Very interesting story in today’s Wall Street Journal about BYD, a Chinese firm manufacturing electric vehicles. One of the most interesting points in this article: despite the global economic downturn, BYD is increasing its operations, first in China and then planned for US and Europe, because entry barriers are lower in the electric vehicle market than in the internal combustion vehicle market.
Mr. Wang’s strategy: capitalizing on the electric car’s low barriers to entry. Few products are as complex to develop and produce as gasoline-powered automobiles, which are assembled with thousands of precisely engineered parts. But electric cars use only basic motors and gearboxes, and have relatively few parts. Aside from perfecting the battery itself, they’re far easier and cheaper to build — and that makes for a level playing field.
“It’s almost hopeless for a latecomer like us to compete with GM and other established auto makers with a century of experience in gasoline engines,” said Mr. Wang in an interview, pacing and juggling calls in BYD’s headquarters on the outskirts of Shenzhen. “With electric vehicles, we’re all at the same starting line.”
BYD has other factors working to their advantage — low labor costs, innovations in battery technology — but the demand for electric vehicles is still not particularly large or particularly intense. The article also discusses the constraint that battery technology presents, and some of the innovations that BYD and others are doing to relax those constraints.