BYD, founded by Wang Chuanfu, has become a legend as a Chinese export enterprise: within 8 years, its sales reached more than 2 billion RMB, the total number of employees exceeded 20,000, and it was successfully listed in Hong Kong. So far, BYD's production scale has surpassed that of Panasonic, Toshiba and Sony, and the gap with Sanyo is shrinking. Looking back on these achievements, Wang Chuanfu believes that the most important point is that BYD has pursued a unique cost leadership strategy.
Low-cost production line
BYD is mainly engaged in the research, development, manufacture and sales of rechargeable batteries. The main products include lithium-ion, nickel-cadmium and nickel-hydrogen rechargeable batteries. In the early 1990s, the rechargeable battery market was dominated by Japanese companies. Japanese battery manufacturers such as Sanyo, Toshiba, and Panasonic accounted for nearly 90% of the global market. As a latecomer, it is easier said than done for BYD to get a share of the market.
However, the entry barrier for rechargeable batteries is relatively low, and the production model is even simpler: buy the accessories and raw materials needed for battery production from upstream companies, and process and assemble them. Like most start-ups in China, BYD adopted a manual-based production model from the beginning to counteract the highly automated Japanese production lines. There is no money to buy equipment, so I have to make some key equipment myself, and then break down the production line into several manual processes to replace machines as much as possible. Unexpectedly, this is not a solution, but it brings unexpected results: on the surface, this backward production model has no advantages at all, but now it seems that the biggest magic weapon to defeat Japanese companies is this kind of manual work. model.
It turns out that the rechargeable battery production line has its own unique features: the higher the degree of automation, the greater the cost of initial investment and the greater the cost of replacement, while the manual operation mode has unparalleled flexibility. A Japanese company has invested more than 10 million yuan in an automatic battery production line. BYD's self-created production line that focuses on manpower has inherent advantages, with a small investment and great flexibility. When a new product is launched, the original production line only needs to make local adjustments in key links, and then do corresponding technical training for employees.
For the fully automated production lines of Japanese manufacturers, each line can only target one product. If a new product is to be launched, a new production line must be invested. The investment can range from tens of millions to hundreds of millions. Today, with the frequent replacement of products in the battery field, BYD has obvious cost advantages in the production line, not to mention the cheap labor in China.
Wang Chuanfu introduced that after the financial turmoil or "9.11", global battery product prices plummeted, making it difficult for many Japanese manufacturers to continue. However, BYD bucked the trend and increased by as much as 90%, placing many orders from Japanese manufacturers. Into the arms, the market share continues to expand. The higher the production line's equipment requirements and the more investment, the more leading edge this "backward" operation mode is.
Affected by BYD, Japanese companies are gradually realizing the importance of improving production lines and are stepping up research and development, but it is too late. Wang Chuanfu believes that, at least in the battery industry, BYD is more than 3 years ahead of them. In the field of mobile phone batteries, Sanyo is the only remaining leader of BYD, and this war without gunpowder has become fierce.
At present, BYD has begun to supply a small amount to Nokia. If Nokia can win, BYD will surpass battery giant Sanyo. And other Japanese companies, such as Panasonic, Toshiba, Sony and other seven or eight old-fashioned companies, all suffered losses in the battery business, and have long been left behind by BYD.
The main embodiment of BYD's cost-leading strategy
- Choose the rechargeable battery industry with low entry barriers and simple production modes
- Use hand-assembled production lines to combat initial input costs Yamato replaces high-cost automated production lines with low cost and flexibility at the same time
- With its own strong research and development capabilities, it can greatly save enterprise costs through improvements in processes and materials
- Extend downstream products , entered the electric vehicle manufacturing, trying to replicate the low-cost manufacturing model
Reduce costs by R&D
BYD's seemingly backward manual model not only reduces the cost, but also more commendable is that the product quality is in no way inferior to Japanese counterparts. This is inseparable from BYD's technical accumulation and emphasis on R&D.
It should be said that BYD's start is not too low. Wang Chuanfu University began to contact batteries. The subject of graduate students is batteries. After graduation, the focus of work in the Institute of Nonferrous Metals is batteries. Before the establishment of BYD in 1995, Wang Chuanfu had been researching the battery field for many years and served as the general manager of a battery company in Shenzhen for two years. At the beginning of his business, he was fortunate to receive millions of dollars in investment. These accumulations are undoubtedly the prerequisite for BYD's rapid take-off.
There are various strategies for cost saving: either to improve management efficiency, or to control expenses, or through research and development. Wang Chuanfu does not agree that many companies rely only on "stingy" cost control strategies. He believes that companies should rely more on research and development to reduce costs with leading technology or alternative materials. He said the savings would be very limited if staff travel was restricted, but a major process change could result in a 10-fold change in cost.
He gave an example. The production of nickel-chromium batteries requires a large number of corrosion-resistant nickel sheets, and the price of nickel is as high as 140,000 yuan per ton. If nickel-plated sheets are used, it will only cost 10,000 yuan per ton, but the quality will be affected. BYD's R&D center specializes in modifying the chemical composition of the battery solution, so that the nickel-plated sheet is not easily corroded. For this improvement of nickel raw materials, the monthly cost has dropped from 5-6 million yuan to a mere hundreds of thousands of yuan. In addition, the improved BYD battery production process after research and development is short, effective, and easy to control.
In order to seek new processes, BYD even worked with upstream material suppliers to develop and jointly formulate cost-reducing solutions. For example, nickel-cadmium batteries need a large amount of cobalt as the negative electrode material. If cobalt with better performance is selected, the cost is very high. BYD cooperated with a company in Shenzhen to find out the quality gap of cobalt at home and abroad, and formulated a method to improve the quality of domestic cobalt, finally making domestic cobalt meet the international quality requirements, while reducing the cost of foreign products by 40%. Due to the wide application of negative electrode materials, BYD can save tens of millions of yuan a year by this alone.
Its own strong R&D strength is the basis for BYD to lead other peers. The company currently has more than 200 R&D personnel, and has a fully equipped battery material research center, battery technology research center and new product development department. The company has established R&D institutions in Europe, the United States, Japan, South Korea, Hong Kong, Shanghai and other places. Relying on research and development to save costs is a major success of BYD.
Copy the low-cost model
In January 2003, BYD announced that it would acquire a 77% stake in Xi'an Qinchuan Automobile Co., Ltd. at a price of HK$254 million. The prelude to the automobile was officially opened, and Wang Chuanfu became the new chairman of Qinchuan Automobile.
Battery is BYD's strength, and making electric vehicles is BYD's original intention to enter the auto industry. China's current car ownership continues to increase, and the pressure on energy and environmental protection is already great. Wang Chuanfu sniffs out the business opportunities. In addition to its technological advantages, BYD also has a leadership in management: Wang Chuanfu is proud of its low-cost manufacturing model. He believes that BYD's mature model can be replicated in the auto industry, and that it can achieve success in this lucrative industry by relying on the cost leadership strategy.
According to reports, in January 2004, Shenzhen will put 200 lithium-ion pure electric vehicles made by BYD into rental operation, becoming the first demonstration area for electric vehicles in the country and truly achieving zero exhaust emissions. Wang Chuanfu said that BYD has made a major breakthrough in the manufacturing technology of automobile batteries, and it is not far from the goal of marketization and practical application of electric vehicles.
But cars are not batteries after all. In addition to the technical bottleneck of electric vehicles, market recognition is the key. Wang Chuanfu's dream of a car kingdom seems to have a long way to go.
