The pure-electric BYD e6 Taxi and k9 Transit Bus

The pure-electric BYD e6 Taxi and k9 Transit Bus

MarketWatch recently had the opportunity to talk with Wang Chuanfu, BYD chief executive officer.

As we know from earlier posts, BYD already delivered some 6,600 Qin plug-in hybrids in the first half of the year in China and received orders for thousands of electric buses. Revenue from selling e-buses are expected to exceed $1.6 billion this year.

However, BYD has struggled to expand production capacity to meet demand and noted strong decline in the traditional-auto business sales.

Wang Chuanfu believes in New Energy Vehicle, however he's targeting plug-in hybrids for private use and battery electric vehicles for fleet use.

MarketWatch: "Tesla’s Elon Musk believes that purely electric cars are the future. You were also a supporter of electric cars in the past, but you seem to have made some adjustments recently. Can you talk about this?"

Wang Chuanfu: "BYD is promoting purely electric buses for public transportation, but plug-in hybrid vehicles for private use, since the latter do not rely on charging stations too much. It is a mistake to use hybrid vehicles for public transportation. The plug-in hybrid model is designed to account for purely electric cars’ inability to drive long distances. Public buses in cities have no need to drive long distances."

"Most private cars drive 40 kilometers every day. Our Qin model can run 70 kilometers on an electric supply and switch to fuel for longer distances. Such a design meets the demand of urbanites and has been accepted by the public."

"It is impossible for the government to build as many charging stations as gas stations. What it can do is build enough charging stations within a certain distance and gradually expand the coverage nationwide. Hybrid cars fit the transition period. In the future, plug-in hybrid cars will account for 70% of private new-energy vehicles, while purely electric cars take up the other 30%. Small batteries with high energy storage for use in automobiles will not be available for around 30 years."

"There is lots of interest in the game. The oil and many traditional industries oppose the development of electric cars because it is an evolution of the traditional automobile industry. In China, the inadequacy of charging facilities also hinders the development of electric cars, adding to the public’s concerns."

"Thus, plug-in hybrid cars are a product of compromise under the current circumstances. It is likely to become the mainstream product in the next 20 years. In their product plan for the next five years, Volkswagen, and BMW, both put more emphasis on hybrid cars than purely electric cars."

Wang Chuanfu noted that in the first few years of electric car development, the company found many difficulties "a lack of policy support, the weak quality of products and low public acceptance". Even some taxi drivers in Shenzhen were afraid to drive EVs because there could be some "radiation" (oh yeah, just give me a good old gas guzzler enveloped by a fume shield).

Now, after implementation of new policies and incentives, BYD expects a boom in EV market:

"I didn’t expect that the opportunity would come so fast. The next three to five years will be a golden period for BYD’s growth. We must seize it. Production capacity being unable to meet demand will be a temporary problem because we were cautious in the beginning. We only sold several thousand F3DM models in a few years, but now we have sold several thousand Qin models within one month. By the end of this year, we will improve our electric-car production capacity."

According to the interview, BYD received orders for 5,000 buses for city public transportation and already delivered 4,000.

Interesting is the possibility of significant cost reduction with scale:

"There is no other country like China that has issued so many policies to support new-energy vehicles. I think there will be a lot of strong new-energy companies emerging in China. We don’t need to introduce technologies from overseas because we are almost on the same level."

"In 2013, new-energy-car sales in China reached 20,000. It is expected to reach as many as 50,000 this year. If one car model could have sales of more than 100,000 units, its costs will be significantly lower. If costs can be reduced by 30% to 40%, it is time for the state to withdraw its subsidies. But before that, the subsidies are necessary."

MarketWatch