BYD Company Case Analysis Free Essay Example

BYD of China has a distinctive competence that allows them to produce a low-cost, environmentally conscious batteries and electric vehicles. The strategic decisions made regarding their supply chain have helped BYD produce batteries with lower costs than leading competitors and used this advantage to become the largest producer of all electric and hybrid vehicles in the world. Increasing government regulations worldwide have ensured a strong future for electric vehicles. Companies like BYD are poised for a decade of growth and success. The automotive industry is at a turning point and if BYD stays committed to their business strategy, they should be able to claim a top spot in automobile manufacturing.

Synopsis

BYD was founded by an innovator, who sought to create high quality batteries to meet the demand of the Chinese market. BYD offers innovative products, inspired by Japanese battery manufacturers, which they claim are safer with half the production cost of alternatives. BYD’s batteries utilize “nontoxic fluids” that will do “less harm to the environment”. (Schroeder & Meyer Goldstein, 2020) By investing in technologies that could reverse engineer superior batteries, BYD has acquired the ability to produce high quality batteries at highly competitive prices. To ensure the success of their supply chain, it is crucial that BYD align their strategic decisions to their low-cost, high-quality operation strategies.

Upon entering the market, BYD selected a cost innovation strategy for manufacturing cell phone and electric vehicle batteries and have consistently made well aligned strategic decisions. In 2000, BYD was the largest producer of cell phone batteries in the world. A few years later, BYD purchased a state automobile manufacturing facility and brought their competitive advantage with them into the new industry. In just 6 years, BYD had the number one plug-in vehicle sold in China and was operating eleven factories. BYD’s operational strategies emphasized cost and quality, as well as improving their supply chain to maximize the efficiency of both battery and vehicle production. According to the case study, the success of the electric vehicle industry is directly correlated to the batteries ability to meet consumer demands. BYD is committed to investing in technology to produce innovative batteries that will help maintain their competitive edge.

Analysis

BYD’s adoption of a cost innovation strategy in the growing electric vehicle market has proven successful in recent years. Bringing the technology of high-quality Japanese battery manufacturers and choosing a location in a manufacturing megacity have allowed BYD to gain a competitive advantage in the electric vehicle industry. BYD has taken substantiative actions to ensure they will be able to meet customer demands, including purchasing a state-run automobile manufacturing facility and investing in expensive production machinery. BYD continues to invest in their battery research and development as their competition will increase with each passing year. Governmental regulations from major cities and countries throughout the world will continue to perpetuate the shift away from combustion and diesel engines for passenger and municipal vehicles. BYD has earned the reputation of a company that is cost conscious, reliable and profitable, so it should come as no surprise that they have attracted investors like Warren Buffet and Berkshire Hathaway, Inc.

BYD has opened offices and manufacturing plants in sixteen countries throughout the world and is strategically located on most continents. According to the case study, BYD sold 229,338 plug-in electric vehicles in 2018. Last year that number jumped up to 593,743 plug-in electric vehicles and they have set a goal to double their sales in 2022. (Kane, 2022) BYD’s alignment of their strategic decisions with their operations, functional and corporate strategies have allowed them to thrive in this growingly competitive market. Toyota, Volkswagen, General Motors, and Tesla are among the largest competitors BYD will face in the future, each promising to add millions of vehicles to the market each year. Additionally, Toyota has decided to invest billions into research and development and launch a fleet of ten all-electric vehicles. Fierce competition awaits BYD, but if they continue to focus on their cost and quality objectives, I believe they will remain profitable and successful.

Recommendations

Companies involved in growing markets, like BYD in the electric vehicle industry, must be aware of market changes and know where to focus their energy and resources. I believe that a major market for electric vehicles will emerge in the United States and the European Union by 2030. This prediction is based on local and federal regulations, which will affect many businesses and individuals. These consumers will no longer be able to purchase gas or diesel vehicles. Some cities such Athens, Paris and Madrid will disallow diesel vehicles within city limits by 2025. (Coren, 2018) Additionally, countries like France, Ireland, and Norway all plan to ban the sale of new gas and diesel vehicles by no later than 2030. (Coren, 2018) The list of countries with impeding regulations includes locations in sixteen countries, with goals ranging from zero emissions to no diesel vehicle sales. These regulations will dramatically change the demands of the automotive industry and manufactures of electric vehicles must be ready to meet the anticipated increase in demand. BYD’s cost innovation strategy, as well as their highly efficient supply chain will allow them to thrive under the increasing industry demands.

BYD focused on battery and automobile manufacturing, as well as producing zero emission transit systems such as electric buses, trucks, and rail transit systems. According to the case study, BYD has already produced seventy-nine zero emission buses for California, and 129 are on order. (Schroeder & Meyer Goldstein, 2020) These buses in CA represent a major industry shift that is occurring in public transit. The Netherlands, the United Kingdom and California are all committed to having zero emissions from vehicles by no later than 2050. California is just one of 16 US states that are transitioning their municipal fleets from traditional fuels to all electric vehicles. (O'Kane, 2020) BYD, who have manufacturing facilities strategically located in California and Indiana, has an opportunity to capitalize on the future needs of the US. In 2035, California will no longer permit the sale of passenger vehicles that have greenhouse gas emissions, sending millions of customers to the electric vehicle market. BYD’s cost innovation strategy will be attractive to US consumers who cannot afford more expensive competitors like Tesla and those who value price over other metrics. Additionally, government contracts are often gained by providing the lowest quote per unit. BYD should put together highly competitive bids to gain contracts with various state and local agencies to become the sole supplier of their respective fleets.

Meanwhile, on the other side the US, New York is making major changes, planning to replace all their school buses with electric, zero emission models in the coming decades. (Lewis, 2022) According to the New York times, there are currently 5,900 buses running within public transportation industry and only fifteen of them are electric. (Hu, Gavrielov, & Ewing, 2022) The state has made plans to add an additional five hundred all electric buses to their fleet. (Hu, Gavrielov, & Ewing, 2022) Additionally, New York has set a goal of “electrifying it’s municipal fleet of nearly 30,000 vehicles” in the next 13 years. (Hu, Gavrielov, & Ewing, 2022) This is yet another niche market that BYD has the opportunity to command if they stay true to their low-cost high-quality strategy.

Conclusion

BYD is not only the leading battery manufacturer of China, they have also become the “largest manufacturer of electric and hybrid vehicles worldwide.” (Schroeder & Meyer Goldstein, 2020) BYD achieved this by capitalizing on an opportunity in an emerging market and applying their distinctive competence in battery manufacturing. As this market has and continues to fill with competitors, consumers will raise their standards for electric vehicles. To ensure their product can satisfy changing customer attributes BYD will need to find innovative solutions to issues such as limited battery range and mechanical problems. By continuing to create innovative products and aligning key decisions with their business and operation strategies, BYD will remain a dominant force in the electric vehicle market.