Dream cars are electric
The mainland vehicle maker BYD is so far struggling to make its dream of leadership in electric cars and buses a reality. Two top analysts put the case for and against
Despite generous subsidies of up to 120,000 yuan (HK$150,000) per vehicle, however, electric vehicles have failed to capture the imaginations of consumers.
Only 11,375 electric vehicles were sold in 2012 out of a car market of close to 20 million. BYD's leading product, the e6, recorded sales of just 1,690, most of which were to a taxi company owned by the Shenzhen government. The short range of most electric vehicles, the high sticker price (the e6 sells for 180,000 yuan after subsidies), a lack of charging stations and an absence of environmental consciousness among Chinese car buyers are likely to continue to weigh negatively on sales for the foreseeable future.
There are green shoots of a recovery emerging, but it remains to be seen whether BYD can make money. To its credit, it has restructured its dealer network, closing a third of its dealers. It has refreshed its product line-up and met modest success with the S6 SUV, now the second best-selling SUV from a domestic Chinese brand. Its new compact cars, L3 and Speed, have also been well received by the market. Two promising vehicles on display at the Shanghai Auto Show in April were the S7 mid-sized SUV and the Sirui mid-sized car. It has become more focused on quality, which was reflected in improved ratings by JD Power's Initial Quality Survey in 2012.
In 2012 BYD would have reported a loss without the 550 million yuan in government subsidies that it received. We expect sales of new vehicle models to help BYD post 18 per cent volume growth in 2013. However, profitability is likely to remain low in this very competitive business. Losses in the solar storage and battery business should narrow, but red ink is likely to persist.