BYD Co Ltd, the Chinese manufacturer of automobiles and rechargeable batteries, is rethinking its automotive strategy as part of its grander plan to restructure. The company has climbed fast in the Chinese market and has been hailed for its technological innovations. The idea is to shift focus from mass producing gasoline cars towards new energy model batteries that will power the cars of the future. The strategy comes as an announcement amidst the ongoing slump in sales of conventional fuelled batteries.
The company has faced a hard hit recently with declining sales and the ones dreamt of market position similar to that of the likes of Toyota have been shattered. The company experienced plunging profits which now stand in the millions of Yuan figures now. A company that size needs ample revenue to sustain itself in order to survive. The company worth $7.7 billion now has solar panels, car batteries, LED light bulbs, cellphone assembly and gasoline powered buses and cars in its diversified portfolio. The portfolio is now hemorrhaging cash and plans to take a more bolder and riskier move towards greener and efficient battery technology and ditch the gasoline powered batteries altogether.
The BYD executives were even found quoting that they might plan to offload the solar panel business too but it’s all rumors for now and nothing is confirmed. “We’re trying to reposition ourselves around what we do best” – producing advanced but affordable iron-phosphate lithium-ion batteries, one of the executives commented.
The move to green technology
The move is needed in these emerging times when innovation is what keeps a company afloat. BYD plans to phase out the gasoline-powered cars slowly over the next couple of years. The auto sales have suffered quite a lot and now the move is towards greener and efficient technology. If the risk pays off, BYD stands to profit a lot from this move.
BYD plans to save up on a lot of costs and the major one would be the fuel costs. It could expect its technology models to hit the US car showrooms by 2016. China has been promoting the incentive to produce greener technology in order to cut down on its carbon omission and has been providing purchase incentives.
BYD faces troubles
BYD has faced a lot of hurdles along the way. The journey has been difficult with BYD failing to deliver on its promises at times. It has experienced losing some long term investors too.
Warren Buffet, one of the richest man on earth, holds a stake in BYD. The stake is through MidAmerican Energy Holdings, which is a private energy group, controls about 28% of BYD. The company’s main earner was the gasoline car business, positioned as a cash cow, was not effectively utilized. In order to expand sales quality was compromised.
The move to re-shift focus in greener pastures is filled with high risks. One failed move to put the company into serious riskier areas and the company could take a big fall. They either know something we don’t or they’re actually going to take a long time, over 5-10 years, to make this radical transition so that there’s little risk,” Zhang, Head of Shanghai consulting firm Automotive Foresight, commented.
BYD is a world leader in rechargeable batteries and plans to hold this position for long.