BYD aims to strengthen presence in Europe through contracts with transport authorities

IHS Automotive caught up with Isbrand Ho, managing director of BYD Europe, based in Rotterdam, to discuss how the automaker plans to increase the penetration of its vehicles in Europe and where the obstacles lie, with special focus on the medium and heavy commercial vehicle (MHCV) segment.

In December 2014 reports suggested that BYD was planning to produce its buses in Europe. State-owned media in China quoted Ho as stating that the automaker planned to build two plants in Europe, with the location being more or less finalised, with one in the United Kingdom and one close to Russia.

In an exclusive interview with IHS Automotive, Isbrand Ho stated that it is currently too early to decide on the exact plant locations for the automaker's production bases in Europe. "We said it was our intention to open two bus manufacturing plants in Europe and that remains true. However, to bring maximum value those plants need to be located close to key customers and, while we continue to work to secure major fleet business, then it would be premature to finally fix plant locations,” said Ho. He added, "The UK and Poland were identified by the media as possible sites and we would not argue that both could be attractive."

BYD's electric buses are not cheap, with a reported price tag of CNY2 million (USD315,000) each. So, who are BYD's European customers? "In the bus market our clients will be both PTAs [public transport authorities] and PTOs [public transport operators] – so both the authorities who run passenger transport and the operators who serve them," said Ho.

Will BYD face competition in the e-buses segment from other manufacturers? "At present, while other makers have introduced a variety of electrified lightweight and small bus models, no one else has yet developed a proven heavy-duty, long-range bus of the type we have introduced. Since BYD is by far the world's largest maker of electric buses, that may not be surprising," said Ho.

With the market for MHCVs in Europe expected to see a slight decline this year, with sales in Central Europe hitting around 50,000 units, while Eastern Europe is forecasted to see sales of just over 100,000 and Western Europe of around 250,000 units, what does BYD expect in 2015 and after in Europe?

"I hesitate to set out our market expectations – but the move toward emissions-free public transport is unstoppable as cities across the world struggle to improve air quality for their citizens and pure electric buses are one of the few solutions which can deliver this," said Ho.

However, despite the current depreciation of the rouble and falling sales in Russia, why does BYD continue to put so much importance on the region?

"Despite its volatile nature, the CIS [Commonwealth of Independent States] represents enormous opportunities for vehicle makers. In our view, those opportunities in the short term are more likely to be for passenger cars and we are watching developments closely at present," said Ho.

BYD saw its stock price plummet in December 2014 on rumours that the Chinese government was reconsidering its plans to bring in electric buses. Recently the company announced it was selling an electronics subsidiary to focus on its core automotive manufacturing business, gaining CNY2.3 billion for the sale of Shenzhen BYD Electronics Components to Holitech Technology. But BYD continues to aim to push its presence in Europe despite concerns elsewhere. New products are also in the pipeline.

"At present we remain in a start-up phase in Europe and our revenues so far have not been significant in the overall BYD picture," said Ho. "However, for the reasons I outlined earlier, we have put major effort into the bus market and in addition our sales of BYD electric taxis and electric forklift trucks are both due for lift off during 2015."

Meanwhile, in addition to electric forklift trucks, BYD is also planning new EV products globally. "We can see that regulators are turning their attention to the explosion in internet deliveries with a resultant increase in potential pollution in urban environments. So, we are in the process of introducing pure electric urban delivery vehicles into our range in China and it would be no surprise if these make their way to Europe in due course,” said Ho.

So does BYD plan to compete in the regular gasoline (petrol) and diesel bus market in Europe? "If you mean by regular buses those with diesel engines then "No, we have no plans to sell any buses in Europe which are not pure electric.”

Without a local production base in Europe, Chinese vehicle makers have the labourious task of shipping vehicles all the way from China as fully built units (FBUs). "You are correct in your assumption that shipping fully completed buses from China to Europe is not particularly efficient, which is why, as I have said, we will be considering local manufacturing bases here when market demand justifies it."

However, often vehicles made in China do not meet European homologation requirements - does this affect BYD buses? "Like any other automotive product our buses have to be homologated for sale in the EU and they are – this is not difficult, its just part of doing business. The e-bus has received all necessary certification," said Ho.

BYD has already begun production in the Americas. The company now has a plant in Brazil's city of Campinas, which has a production capacity of 1,000 buses per annum, according to a BYD news release issued at the start of construction of the facility in 2014.

In North America, BYD announced a manufacturing facility in Lancaster, California, in March 2013. The plant manufactures e-buses as well as iron phosphate batteries, according to a company announcement.

Will BYD look to expand with production bases elsewhere, in addition to those mentioned earlier in Europe?

"My responsibilities are related to Europe and it would not be appropriate for me to comment on other global activities of BYD, other than to confirm that bus plants are operational already in both Brazil and California," said Ho.

Outlook and implications

BYD was only established as an automaker in 2003, although it was conceived in February 1995 as Build Your Dreams (BYD) Company, with a registered capital of CNY2.5 million (USD399,771). By 1997, the company had begun production of lithium-ion batteries. In 1998 and 1999, the company formed subsidiaries outside of China - BYD Europe B.V. was formed in December 1998 and BYD America Corporation founded in November 1999. In 2000, BYD began supplying batteries to Motorola and in 2002 began supplying Nokia.

In January 2003, BYD bought Xian-based Tsinchuan Automobile Company, reportedly a state-owned automaker, giving the battery-maker rights to produce and sell vehicles. By June 2003 the company had rebranded Tsinchuan as BYD Auto Company and established itself with the existing manufacturing base in Xian, China. The first BYD car was produced in September 2005.

In September 2008, US billionaire Warren Buffett decided to take a 10% stake in BYD, buying 250,000,000 shares issued on the Hong Kong Stock Exchange, boosting the company's global image.

In July 2009, BYD bought Hunan Midea Coach Company, granting it permission to manufacture buses and coaches, thereby giving the company access to the commercial vehicle market. The plant has reportedly had CNY3 billion invested in it to develop the 4-square-kilometre base in Changsha in China's Hunan province.

BYD's move into the commercial vehicle segment began with the first bus produced in September 2010. Trials of the K9 e-bus then began in cities across China. In the MHCV segment, therefore, BYD is a bus maker.

BYD has already begun working with government agencies across the globe, as the trend to reduce emissions is pushing public transport authorities to choose cleaner vehicles for their fleets. BYD's e-buses are currently in use in Milan, Barcelona, London, Amsterdam, and other major European cities. In October 2014, 34 of the company's fully electric taxis were put into service in Brussels (see China: 17 October 2014: Belgium introduces BYD e6 on to capital's roads as taxi). The Dutch island of Schiermonnikoog has converted its entire bus fleet to pure-electric BYD e-buses and a fleet of 35 units has been ordered for Amsterdam's Schiphol Airport.

A full version of the interview is available in the February edition of IHS Automotive Commercial Vehicle World magazine.