China’s BYD: $25 Billion Reverse Engineering Specialist?
Caing has an interesting article exploring BYD, which is one of China’s fastest-growing manufacturers and has attracted major investments from Warren Buffett (who in 2008 bought a 10% stake in the firm and upped it in August 2009). The firm, whose name stands for “Build Your Dreams,” was founded as a battery and electronics manufacturer in 1995 and in 2002 decided to expand into the automotive sector. While many small Chinese manufacturers are known for designs “inspired” by existing products, BYD has made a science out of copying, cost-reduction, and mass production of batteries, electronics, and cars. In the process, its founder, Wang Chuanfu, has become the richest man in China, with a net worth of $5.1 billion.
In an age of almost fully-mechanized manufacturing, BYD instead uses large, 18th-century style workshops of low-wage employees (of which it has over 130,000), minimizing the use of expensive equipment. The firm’s cars are mostly virtually-identical copies of Toyota models, but sold at half the price. BYD has become quite a success story, becoming the world’s largest supplier of Ni-Cd batteries and the second-largest supplier of Li-Ion batteries, and the firm is applying its reverse engineering experience to an ever-widening array of products. Whether the company’s blatant disregard for intellectual property will allow it to grow outside the Chinese domestic market is questionable. For now, though, even competitors are highly impressed– as one former employee of Chery Auto (another Chinese automaker) shared:
“BYD’s excellent quality imitation cars are tied to the fact that the company has accumulated experience in strict product control from its earlier practices in batteries and the IT sector,” the Chery source said. “Maybe it’s right. They very well may become China’s flagship auto manufacturer.”
Some examples of BYD’s automotive reverse-engineering, starting with the company’s logo: