Chinese Electric Carmaker Aims To Become A Global Brand

Nov 6, 2017
Originally published on November 7, 2017 1:23 pm

When President Trump arrives in China later this week as part of his Asia visit, he is expected to press the country's leader, Xi Jinping, for better trade deals with the United States. Trump will be accompanied by a high-powered delegation of American CEOs and is expected to announce a flurry of commercial deals.

In the southern city of Shenzhen, a city of towering glass skyscrapers, high-tech industrial parks and enormous shopping malls sometimes called the Silicon Valley of China, it becomes apparent that the U.S.'s economic goals may have nothing to do with China's own.

China has ambitious plans to dominate industries, and in some cases, it already has.

'New energy era'

On a manicured corporate campus in Shenzhen, with a monorail sky train swooping in a dramatic arc around its periphery, China's ambitions are everywhere on display. The campus is home to the world's highest seller of electric vehicles, the Chinese company BYD Co. Ltd. — the company's initials stand for "Build Your Dreams."

BYD hopes to do what no other Chinese automaker has done before: become a global brand.

Last year, BYD sold fleets of electric buses to Los Angeles and Denver. Warren Buffett owns a 10 percent stake in the company, and Leonardo DiCaprio is its brand ambassador, appearing on company billboards and commercials.

The company is worth $18.4 billion, according to Forbes, and saw its stock price increase by nearly 60 percent this year.

At 5:00 p.m. on workdays, factory workers in pale-blue company uniform shirts stream out of factory buildings.

"This is the start of their leisure time," a BYD guide says.

Almost 40,000 people work on this campus, and some live just a few feet from the factory in large, concrete-block apartment buildings made colorful by the laundry strung on the balconies. The factory workers live four to a room, the guide says; office workers each have a room to themselves.

The blue-shirted workers are helping catapult China into the "new energy era," as BYD chief of public relations Richard Li puts it.

Li, also clad in the company's pale-blue shirt, is echoing the words of his country's leader. In a recent 3 1/2-hour speech in the Great Hall of the People, Xi hailed China's "new era" of power and asserted that China must take the "driving seat" to respond to climate change.

"Any harm we inflict on nature will eventually return to haunt us," he said.

China's pollution problem is no secret, least of all in smog-choked cities like Shenzhen and Beijing. All of which puts this sleek manufacturing center in lockstep with government policy: China has said it wants 20 percent of its fleet to be electric by 2025, and in order to force that change, said it will soon begin enforcing a penalty — similar to a carbon tax — on car makers that do not produce a certain percentage of electric or hybrid vehicles each year.

At the same time, the government is aggressively subsidizing Chinese electric vehicle companies to ensure they own the market.

"In many ways, China already is dominating" the electric vehicles market, says Alvin Lin, the climate and energy policy director in Beijing for the Natural Resources Defense Council. "China is really viewing this as a strategic industry and putting their weight behind it."

Lin says China has inherent advantages, such as its "late developer status" — because there are fewer cars per capita in China than the U.S., Chinese consumers may be more open to buying electric.

But the prices of these green tech cars in China are still fairly high for consumers: BYD's pure electric sedan costs around $45,000 before incentives and subsidies from the Chinese government, and its hybrid SUV starts at $30,000 before incentives and subsidies.

Li of BYD speaks as though China has already completed its transition out of what he calls the "conventional vehicle age." But that's not quite true yet.

BYD sold more than 100,000 electric and hybrid vehicles last year. While that's more than any other company sold in China in 2016, it scarcely amounts to a blip among the 28 million cars sold there in the same period. BYD has had more success with taxi and bus sales than with individual consumers, a problem that the Palo Alto-based electric vehicle manufacturer Tesla has also encountered.

One Shenzhen taxi driver, Liu Jun Fang, says his BYD electric car is a smooth ride. But he complains about a lack of charging stations; he can only drive about 180 miles without a charge, he says. He has had passengers tell him that American electric cars, made by Tesla, go farther — which is true. He is also concerned about the radiation emitted from the batteries in the cars. It's a big enough concern among drivers in China that BYD recently brought taxi drivers from the Chinese city of Taiyuan, where the entire fleet is electric, to its campus to conduct a public radiation test inside the cabs.

Setting standards

At BYD, what matters most is that its cars are entirely Chinese-made. Even the front grill of its hybrid SUV is meant to call to mind the armor worn by ancient Chinese warriors.

The appeal of China's market is not lost on U.S. automakers. For years, they have been trying to get into China but have bumped up against Chinese government restrictions. China has steeper barriers to automotive trade than any large market in the world, requiring foreign companies either to pay high tariffs or set up joint ventures with Chinese companies and share their technology.

"China is OK with competition in sectors it deems priorities, so long as China dominates," says Lester Ross, a partner at WilmerHale who represents foreign companies in China. "It's a very nationalistic approach, and we believe it holds China back because it does not foster true competition inside China."

Nevertheless, U.S. car companies have continued to pound on China's doors. Tesla just announced it will become the first foreign car company to have a wholly owned manufacturing operation in China.

"It's really the only way to make the cars affordable in China," Tesla CEO Elon Musk said in a recent earnings call.

The plant will operate inside a free-trade zone, allowing Tesla to hold onto its intellectual property. What sounds like a coup for Tesla, though, may actually be a strategic win for China. Tesla will still have to pay steep tariffs to the Chinese government and must purchase its parts from Chinese manufacturers.

Such issues are sure to come up during Trump's visit to Beijing later this week. Trump talked tough on China during the presidential campaign, and his administration recently launched an investigation into whether China has stolen U.S. intellectual property. That investigation could grant the administration broad authority to retaliate against China — a tactic, American trade experts say, that China has traditionally been better at employing.

"China wants to set its own standards," Ross says. "And it can. China has four times the population of the U.S., it is the first or second largest economy in the world and it doesn't buy into the central expectations of the global economy."

Miranda Kennedy is a senior editor at Morning Edition. You can follow her on Twitter at @mirandatk. NPR producer Alyssa Edes contributed to this story.

Copyright 2017 NPR. To see more, visit http://www.npr.org/.

STEVE INSKEEP, HOST:

And I'm Steve Inskeep in Beijing amid thousands of people in this city's Tiananmen Square. The Red Wall at the front of the Forbidden City is just behind me here. President Trump comes to this city this week. He's going to meet China's leader, Xi Jinping, who was just confirmed as China's leader for another five years. It happened at the Great Hall of the People, this massive, columned building off to the side. President Xi has set ambitious goals for his country, goals that matter as President Trump comes here seeking better trade terms with China. China has goals to dominate industries of the future, including an industry we'll discuss this morning. We saw a sign of it as soon as we traveled to the southern city of Shenzhen and climbed into a taxi - an electric taxi.

So what's it like to drive this car?

LUI JUN FAN: (Speaking Chinese).

INSKEEP: The driver whose name is Lui Jun Fan answered, OK. He's a restaurant owner whose business failed. So he put on sunglasses and climbed behind the wheel. His taxi runs quietly and is easy to drive but...

FAN: (Speaking Chinese).

INSKEEP: "Let me tell you one problem," he says. "There aren't enough battery charging stations around here." He's heard of people fighting over them. His battery is not the world's best.

How many kilometers can you go without charging the car?

FAN: (Speaking Chinese).

INSKEEP: He says his battery gets him about 180 miles per charge. He's heard from taxi passengers that American electric cars made by Tesla go farther. And what he's heard is true. But from China's perspective, the key point is that the battery is made in China. The government has set a goal to become the biggest player in what are called new energy vehicles - like hybrid and electric - setting the stage for a quiet revolution in the auto industry.

You can hear that gentle whine of the electric motor. That's the only sound this car makes as we're driving through Shenzhen.

The driver is taking us outside the city to a place where we can learn more. The electric vehicle company - BYD - initials that stand for Build Your Dreams. Its investors include Warren Buffett, and its brand ambassador in China is Leonardo DiCaprio...

(SOUNDBITE OF BYD COMMERCIAL)

LEONARDO DICAPRIO: New energy can give us a new future...

INSKEEP: ...Whose face appears on ads at the corporate campus. BYD started making batteries years ago for phones and computers and, with help from government subsidies, has expanded into battery-powered cars and even electric monorails like the one that runs overhead at the company headquarters. We climbed on board with Richard Li, the company's chief of public relations.

So I got to ask this question, have you ever been to Walt Disney World?

RICHARD LI: (Laughter) Yeah.

INSKEEP: I asked that because the monorail looks like the elevated trains that glide around Disney. It passes a parking garage.

FAN: So you see they have 10 floors, and each floor you have 40 spots, so you can charge 400 cars simultaneously here.

INSKEEP: Every single parking space is a charging station?

LI: Yes.

INSKEEP: Later we transferred to an oversized golf cart - battery-powered, of course - and ride past the factory entrance.

We're watching a shift change over here. Hundreds if not thousands of people walking out of the factory. Everybody in a blue shirt.

Close to 40,000 people work here. Some of them live in apartment buildings right on the property, four to a room with their laundry drying on balconies.

LI: Our goal - our objective - is to achieve complete transportation electrification.

INSKEEP: Electrification of every kind of...

LI: Yes.

INSKEEP: ...Moving vehicle...

LI: Yes.

INSKEEP: ...Essentially.

For all of the grandeur of its headquarters, BYD is not a big automaker yet. The company says it sold more than 100,000 hybrid or pure electric vehicles last year. That is a fraction of what Toyota sold with its hybrid the Prius. But BYD's stock value is soaring. It stands to benefit as China's government begins requiring all automakers to produce at least some new energy vehicles. That rule by China's central planners could reshape the global auto industry. To learn just how, we returned to Beijing to the home of a man with long experience in the Chinese auto business.

JACK PERKOWSKI: Jack Perkowski.

INSKEEP: Hey. Steve Inskeep.

PERKOWSKI: Nice to meet you.

INSKEEP: Jack Perkowski led the way into the elevator of his apartment building.

PERKOWSKI: You can experience my daily commute.

INSKEEP: He works on one floor and lives on another.

Oh, what a lovely apartment.

PERKOWSKI: Thank you.

INSKEEP: Perkowski is an American who came here more than 20 years ago and put together an auto parts company.

PERKOWSKI: Individuals didn't have money. Companies didn't have money. Nobody had money. So all of a sudden, there's this guy running around China, visiting all these factories, saying that he was going to bring - or could bring - capital.

INSKEEP: Today it's different. China has access to almost limitless capital. And when the government decided the future belonged to new energy cars with those electric vehicle - or EV - batteries inside, Chinese entrepreneurs lunged at an opportunity.

PERKOWSKI: Do you know that now there are 140 companies in China - over 140 companies in China - making EV batteries? One hundred forty.

INSKEEP: Wow.

PERKOWSKI: And there are probably a half a dozen around the rest of the world. Are all of them good? No. No, not all them are good, but there are 140, and they're all putting on capacity.

INSKEEP: Years ago, China turned its attention to steel, and Chinese companies made so much of it they flooded the world market. The same could happen with electric vehicles and parts. There may be a place for American firms in all of this. Tesla says it plans to build a factory in China. And Jack Perkowski himself is now involved in founding an electric vehicle company. But Chinese firms will have a powerful government behind them. The people watching this include Alvin Lin - of the U.S.-based nonprofit the Natural Resources Defense Council - who works in Beijing.

ALVIN LIN: China really wants to dominate the world market in electric vehicles and - put very simply.

INSKEEP: Do you think that China could dominate the world market for electric vehicles?

LIN: Certainly. You know, I think in a way they already are.

INSKEEP: China's President Xi approaches this growing industry very differently than the president he will host this week. President Trump's proposed tax plan would eliminate tax credits for Americans who buy electric cars. And instead of a focus on new energy sources, President Trump promotes fossil fuels.

LIN: China is really - at the central level compared to the U.S. federal government - really viewing this as a strategic industry. So they're putting their weight behind it.

INSKEEP: China's biggest advantage is visible here. We're on a pedestrian bridge overlooking a Beijing thoroughfare, six lanes of auto traffic. China - not the United States - now has the world's biggest auto market, which gives China outsized influence no matter what President Trump may achieve when he comes here to Beijing this week. We will report from China throughout this week of the president's visit. Transcript provided by NPR, Copyright NPR.