While the world debates how to tackle global warming at the COP15 meeting in Copenhagen, China is pushing through its plans to cut fuel emissions.

The Chinese Government has announced that it will subsidise sales of green vehicles in five cities that have been selected for a pilot programme as the country attempts to promote the use of electric, hybrid and fuel cell technologies (see article). The efforts coincide with several Chinese automakers unveiling self-developed green cars.

Among them is BYD Auto, which is 10 per cent owned by US billionaire investor Warren Buffet’s Berkshire Hathaway. BYD had been pushing for incentives to kick-start sales for new energy vehicles – so will this be the boost to push the carmaker to another level?

Platform for success

BYD Auto was created in 2003 after BYD Co Ltd acquired the Tsinchuan Automobile Company. It produces nearly all of the components used in its vehicles from air conditioning units to engines and in December 2008 began producing the world’s first mass produced plug-in hybrid electric vehicle – the BYD F3DM. The vehicle was scheduled to go on sale in Europe during 2010 and in the USA in 2011.

The company has called for green car incentives to provide a platform for success in China where the vehicles would otherwise be too expensive for most members of the public. BYD’s chairman Wang Chuanfu told an industry conference in September that a continued lack of consumer subsidies would doom the future of all green cars in China and while that may be exaggerated it does appear to have been the stumbling block for the F3DM which has only been sold to a relatively small number of fleet customers and has yet to be made available in BYD stores anywhere in China.

BYD was also in the news during this year’s LA Auto Show where it became apparent that the Los Angeles market is likely to be the entry point for the company’s e6 electric car which offers a 205mile range – easily enough to satisfy the demands of nearly every commuter – and can reach a 50 per cent charge in just 10 minutes.

So with BYD declaring that it will “re-launch” the F3DM on home turf in the first quarter of next year; and finally making cautious steps into the US, perhaps a corner has been turned?

Why doubts still linger

Despite offering some eye catching green models and seemingly being ahead of the pack in terms of range and charge times, doubts still linger about the company.

Firstly, the green car incentives in China may not offer the support BYD hopes. The purchase rebates are limited to five, so far unidentified, cities and the announcement from the Chinese Government was so sketchy that it is unlikely to prompt BYD to ship its green cars to dealers.

Much of BYD’s success so far has hinged on its ability to produce batteries using simpler technology than its competitors – it reverted to manual assembly lines with inexpensive labour in an effort to undercut its Japanese rivals, for example. However, the results has been inconsistency and while BYD can boast that it has never had a battery recall, reports in the Wall Street Journal suggest it scraps 15-30 per cent of its batteries because they fail to meet quality standards. That’s well above the industry average of five per cent. While this isn’t a major problem when producing batteries for mobile phones, etc, it becomes a much more significant issue for electric car batteries which are reliant on hundreds of cells.

With the company already missing several launch deadlines, there has been speculation that the F3DM’s battery is simply not ready for mainstream production. The e6 too still has a long way to go as it hasn’t yet passed Chinese safety tests. Questions too loom over whether the investment from MidAmerican was really a hat tip to electric cars or whether its interests lay elsewhere – with BYD’s batteries being tested for the storage of wind generated energy.

So will BYD succeed?

BYD is unquestionably a well-run company headed by a brilliant entrepreneur. Its models have been ahead of the game with a competitive advantage gained thanks to its ability to commoditise technology products and make them cheaply available.

However, while BYD may have gained initial ground in the new energy race its competitors are gathering pace quickly – notably the Nissan LEAF is scheduled to launch next year. BYD meanwhile, seems intent on entering the US market carefully with a conservative strategy to build brand awareness, which will take time.

In the meantime, with larger manufacturers finally catching on to electrification, BYD’s pace-setting technology may be matched or even surpassed and so the next 12 months will be crucial for the company to establish itself sharply and prove it is a legitimate player in the green car race.

Faye Sunderland