor Warren Buffett announced his investment in BYD shares. Buffett's investment to some extent represents global recognition of BYD's brand value, which is of strategic significance for accelerating the promotion of BYD’s new energy vehicles and other environmental protection products in North America, Europe, and worldwide."

"In 2005, BYD released the new car F3, and in just over a year, the sales volume of F3 reached 100,000 vehicles. Subsequently, F3R, F6, F0 were launched in succession. In 2008, BYD’s car sales totaled 200,000 vehicles. In 2009, BYD's sales target for automobiles was 400,000 vehicles, a rarity in the industry for such a young Chinese car manufacturer to achieve continuous exponential growth. Currently, BYD F3 has successfully joined the “Monthly Sales over Twenty Thousand Club,” maintaining the number one position in sales for several consecutive months and creating a myth in the domestic automobile industry."

"BYD has managed to become the number one in the domestic battery business and number two in the world."

"In fact, from a simple fact, we can glimpse the secret of its success—last year alone BYD applied for multiple patents. BYD people understand that technology is essential for development. Starting from manufacturing mobile phone batteries, BYD became the world’s number one “Lithium Battery King” in just a few years."

"On July 31, 2002, BYD was listed on the Main Board in Hong Kong."

"After switching to automobile manufacturing, it initially focused on electric vehicles, which represent the international green trend and the direction of the industry. In January 2006, BYD established the Electric Vehicle Research Institute, dedicated to the research and trial production of whole electric vehicles and components."

"On October 6, 2008, BYD invested nearly 200 million yuan to acquire the semiconductor manufacturer Ningbo Zhongwei, integrating the upstream industry chain of electric vehicles, accelerating BYD's commercialization pace of electric vehicles. Via this acquisition, BYD enhanced its R&D and production capabilities for electric vehicle drive motors."

"Wang Chuanfu likes to wear jackets in the company, which he calls “work clothes,” making him look no different from an ordinary engineer. He says it's more convenient to crawl around in the workshop, so this loose jacket is the most popular outfit among the senior management of BYD. When Wang Chuanfu, wearing his jacket and holding molds, walks into his office, he looks more like an engineer. In his office, piles of technical books are stacked up."

"Wang Chuanfu often says that he is always proving himself, from the founding of BYD to now, aiming to rewrite the history of automobile industry development, continually proving to everyone amidst numerous doubts: “I can, BYD can.” He says he has never stopped learning and practicing, although it is not easy, but he knows that this research work "cannot be substituted by anyone." He describes himself as a "hard-working person," not feeling secure if he does not personally disassemble and fully understand the structure of batteries. Once he thoroughly understands an industry, he can “drive the car very fast.”"

"In 2009, when a senior executive from BYD attended the Paris Motor Show and saw Ford employees still staying in the luxurious George V Hotel, he was very "shocked." To save costs, BYD executives even rented a house in the suburbs when attending the Detroit Auto Show. And as early as 2008, all of BYD's businesses were already profitable."

"Originally, when starting his business, Wang Chuanfu plunged into the mobile phone battery industry. From nickel batteries to lithium batteries, BYD calmly caught up, once making industry giants like Sony and Sanyo fearful. Just when people were amazed at Wang Chuanfu's aggressive stance in the battery industry, he swiftly shifted to the highly competitive automobile industry. However, the glory in the battery industry did not mean that Wang Chuanfu could also be successful in the automotive industry."

"In BYD's automotive engineering institute located in Songjiang, Shanghai, there are thousands of automotive engineers, 90% of whom came to BYD right after college. Every year, Wang Chuanfu has these young engineers learn to dismantle cars, and he also requires them to write detailed reports after disassembling. Initially, some young people were reluctant to casually dismantle new cars, especially expensive ones. Knowing this, Wang Chuanfu immediately scratched his own Mercedes with a key and then said: "Now, you can dismantle my car.""

"Fifth, BYD achieved the peak of "Shanzhai prowess." The "Shanzhai path" can be said to have been taken by every domestic car brand, but BYD traveled it most successfully. The popular BYD F3, upon its release, faced criticism for its "obvious Shanzhai traces." BYD F3's parts could even be used interchangeably with those of the Toyota Corolla, to the extent that someone could remove BYD’s logo and replace it with a Corolla’s logo. Regarding this, Wang Chuanfu did not shy away, but rather described such imitation as "standing on the shoulders of giants." He stated, "We indeed referred to some excellent foreign brands, using their non-patented technologies and excluded the patented ones. The F3 sells so well because it is well-designed." Wang Chuanfu applied his "human wave tactic" and "Shanzhai tactic" from battery production to car manufacturing, which, using China's plentiful and cheap labor resources, greatly reduced production costs and thus strengthened his market competitiveness. From batteries to mobile phones to automobiles, Wang Chuanfu has always faced pressure. Nevertheless, he "persistently went his own way," even the electric car project, which came under criticism from top global investment banks, was pushed forward by his confidence and passion. His personality and experience have made him a dominant figure within the company. He once said, "I believe in this company, and I can't leave; I must be the one to manage it... Our company has only one voice." But even as a dominant figure, Wang Chuanfu is known for recognizing and utilizing talents. Many individuals, like Wang Chuanfu, refused to settle for the status quo and were recruited under his command, becoming key pillars in BYD's development, and Wang Chuanfu has generously rewarded them."

"Fourth, cost-saving is the key to victory. At the onset of BYD's venture to cut costs, Wang Chuanfu broke down the battery production process and independently developed some key equipment, completing production through a combination of semi-automatic and manual labor. This approach reduced battery production costs by 40% compared to Japanese manufacturers. Through disassembling, learning, transforming, and innovating, Wang Chuanfu eventually became known as China's "Battery King." After entering the automotive industry in 2003, Wang Chuanfu, who had never been involved in this field, still relied on BYD's "semi-automated plus manual" production model. From battery production lines to subsequent car molds, Wang Chuanfu could be said to have utilized human resources to the utmost. Additionally, many of BYD's production facilities are self-sufficient. For example, the BYD F3 now sells over 20,000 units a month; it is said that Toyota once purchased it to study and was at one point surprised at how closely BYD could mimic their car, yet offer it at a much cheaper price than the Corolla."

"First, Warren Buffett invested in BYD. The might of the "Oracle of Omaha" in the stock market is formidable. With his support, BYD soared from a newcomer to a phoenix, and it was easy for Wang Chuanfu to become the richest man. Buffett's favor was not because he had much affection for BYD, but because he recognized the prospective significance of BYD’s position in the new energy sector. Thanks to Buffett, BYD's stock price skyrocketed more than eightfold from around 8 Hong Kong dollars the previous year. In a short period, the name "Buffett" increased Wang Chuanfu's wealth by about 29 billion yuan. No wonder everyone considers Buffett a benefactor to Wang Chuanfu."

"Therefore, people often talk about how Wang Chuanfu still lives in a two-bedroom, one-living room apartment in Kuiyong Town, Longgang District, Shenzhen, drives an old Lexus, and his only valuable possession is an Adidas sports watch, which accurately tells him whether BYD's global institutions are operating during the day or night. Wang Chuanfu is a low-profile person in the auto circle. For most people, the satisfaction derived from self-actualization far exceeds the modest personal enjoyment of "eating well and using good." This former farm boy from Wuwei County, Chaohu, Anhui, fears nothing more than mediocrity."

"At BYD's Shenzhen headquarters, there are staff apartments, football fields, kindergartens, supermarkets, and middle schools."

"In 2008, Wang Chuanfu's salary was 2.65 million US dollars. But he and his wife and young children have always lived in a BYD dormitory, a two-bedroom apartment in Kuiyong Town, Longgang District, Shenzhen, which is no different from other engineers in the company. Wang Chuanfu clearly stated: “I am not interested in wealth.” After BYD went public, he simply distributed his 15% shareholding to more than twenty managers and engineers in the company. However, the outwardly calm and serene Wang Chuanfu is inherently "combative." After becoming the well-known "Battery King," Wang Chuanfu once said: "Having no competitors is so boring.""

"For years, Cupertino had flown engineers into China by the planeload to oversee the ramping up of new products. Prior to Covid, Apple was booking “50 business class seats daily” from San Francisco to Shanghai, according to an accidental leak from United Airlines revealing Apple as its largest corporate customer. Suddenly that wasn’t possible. But every product Apple made had an in-region support team, and they were forced to step up their game. Apple’s partners, too—from Foxconn, Luxshare, and BYD to deeper layers in the supply chain—knew what they were doing. Apple had trained their engineers and, at times, orchestrated mini-crises to let the schedule slip and see how the suppliers would react. “I intentionally let one whole build just basically crater,” says a former engineering manager, describing an event before the pandemic. “It was an example for them to learn what it takes.” It was like the old parable about teaching a man to fish. “All of these suppliers, or a lot of them, have gotten to the point where they understand what it takes to develop an Apple product,” this person says. “And so when we stepped away, there’s a machine that’s already enabled, that knows what it takes to build a product.”"

"The presence of a single predator causes the whole tank of sardines to better themselves. Beijing, it’s often said, wanted Tesla to play the role of the catfish for the EV industry. The theory is partly misleading. It implies that Tesla just *inspires* competitors to do better, but Tesla works intimately with and improves its third-party vendors, who then supply the local EV brands such as BYD. This, of course, is the Apple model, and Parikh—who played a key role in establishing the Shanghai Gigafactory—specifically hired engineers with Apple experience to set the plan into motion. “Working with Tesla is not easy,” Parikh says. “But the mindset of suppliers is ‘We’re going to become very strong if we can adapt.’ It’s just like working with Apple. If they can unlock the scalability, then they can grow with Apple, or grow with Tesla, and become world-class suppliers.”"