IHS Global Insight Perspective | |
Significance | Daimler and BYD have signed a memorandum of understanding to develop electric vehicles jointly in China. BYD is already a dominant player in China's "new energy" industry thanks to its parent unit's long-standing prowess in developing lithium-ion batteries, alternative powertrains, and related components. |
Implications | As part of the deal, the two automakers will develop a new electric car tailored to meet the requirements of Chinese buyers and will create a new brand for marketing this vehicle. Daimler and BYD will also establish a common technology centre in the country to develop, design, and test electric vehicles. |
Outlook | The Chinese government is already offering a series of support measures to boost the development and usage of alternative-fuel vehicles (including those with electric and hybrid powertrains) in the country. This new alliance is a huge opportunity for both companies to exploit the massive growth potential for electric vehicles in the world's biggest automotive market. |
Chinese automaker BYD Company and Germany's Daimler AG have signed a memorandum of understanding (MoU) to develop electric vehicles (EVs) jointly in China. Describing the new alliance as a comprehensive technology partnership to accelerate the development of EVs in the fast-expanding Chinese market, Daimler said in its statement that, "China has the potential to be among the world's largest market for zero-emission vehicles." As part of the agreement, Daimler and BYD intend to develop a new EV specifically tailored to match the requirements of Chinese customers. The vehicle will be marketed under a new brand jointly created and owned by Daimler and BYD. In addition, the two automakers will establish a common technology centre in China to develop, design, and test new EV technology. Daimler and BYD have also agreed to undertake further discussions on jointly exploring additional business opportunities in the fast-expanding Chinese market, if this is in their mutual interests.
Dr Dieter Zetsche, chairman of Daimler's board of management, said that, "With this announcement, we continue to push ahead as a global leader in electric mobility. Daimler's know-how in EV architecture and BYD's excellence in battery technology and e-drive systems are a perfect match. Thus, we will be able to participate in the potential growth of electric mobility in China, currently the largest auto market of the world." Wang Chuanfu, president of BYD, backed the move, stating that through "this technology partnership [with Daimler], we have created a win-win business model [to capitalise on our] complementary competencies."
Outlook and Implications
BYD already has an alliance with German automaker Volkswagen (VW) to develop vehicles with alternative powertrains (see China - Germany: 26 May 2009: Volkswagen Signs MoU with BYD Auto to Explore Hybrid, Electric Vehicle Development) and it is perhaps strange that VW did not look to pursue this opportunity itself. Despite its relatively young age, BYD has made significant progress so far in both battery manufacturing—where it is now one of the top manufacturers of nickel-cadmium (NiCD), nickel-metal hydride (NiMH), and lithium-ion (Li-ion) rechargeable cells—and the manufacture of passenger cars. The automaker received approval for mass production and sales of its F3DM plug-in hybrid vehicle in the Chinese market at the end of 2008 (see China: 28 November 2008: BYD Wins Approval for Sale of Plug-In Hybrid Model in China) and is now following this up with the e6 pure-EV. BYD currently aims to launch its e6 model in the United States and Europe during the second half of this year (see China: 21 January 2010: BYD Receives Regulatory Approval to Produce e6 EV; Aims to Become World's Biggest Carmaker by 2025). The company is also exploring the possibility of tapping into solar energy to power its future range of EVs (see China: 25 January 2010: BYD to Invest US$3.3 bil. in Chinese Solar-Power Battery Plant by 2015).
Meanwhile, Daimler has already revealed that globally it will focus on using alternative powertrains and other fuel-efficient technologies to combat the intensifying competition from local rivals such as BMW and VW's Audi brand. It recently introduced the electric version of its Smart compact car and is due to launch a pure-electric version of its Mercedes-Benz A-Class, and it has been looking at the potential for launching these vehicles in the Chinese market over the past few months (see China: 15 December 2009: Daimler to Expand Chinese JV Production Capacity, Mulling Electric Car Launch). With its many metropolitan areas, China has the potential to be among the world's largest markets for zero-emission vehicles. Moreover, Daimler already has an alliance with the U.S.-based Tesla Motors to develop alternative-fuel vehicles (see Germany - United States: 20 May 2009: Daimler Announces 10% Purchase of Tesla, Future Product Collaboration), and this agreement with BYD will help its pursuits in the sector further.
However, the key challenge for the new Daimler-BYD alliance will be the intense competition from Japanese majors such as Toyota, Nissan, and Mitsubishi, as well as the fast-growing own-brand portfolios of smaller Chinese automakers such as Chery Auto, Geely Group, and the like. The Japanese automakers already have their battery-supply alliances for alternative-fuel vehicles in place with Panasonic, NEC, and GS Yuasa, respectively, while the Chinese peers are eyeing sourcing from Taiwan under the impending cross-strait import treaty (see Taiwan - China: 19 November 2009: Chery to Establish Global Electric Vehicle R&D Centre in Taiwan). Chinese automakers Shanghai Automotive Industry Corporation (SAIC) and Geely Group have also formed alliances with U.S.-based suppliers to increase the development of EVs (see China - United States: 18 December 2009: Chinese Automakers Form Alliance with U.S. Suppliers to Strengthen EV Development).
The support infrastructure is being put in place across China to make EVs commercially viable in the months and years ahead, with a growing network of charging stations being rolled out across the country (see China: 23 February 2010: Chinese JV to Establish Electric Vehicle Charging Stations; German Group to Invest in Battery-Saving Technology). In addition, the government has already announced a 10-billion-yuan (US$1.5-billion) package to promote the usage of alternative-fuel vehicles in public transport, taxi services, and other sectors across 13 local cities including Beijing and Shanghai (see China: 27 January 2010: China Extends Rural Vehicle Subsidy; Shanghai to Encourage Development of Alternative-Fuel Vehicles). There is no doubt that this JV is an exciting development for both companies, with Daimler particularly proactive in investing in its alternative-powertrain and electric car strategy. This new alliance is a huge opportunity for both companies to exploit the massive growth potential for EVs in the world's biggest automotive market.