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Group 6 Lorenzo De Paolis Antonio De Santis Riccardo Lupi Giovanni Serpi Anna Sitnikova Alessandra Tossut. Final Project International Business Prof. John Mathews. Electric vehicles industry in china: the success of byd. China economic outlook FDI Clusters
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Group 6 Lorenzo De Paolis Antonio De Santis Riccardo Lupi Giovanni Serpi Anna Sitnikova Alessandra Tossut Final Project International Business Prof. John Mathews Electricvehiclesindustry in china:the success ofbyd
China economic outlook • FDI • Clusters • Porter’s Diamond of the Electric Vehicle Industry • BYD and the Porter’s Diamond OuTLINE
CHINA ECONOMIC OUTLOOK • Asia iscurrentlyundergoingrapidgrowth and industrialization, spearheadedby China and India • Over the last 20 yearsChinese economy hasenjoyedoneof the highestgrowth rate in the world • In 2010, China's GDP was valued at $5.87 trillion, surpassed Japan's $5.47 trillion, and became the world's second largest economy after the U.S. The roleof the governement in such a scenario hasbeencrucial: The move to a market economy and membership of the WTO in 2001 had provided enterprises with many opportunities Government started to give incentives to the creation and development of SEZs
FDI TO Specialeconomiczones • FDI and the Chinese government have played important roles in the success of the SEZs by • attracting capital investment, technologies, and management skills; • generating learning and spillovers; • helping to build local manufacturing capacity. • In August 2000, BYD moved its production to an industrial park in a district of Shenzen. • Thereis a positive relation between Output and FDI
CLUSTERS IN CHINA Source:McKinsey
FACTOR CONDITION: LITHIUM • Lithiumis a soft, silver-white metal thathas several industrial applications, including lithium-ion batteries useful for Evs • Major reserves are in South America, China and Australia • Lithium is a comparatively rare element, although it is found in many rocks and some brines, but always in very low concentration Source:USGS
PORTER DIAMONDELECTRIC VEHICLE INDUSTRYRELATED AND SUPPORTING INDUSTRIES
EV industry comprises firms involved in drive motors, power cells, intelligent transmission systems, electric commercial vehicle integration and other key technologies Evrelated and supportingindustries Source:Roland Berger
PORTER DIAMONDELECTRIC VEHICLE INDUSTRYRELATED AND SUPPORTING INDUSTRIES
PORTER DIAMONDELECTRIC VEHICLE INDUSTRYFIRM STRATEGY - STRUCTURE AND RIVARLY Source: Ascendas Marketing Research 2009 Despite the explosionofdomesticmanufacturers, foreign OEM (OriginalEquipment Manufacturing) suchas Volkswagen and GeneralMotors(and theirdomesticpartners) comprise the biggest market share in the automotiveindustry. Onlythree pure domesticplayers are in the the top ten namelyChery, Geely, BYD. The strongest competitor in the Chinese market is VW, which is still the largest passenger car company in China and will enter the e-market soon.
ChineseOEMsinvolved in EV development Chinese domestic automakers are looking for innovative ways to produce cheap electric cars to fulfill the demand of China's domestic market. Then they will use this technology to expand internationally. A new generation of Chinese electric cars may help drive down the production cost of electric cars globally. Source: Autohome 2009
Comparisonto india • India automotiveindustryhasexperiencedtremendousgrowth in recentyearslargely due to a burgeoning middle classwith a largerdisposableincome. • Industry output in India isestimatedtoreach 4 millionsunits in 2013 (PriceWaterHouseCoopers 2009) • The industry (OEMs and suppliers) contributednearlyto 5% of GDP growth rate in 2006. • Howevercost and qualityremainslimitationsof India’s auto industryexpansion:labourcosts are rising due to a shortageofskilled-labour and infrastructure are stillpoor in comparisonto China. • Onlytwo out of 4 playersinvolved in Evsindustryalreadycommercializetheirproducts. The othershaveonlyplans. Source Autoblog 2008
Green vehicle sales in Japan for 2010 were an estimated 500,000, more than 10% of all new car demand with Toyota as the dominant player. • Government support for electricity in vehicles, both hybrids and pure EVs, is also quite vigorous (the consumer subsidy is about $9,000). • One of the obstacles to widespread adoption of EVs is spending long time charging a coalition comprising Tokyo Electric Power Company (TEPCO), Nissan, Mitsubishi and Fuji Heavy Industries (the manufacturer of Subaru vehicles) and Toyota created a new technology, the CHAdeMo, that provides 80% of chargeable capacity to the Leaf in 30 minutes Japansituation…
In 2010, GM started to produce a series of hybrid vehicle called the Chevy Volt. Volt ais “Range Extended” Electric Vehicle. It is not a pure EV because it retains an onboard (ICE) internal combustion engine. • In september 2011 - General Motors announced the intention to develop electric cars in China through a joint venture with a Chinese automaker, and to transfer battery and other electric car technology to the venture. US situation… Japanisstill the dominant player in the US green vehiclesmarket…
BYD AND THE PORTER’S DIAMONDRELATED AND SUPPORTING INDUSTRIES
BYD AND THE PORTER’S DIAMONDFIRM STRATEGY, STRUCTURE AND RIVALRY
BYDVERTICAL INTEGRATION “Vertical integration is the enabling force behind BYD's innovation. Vertical integration not only cuts costs, but also improves efficiency and quality, brings continuous innovation, and breaks ground for new strategies in products and businesses.”
BYD AND THE PORTER’S DIAMONDTHE ROLE OF GOVERNMENT • BYD received 354 million yuan, 390 million yuan and • 359 million yuan in government subsidies, respectively, in • 2008, 2009 and 2010.
ZhihuaZeng, «How Do Special Economic Zones and Industrial Clusters Drive China’s Rapid Development?», Policy Research Working Paper 5583, March 2011 • www.byd.com • Shirouzo Norihiko, «Technology Levels Playing Field in Race to Market Electric Car», The Wall Street Journal, January 12, 2009 • Leung A., «BYD plummets, puts spotlight on strategy and Buffett», Reuters, August 2011 • Lockstrom,Callarman, Lei, "The Electric Vehicle Industry in China and India: The Role of Governments for Industry Development", 2010 • Kasperk, Garnet "National Competitive Advantage of China in Electric Mobility: The case of BYD“, 2010 • Huckman, Maccormack"BYD Company, Ltd." , Harvard Business School, 2009 • Wang, Kimble "Betting on Chinese electric cars?-analysing BYD's capacity for innovation" , Int. J. Automotive Technology and Management, Vol.10, 2010 • "The Competitive Advantage of Nations" M. Porter, 1990 • (http://www.nytimes.com/2011/09/21/business/global/gm-plans-to-develop-electric-cars-with-chinese-automaker.html) • http://www.evsroll.com/GM_electric_cars.html • http://www.jetro.org/content/997 • Groode, Tillemann-Dick, “The Race tobuild the ElectricCar”, The Wall Street Journal, March 2011 rEFERENCES