Grasping Reality on TypePad, by Brad DeLong

...These newly assembled vehicles, part of a family of SUVs called the Tang that retails from about 240,000 yuan (35,700), are aimed squarely at middle-class drivers in the world’s largest electric vehicle market, China. Their manufacturer, BYD Co., is in turn the No. 1 producer of plug-in vehicles globally... powering, to a significant extent, a transition to electrified mobility that’s moving faster in China than in any other country. Founded in Shenzhen in the mid-1990s as a manufacturer of batteries for brick-size cellphones and digital cameras, BYD now has about a quarter-million employees and sells as many as 30,000 pure EVs or plug-in hybrids in China every month, most of them anything but status symbols. Its cheapest model, the e1, starts at 60,000 yuan (8,950) after subsidies....

Last year, BYD opened one of the world’s largest battery plants, a 10 million-square-foot facility in Qinghai.... This empire has made a billionaire of its founder and chairman, a former government chemist named Wang Chuanfu. It’s also been a boon for another high-net-worth individual, Warren Buffett, whose Berkshire Hathaway Inc. bought a 10 percent stake in BYD a decade ago.... Thanks to generous government subsidies and municipal regulations that make owning an internal combustion vehicle in many cities inconvenient, expensive, or both, China accounts for more than half the world’s purchases of electric cars. More EVs were sold in Shanghai last year than in Germany, France, or the U.K.; the city of Hangzhou, smallish by Chinese standards, had higher sales than all of Japan. Virtually all of Shenzhen’s 20,000 taxis are electric BYDs, compared with fewer than 20 of any make in New York. More than 500,000 electric buses ply Chinese roads, compared with fewer than 1,000 in the U.S.... The Chinese government has said it intends to eliminate fossil fuel-powered vehicles by an as-yet-unspecified date, probably about 2040. Given the scale of the market, China’s demands stand to shape 21st century carmaking every bit as much as the American consumer’s shaped the 20th....

Wang and his colleagues are... proud of the company’s pioneering history, they’re acutely aware that getting somewhere first doesn’t ensure long-term success. BYD may have begun China’s electric revolution; now the carmaker’s leaders have to figure out how to finish it....

Wang was a nobody in Shenzhen, one of thousands of young entrepreneurs angling for a piece of the global supply chain. But he was also an expert in batteries at a moment when they were coming to underpin a fundamental technological shift. As lithium-ion-powered laptops and mobile phones became commonplace in the late 1990s, BYD’s low costs and nimble production methods gradually allowed it and other Chinese companies to unseat Japanese manufacturers as the go-to suppliers.... By the early 2000s, BYD batteries were in Nokia handsets, Black & Decker power tools, Dell notebooks, and even the era’s ultimate status symbol, Motorola’s Razr phone. In 2002 the company went public in Hong Kong. The next year, BYD bought a majority stake in Xi’an Qinchuan Auto Co., a troubled state-owned carmaker....

As Tesla was focusing on the midlife-crisis market, BYD was electrifying less glamorous vehicles and building a business supplying solar panels and other infrastructure. The company began mass-producing electric buses in 2009, and the next year won a 1,000-vehicle order from the province of Hunan. Similarly sized contracts followed, along with smaller deals in cities such as Amsterdam, Frankfurt, and Los Angeles—though the latter deal and another in Albuquerque became embroiled in criticism over mechanical problems that led the New Mexico city to return its BYD buses....

In retrospect, the logic of focusing on big, lumbering vehicles operated by cost-conscious public transport authorities was obvious. Typical car-buyer concerns such as acceleration and top speed are less of an issue for a vehicle designed to stop every few blocks. Nor is range anxiety a factor on fixed routes. Putting commuters on electric buses, the thinking goes, also helps build brand awareness and acceptance for EVs generally. And the possible upsells are manifold: BYD solar generators, BYD energy storage installations, BYD fast chargers, perhaps even a few BYD electric forklifts to shuttle parts around....

Wang concedes that BYD is facing a brutal contest for customer loyalty. But he also professes confidence that the world is on the cusp of a permanent shift to electric mobility and that his company will be out front at home and then abroad.... Wang says he’s argued in conversations with government officials that with the right mix of subsidies, research incentives, and regulatory mandates, China could turn off its last conventional car by 2030. In buses it’s already well on its way, with taxis making rapid progress. Wang says delivery vans and other logistics vehicles could follow soon.... No other large country is prepared to move so fast, least of all the U.S., where the Trump administration has proposed eliminating subsidies for EV purchases and sought to cancel planned improvements to mileage standards....

Before buying a new gasoline car in Shanghai, a purchaser must enter an auction for one of a limited number of license plates, at prices that hovered at about 14,000 each last year, according to BloombergNEF. An EV plate, by contrast, is free. Comparable systems are in place in other big cities. The most important factor in China’s electric boom, however, has been a complex system of government subsidies that in 2018 could provide more than 7,900 for the purchase of a long-range, pure-electric car.... The subsidies, which have cost the government at least 14.9 billion, were always meant to be temporary. They’re now being phased out, on the theory that EVs are a sufficiently mature technology to stand on their own in the marketplace....

If BYD fails to create cars that win customers’ hearts, Wang has a backup plan: returning to the company’s roots as a third-party battery manufacturer, this time for vehicles.... Even this plan is no guarantee of long-term prosperity. Making batteries is a complex, costly, and time-consuming process of painstaking development in return for incremental gains....

In a large BYD bus the batteries alone weigh 2 tons, and they require three to four hours to reach a full load with even the fastest charger—a function of technological limitations that even China and its most powerful companies can’t just wish away. Wang wants BYD to one day be the world’s leading enabler of electric mobility—the Exxon Mobil and General Motors of the gigawatt age, all in one. But beyond China, where a powerful, centralized state has made switching to EVs a national priority, almost no government has yet shown itself willing to make a comparable commitment. China will almost certainly be the country where the EV revolution arrives fastest; what’s not yet clear is how much farther it will spread and how quickly—and whether BYD will be among its winners. With practiced modesty, Wang claims to be far less concerned about the second question than the first. “My personal success is less important,” he says. “The impulse for me is to create a new industry”...

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