BYD (“Build Your Dream”)

Chinese battery maker, BYD and value addition as OE supplier.

About BYD BYD is ranked No. 1 at the top of Bloomberg's and Business Week's 2009 Tech 100 List and is the leading manufacturer of advanced, environmentally-friendly battery technologies like the BYD's Iron Phosphate battery. BYD's solar panels and LED Lighting systems have CEC, TUV/CE and UL listings, and the company enjoys rapid growth in consumer electronics space and electrified transportation sector (including EVs, electric buses and EV chargers) under its BYD brand. BYD is the fastest-growing Chinese automotive and green energy technology enterprise. The Company trades on the Exchange (HKE) under the ticker numbers (HK.0285 – BYD Electronics) and (HK.1211 – BYD Company Ltd.), as well as on the under the ticker number (002594 - BYD Company Ltd.).

Established in 1995, BYD is a top high-tech enterprise in specializing in IT, automobile, and new energy.BYD is the largest supplier of rechargeable batteries in the globe, and has the largest market share for Nickel-cadmium batteries, handset Li-ion batteries, cell-phone chargers and keypads worldwide. It also has the second largest market share for cell-phone shells in the globe. BYD Auto becomes the most innovative independent national auto brand and leads the field of electric vehicles with unique technologies.In the field of new energy, BYD has developed green products such as solar farm, battery station, , and LED, etc. It will continue to lead the new energy revolution in the world!

Events

 1995 Founded by Mr. .  2000 Qualified as a Li-ion battery supplier for Motorola  2002 Qualified as a Li-ion battery supplier for Nokia Listed on the Hong Kong Exchange (1211.HK) (the highest H-share listing in Exchange history)  2007 BYD Electronic Co. successfully listed (0285.HK)  2008 BYD purchased SinoMOS Semiconductor Co. BYD F3DM launches in the market (1st MP PHEV) invested 10% of BYD with the direction from Mr.  2009 Started Shaoguan Production Base Project of the biggest testing track in China  2010 Signed Memorandum of Understanding with Daimler Mercedes-Benz Established North American headquarters in Mr. Warren Buffett, Mr. Charlie Munger and Mr. Bill Gates Visited BYD Mr. Warren Buffet, Charlie Munger and Bill Gates witnessed the launch of eBUS, M6 in China BYD donated 1000 sets of HES (Home Energy System) to Tibet

BYD and value addition as OE supplier

BYD—a rapidly-growing automotive and green energy technology company in China—to integrate DTS Neural Surround™and DTS Digital SurroundTM technologies into BYD vehicles.

BYD is China's first domestic OEM to incorporate DTS premier sound technology, enabling BYD car owners to experience immersive, multi-channel audio on the go.

Their partnership with DTS enables them to achieve this by facilitating the delivery of a superior audio entertainment experience to BYD car owners. Integration of DTS premium audio transforms the BYD vehicle into an auditorium transmitting high-definition 5.1 surround sound, adding significant value for the owners and creating a unique differentiating factor for BYD.

DTS is partnering with China's FM Radio Broadcasters, which leverage DTS Neural Surround technology for FM radio programming to broadcast DTS 5.1 content, enabling BYD owners to consume high-definition audio content when listening to the GZBN FM radio channel, in addition to other DTS-broadcasted stations in their vehicles. BYD car owners will also be able to enjoy widely available DTS CDs in 5.1 surround sound on the go. DTS Neural Surround creates a seamless conversion between stereo and surround sound audio through a special capture, edit, management and delivery process. The DTS Digital Surround high- quality audio codec delivers greater frequency response and dynamic range for discrete surround sound. The end result is an immersive audio experience that consumers can enjoy while driving BYD vehicles.

BYD has been OEM (Original Equipment Manufacturer) for many world-leading brands, such as Nokia, Apple, Samsung, Motorola, Toshiba, etc with international quality management methods and tools, and is one of the enterprises which first adopt the Six Sigma management system. In the auto field, through continually upgrading technology and cooperating with world-leading suppliers, like Bosch, PPG and BorgWarner, it has created high-quality products. By adopting the IQS standardized quality management system and strict checks at each stage of production, and incorporating quality consciousness into business management, it has brought real quality improvements. First-class suppliers provide details assurance.

It is understood that currently, the windscreen wiper blades on BYD autos have already adopted Bosch boneless wiper blades as standard. Bosch have also become the suppliers of the brake systems, further improving the overall safety of the automobile. In terms of processes, BYD has invested close to100 million RMB to install 24 painting robots to ensure a full and attractive coat of paint. It acquired the Japanese die factory of Ogihara at Tatebayashi. The factory has been operating for over 40 years and has die technology of an international standard.

To increase the overall quality of the auto, BYD has also significantly upgraded four wheel alignment equipment, automobile clearance and rust proofing, for example by introducing wax injection and leveraging cavity wax injection technology, thus extending the duration of rust proofing of the car body. In terms of car body design, BYD has also paid more attention to safety. Taking the S6 as an example, the application of a large quantity of high-strength and ultra high-strength steel sheets significantly improved the safety of the S6 car body.

In 2011, BYD raised millions developing a second crash-test laboratory in Shenzhen in accordance with European and US crash-testing standards. It is planned to go into operation in the latter half of this year. Substantial increase in sales depends on improvement in quality. BYD continues to work on quality by leveraging the inherent technological strength and quality of products, to give consumers outstanding quality of products and service.

Challenges in the respective domain- Macro and micro environment issues.

Compared with other state-run auto companies such as Corporation, BYD didn’t get wide support from the government. Looking forward, the top concern for BYD is neither funding nor subsidies but to ―get its name out for selling good quality .

The challenge is twofold.  First of all they to prove to the Americans that the quality of the cars is good,  Then they also have to show them the technology is solid.

Auto market, stating that petroleum-powered vehicles are not sustainable due to the massive demand, and that electric vehicles are imperative.

BYD is receiving subsidies, land and low cost resources from the Chinese government,

China is aggressively pushing forward a plan to speed up the development of new energy vehicles, which include financial subsidies as well as 10 billion yuan (US$1.5 billion) investment to help car makers upgrade technologies. Several car makers, including SAIC Motor Corp, Chang'an Auto Group and BYD Auto Co Ltd, have poured a huge amount of funds into investment and offered various new models of green cars to meet demand.

Pricing strategy:

The company has a goal of reducing the cost of solar panels by 10 percent a year to make them more affordable to the general public.

Shares of BYD, the Chinese battery and maker in which Warren Buffett is a major investor, tumbled in Hong Kong trading Wednesday after an analyst in China slashed his firm's target price for the stock to virtually nothing.

BYD intended to gain Competitive Advantages through Cost advantage and quest to be the lowest cost producer, but The biggest challenge for them now is to bring down the initial cost, BYD would like to sell the car for about the same price as conventional vehicles, and win over auto buyers by offering them lower operating costs and higher performance. The only way to conquer this market is to provide a product that is comparable at the beginning and superior in the end, There are not many in the world that have comparable experience and expertise. The BYD technology is super safe, its batteries will last a long time and they will cost less than competitors. BYD’s electric Cars will be much cheaper than competitors.

Nature of business marketing

Business Areas

A. It business: B. Auto business C. New energy business  Solar farm  Battery energy storage station  Electric vehicle BYD Auto Co., Ltd, established BYD Auto to enter the field of automobile manufacturing and sales began the development of national self-brand vehicles journey.

This sub-divided into four chapters, from different angles, using marketing theory tools to an analysis of China’s auto market, and future marketing direction of BYD were thinking and theoretical exploration.

The first chapter introduces the BYD Group, BYD Auto to China’s current status of the automotive industry, BYD Auto’s current market situation and future outlook for the automotive market.

Chapter II, mainly through the analysis of the social environment and the competitive environment of the industry to find the future market opportunities and threats that exist. China’s automotive market, the continuous rapid growth and continuous expansion of the total size, so that the international status of China’s auto market significantly improve China’s auto market has become the world auto market an important part of an integral. The rapid development of automobile industry in 2009, making China the world’s No. 1 auto producer and consumer. Statistics show that in 2009, domestic car sales 13.791 million, and 13.6448 million, an increase of 48.30% and 46.15%. Passenger car sales 10.3838 million and 10.3313 million, an increase of 54.11% and 52.93%; commercial sales 3.4072 million and 3.3135 million, an increase of 33.02% and 28.39%. China has become the global automotive market growth to promote a major force

SWOT ANALYSIS

Strengths:

• BYD has rapidly grown to become the world’s second largest manufacturer of rechargeable batteries. • BYD has become the largest Chinese supplier (fourth largest global) of lithium ion batteries to cell phone manufacturers.

• BYD has a strong base of workers of 17,000 workers with a daily output of over 2 million units.

• BYD has developed deep capabilities in process engineering enabling it to enjoy a significant cost advantage over global competitors. BYD has significantly lower annual capital expenditure versus typical Japanese firms (as much as 10 times less).

• BYD has continuously invested in both product and process R&D (roughly 2% of revenues) which enabled it to have a better competitive advantage versus other Chinese competitors.

• Availability of Cash after raising capital through an IPO on the .

Weaknesses:

• BYD suffers from a high turnover rate of about 10% to 20% in its manufacturing workforce. This is due to the fact that 95% of the workers were young women coming from smaller inland villages throughout china and returning back to their home villages after few years.

• Adopting a labor intensive approach introduces some variability in the production performance.

Opportunities:

• Increasing its capabilities in component manufacturing, BYD can strengthen its position to integrate further into the process of phone assembly. The addition of assembly services would allow BYD to offer a ―one stop‖ solution to OEM’s for the outsourced manufacturing of their products.

• BYD can also explore new vertical opportunities by owning rather than contracting for assets putting more control under its whole supply chain. BYD can start expanding vertically to have a vertical integration of the whole supply chain. 95% of the work is done internally (e.g. design of tooling and molds) putting more processes under its control and allowing getting benefits in both cost and quality.

Threat

 Economic :Artificially low Yuan.  Technology : Current electric grids cannot satisfy ZEV demand .  Supply :Leatheam Supply.  Substitute : Consumer ZEV.

Distribution channel issues

 BYD hasn’t gone directly to retail. Instead they decided to take on the American market from a different route: the fleet vehicle. According to Li, the market of individual buyers of electrical vehicles is not mature; both because consumers lack confidence in the new technology and the cost of charging the vehicle in the middle of the day still remains a major obstacle. Fleet vehicles will solve the problem to a certain degree, as Hertz rental company will spare the cost of charging by building charging stations at certain locations.  BYD has begun consolidating its distribution network. As from present, one greater regional sales manager will be responsible for all sales activities and dealers in a region, while one sub-regional manager will be responsible for four to five outlets.  One BYD dealer said that BYD has reduced its number of dealers to 800 - compared to BYD's record-high of 1,200 dealers. The dealer also suggests that 500 should be an optimal number of dealers for BYD.  According to the distributor of BYD in Shenzhen, since F3DM low-carbon dual-model electric vehicle going on market, 14 have been sold on the terminal market with total orders of more than 500.  According to relevant information, the actual price of F3DM has been raised by 50,000 Yuan from 169,800 Yuan for relieving the current contradiction of demand and supply  Comparing with other types of vehicle of BYD, the ordering time for F3DM low carbon vehicle will be longer. It’s said that some of the customers calling for consultation are from Hong Kong, and even oversea.

Technology and Product issues.

Listed in the Hong Kong stock exchange, BYD’s share prices rebounded in the past four months after it hit the bottom in October 2011. Investors were disappointed by its failure to deliver an electric car plan with prices peaking in February 2012.

Also, whether a Chinese company is backed by the Chinese government, is a controversial business advantage in the U.S.

In the auto field, through continually upgrading technology and cooperating with world- leading suppliers, like Bosch, PPG and BorgWarner, it has created high-quality products. By adopting the IQS standardized quality management system and strict checks at each stage of production, and incorporating quality consciousness into business management, it has brought real quality improvements. First-class suppliers provide details assurance.

BYD’s batteries become connected to the grid to store solar and wind generated power, BYD built a 2-MW demonstration energy storage system in a 40-foot mobile container for PacifiCorp, in Portland. It also has a 1-MW stationary demonstration storage project in its factory in Shenzhen, that is connected to the grid, and a 200-kW storage unit in a 40-foot container, that features four-hour discharge, as well as a 600-kW 40-foot storage container for 1.5-hour discharge.

Buying centre/ Buyer behavior

BYD was the first company to get subsidies for its car buyers. BYD’s downtown headquarters now mainly serves mainly a marketing function. But the next step is to open a manufacturing plant in L.A. in order to become a major player in the fleet vehicles market. In 2010, the Chinese government has expanded the trial cities for promoting energy-saving and new energy vehicles from 13 to 20. Five cities have be chosen as the pilot cities for the trial program, where private buyers purchase energy-saving and new energy vehicles can get incentives and subsidies, including Beijing, Shanghai, and Shenzhen etc.. As the first and only chosen by National New Energy Vehicle Recommendation List, the E6 has been available to government agencies and corporations since Dec.15, 2008. The first private sales location is in Shenzhen as selected and will expand to other new energy car trial cities in China.

Issues with suppliers/ vendors

BYD becomes the supplier of electric car batteries to other car companies: Volkswagen and Mercedes Benz have announced they are partnering with BYD The Lavida electric model is likely to have most of its parts sourced from Chinese producers, including the battery expert Build Your Dreams (BYD). VW’s German rival Daimler announced two weeks ago it was also partnering with BYD to build electric cars in China.

Profiling of market segments

The potential Chinese market is huge, Total investment in China in renewable energy by the government and private sector last year was $34.6 billion, nearly double U.S. spending of $18.6 billion, according to a report by the Pew Charitable Trusts.