BYD In Talks With VW, Looking Ever More Likely To Be King Of Electric Car Market

The latest sign that Chinese electric car and battery manufacturer BYD is set to make it globally: it’s in talks to partner with VW, and provide ze Germans with their lithium-ion batteries. “Particularly for the Chinese market, potential partners such as BYD could support us in quickly expanding our activities”, said VW board member Ulrich Hackenberg yesterday. Ford and another unnamed manufacturer are also talking to BYD about similar arrangements.

The deal serves to show just how powerful and profitable lithium-ion producers like BYD are going to get in the coming years – VW is having to partner with a number of companies, including BYD, Sanyo and Toshiba, just to be able to source enough batteries for its electric cars. No-one can produce these things fast enough at the moment, but once someone does, they’re clearly going to be unimaginably massive – one estimate puts the 2030 market at $150bn. BYD are well placed to take an early lead, but the US is keen not to be left behind – the government has been courting applications for $2.4bn in federal funding for developing battery production facilities.

BYD’s actual cars have been selling well, with a 143% increase in year-on-year sales of its F3 model. It came to greater Western attention when the twinkly ukulele-wielding investment oracle himself, Warren Buffett, bought 10% of the company last October. It’s a decision that his Berkshire Hathaway partner Charlie Munger defended at the Berkshire shareholder retreat last week (or “Woodstock for capitalists” as Buffett dubbed it), saying it wasn’t a speculative venture capital investment, but in something that was small but with big ambitions.

BYD’s founder and chairman, Wang Chuanfu, certainly has the work ethic to make it a success: “Maybe in the Western world, life is number one and work is number two, but in China, work is number one and life is number two. I enjoy working very much, if you ask me to go sightseeing for a day I probably wouldn’t enjoy it.” He works seven days a week, every week. Suddenly Bad Idea’s bank holiday weekend seems like a personal weakness.

BYD has got embroiled in some mild controversy, with one of their rivals, Taiwanese company Hon Hai, accusing them of stealing trade secrets, but BYD are denying it, and Berkshire’s Munger is relaxed about them: “That set of claims, in my view, has been totally discredited. I don’t have any ethical concerns about BYD.”

BYD use iron-phosphate-based lithium ion batteries, which are safer and mean your car isn’t prone to bursting into hot metallic flames; they will be heartened then to note this bit of research by MIT, who have pioneered a kind of iron-phosphate lithium ion battery that can be charged in 20 seconds, equally without blowing up, hot metallic flames etc. The one thing about petrol is that it works straightaway – no matter how green or cost-effective in the long term the electric car might be, consumers will only get on board if they’re convenient, and so getting recharging times down is surely a key detail.

Something tells me that the UK’s £250m of funding in general electric car-ness won’t go very far towards getting us any of this pie. It’s not like we don’t have either the manufacturers – there’s an association of them in fact – and there’s also some quality research being done, like the air-fuelled battery being researched at St Andrews University. Let’s hope we don’t end up missing out on the manufacturing opportunity of the century.

Posted by Ben Beaumont-Thomas in Green Rush | May 26, 2009 1:05PM |