The quiet man switched on to cars

By John Reed and Patti Waldmeir
Published: November 3 2008 02:00

Everyone agrees the world needs greener cars and Wang Chuanfu believes he is the man to deliver them - by combining Chinese brains and hard work with Warren Buffett's money.
Just over a month ago - when the Dow Jones index fell nearly 7 per cent, one of Wall Street's worst days - Mr Buffett's Mid-American Energy Holdings bought a 10 per cent stake in BYD, the company that Mr Wang founded.
BYD is a global leader in rechargeable battery technology and a rising star of the Chinese auto industry. Mr Buffett's investment is a clear vote of confidence that Mr Wang - an engineer-turned-entrepreneur - can combine batteries and cars to lead a green revolution in electric vehicles. The move electrified the Hong Kong stock market: shares in BYD, which is 25 per cent owned by Mr Wang, rose by 42 per cent.
On a Saturday morning recently at the company's headquarters in Shenzhen, in the industrial hinterland just across the border from Hong Kong, Mr Wang made clear he sees his company as a symbol of the passing of the baton of industrial leadership from mature western economies to China.
Sitting at the end of a long boardroom table stocked with Diet Coke for visitors, his short-sleeved shirt complete with ballpoint pen in the pocket, the bespectacled 42-year-old Mr Wang looks more like a Chinese Bill Gates than a polished car-industry executive such as Carlos Ghosn. Mr Buffett is clearly betting that he will be the geek who launches the next revolution in automotive technology.
The quietly spoken Mr Wang says his goal is to make BYD the world's largest car company by 2025. "For new-energy cars, we believe we can become the global leader," he says. "From the technology standpoint, 10 years should be enough." He is positioning himself at the centre of the automotive industry's impending shift into plug-in hybrid and electric vehicles powered by lithium-ion batteries, a move due to bring some of the fastest technological changes in a century of automotive history.
Asked to sum up how BYD built its business, he offers a modest response. "We are a typical Chinese company," he says. "We are smart and we work hard. We took advantage of the situation."
But his unassuming words mask a cultural pride: Mr Wang says Chinese companies are smarter and work harder than their western competitors. He says China's main advantages are the size of its market and the quality of its people; 5m graduates leave Chinese universities every year, "more than the population of some European countries", he says. And they will work for much lower salaries than their western or Japanese competitors.
BYD employs 10,000 engineers, half of them working on cars, and Mr Wang says he will have 30,000 automotive engineers within a decade. His US and Japanese competitors cannot afford to hire so many, he says. "The cost is too high."
BYD recruits most managers straight out of university, trains them on the job and lodges new graduates in a high-rise dormitory-style building adjacent to the factory.
Thirteen years ago, when he founded the company, Mr Wang lacked even the capital to import an automated battery production line from Japan. Today his company is the world's largest producer of mobile phone batteries - with 30 per cent of the market - and the second-largest producer of rechargeable batteries to power electronic goods such as laptop computers. And perhaps even more surprisingly, BYD - which produced its first branded car in 2005 - sold more cars than any other Chinese carmaker in September. That monthly milestone, achieved largely through the launch of BYD's new F0 subcompact, is unlikely to be sustained in the near term; but JD Power, the leading auto consultancy, still expects BYD sales to grow by more than 50 per cent this year.
Trained as a researcher in Beijing, Mr Wang founded BYD in 1995, when China's government was opening its economy to the world. "At that time Shenzhen was a hot place," he says. "There was a gold rush here."
Frustrated by the lack of funding available to government researchers, Mr Wang borrowed money from a relative and set up on his own making nickel batteries. He used semi-automated equipment that he pieced together after reading technical publications. BYD put Japan's incumbent battery producers on the defensive. It faced down lawsuits by Sony in Japan and by Sanyo in the US, the latter put to rest in an out-of-court settlement.
With the market for smaller lithium--ion batteries now cornered, Mr Wang is focusing much of BYD's energy on alternative-fuel cars. With world attention focused on greener options than the internal combustion engine, Mr Wang feels his expertise in battery production will give him an unstoppable advantage in the arena of electric cars. BYD will launch a plug-in hybrid car later this year, with sales in the US and European Union to follow in 2011. An all-electric model, the E6, will be launched in China in 2009.
BYD will be competing with plug-in models produced by Renault, Nissan, Mercedes-Benz, and General Motors, which plans to make its Volt model in China. Mr Wang says he is ready. "I believe Chinese companies can become leaders in the alternative car business because we make good batteries," he says. More experienced carmakers are struggling with such issues as the speed of charging and durability of automotive batteries - which need to last far longer than in laptops - in their prototype plug-in cars.
Mr Wang's competitors may disagree, pointing out that the fit and finish of BYD's models falls far below the standard of vehicles produced by established carmakers. "They've got a long way to go on rattles, squeaks, comfort, fuel economy, acceleration, and smoothness of ride - all the things that take a long time to get right," says the China head of one leading foreign carmaker who has ridden in BYD's cars, but requests anonymity.
A test drive of a prototype E6 by the Financial Times around BYD's parking lot confirms this view. The car is quiet and efficient, but its handling and quality of finish fall short of most foreign carmakers' models. BYD vehicles could face substantial hurdles to widespread acceptance in the US and Europe, especially after recent scandals over Chinese products, such as milk.
And, given cases of exploding lithium-ion batteries in laptops, the potential product liability risk of electric cars faced by carmakers - Chinese or not - is huge.
Mr Wang deflects the point firmly. "We're the only battery maker that has never had a recall," he says, leaving unspoken the names of Sanyo and Sony, which have both had expensive recalls. "We're very confident of the quality of the batteries."
He acknowledges BYD has a long way to go in building its brand to compete with foreign ones with decades of consumer awareness and marketing experience. On the other hand, he says, plug-in cars present a blank canvas of sorts.
"We're talking new cars and ever-yone is starting from the same point," he says.
Additional reporting by Justine Lau
Life of leisure just wouldn't play well for boss of the batteries
Wang Chuanfu is all work and no play - and proud of it.
He says his punishing seven-days-a-week schedule is par for the course in China. "Maybe in the Western world, life is number one and work is number two," he says one bright Saturday morning at the bustling headquarters of BYD, his battery-cum-car company in Shenzhen. "But in China, work is number one and life is number two," he adds. "Especially in my generation. I don't know if the next generation will be the same. I enjoy working very much, if you ask me to go sightseeing for a day I probably wouldn't enjoy it."
In the rare moments when not at the office, Mr Wang lives in a modest penthouse flat in the "workers' village" with his wife and daughter.
Mr Wang spurns the trappings enjoyed by many of his western peers, such as corporate jets and expensive clothes.
He does, however, own three Mercedes-Benz cars and a Lexus, which he says he owns because he likes to take them apart to figure out how they work. He also wears an Adidas watch, which displays the time of different cities so that he knows whether it is day or night in BYD's overseas offices.
Mr Wang's success in becoming one of China's leading entrepreneurs has surpassed his ambitions. "I had dreams," he says, "but nothing this big."
Copyright The Financial Times Limited 2008