In this far corner of China’s manufacturing heartland, Gov. Ted Kulongoski’s dream of making Oregon home to America’s green car movement is about to roll off the assembly lines.
At BYD Auto Co., China’s fast-growing automotive star, a plug-in electric hybrid sedan is just weeks from meeting millions of Chinese consumers. The F3DM, which runs up to 80 miles on a single charge and packs a 7-gallon tank, will probably launch in the United States by 2010.
Kulongoski, who clinched a deal last week to bring Nissan’s pure-electric cars to Oregon, is vying for BYD’s bid for a North American pilot site. On Friday, he met with BYD President and Chairman Wang Chuanfu at the company’s mammoth headquarters nearly two hours from China’s booming industrial zone.
“We’re hoping to build a critical mass,” Kulongoski said. “We’re laying the infrastructure and hoping to bring change at home by reducing greenhouse gases. The most logical place to move toward is electric autos.”
On a 10-day business trip in Asia, Kulongoski has trumpeted Oregon’s status as the No. 1 hybrid market in the country and promoted an ambitious vision to automakers in Japan and China: electric charging stations every 60 miles along interstates. Tax incentives for Oregonians to buy electric cars. And tax bonuses for drivers to build car chargers in their garages.
If Oregon is successful in claiming a stake in the world’s emerging electric car industry, ripples across many other sectors could provide a boost to the state’s economy, hurt by the departure of Freightliner and other manufacturers.
Patrick Reiten, president of Pacific Power, said there will be growth — and challenges — in meeting the power supply needs that come with electric cars. Pacific Power is owned by Warren Buffett’s MidAmerican Energy Holdings Company, which in September bought a 10 percent stake in BYD for about $230 million — a relationship Kulongoski hopes will help nudge BYD to Oregon.
Bill Wyatt, executive director of the Port of Portland, has met with BYD executives several times. The Port is a major gateway for Japanese and South Korean cars, with about 450,000 Toyotas, Hyundais and Hondas arriving last year. Wyatt said the Port has courted Chinese carmakers in preparation for the flood of Chinese autos expected to hit the U.S. in coming years.
“Eventually, one of these Chinese car manufacturers is going to begin large-scale exports to the United States,” Wyatt said. “Whoever it is, we’ve gotten to know them at this point. When they do, we want to talk to them.”
BYD, which could be the nation’s first introduction to Chinese-made autos, plans to open five test market sites worldwide, including in Israel, Denmark and Hong Kong. Though company executives have yet to finalize any decisions, Portland and Los Angeles are at the top of the list.
“We have to look at the market to see how people will respond first,” said Henry Li, general manager of BYD’s auto export trade division. “We’re a newcomer. So we have to have a new strategy.”
Build Your Dreams
BYD has been in the auto business only five years, but bold expansion and innovation have helped the company live up to its name — Build Your Dreams.
“For a company like us, we’re bold enough to try anything new,” Li said. “Give us some time, and we’ll make it happen.”
In 1995, BYD started with about $300,000 and 20 employees, pumping out batteries for cell phones. Today, the company makes 60 percent of the world’s nickel-cadmium rechargeable batteries used in products such as tools and toothbrushes. It makes 30 percent of the world’s lithium-ion batteries in cell phones, not to mention countless other components for companies such as Motorola, Nokia and Samsung. The company now has seven plants across China, which employ a labor force of 130,000 — and growing.
“We are experts in the battery market,” Li said. “We have the know-how and the process down. We make the safest batteries in the world. We have never had a recall.”
This expertise in batteries is at the heart of BYD’s strategy for taking over the auto industry, which it entered in 2003 after purchasing a government-owned auto plant. In a short time, BYD has become a top seller in China. Currently, BYD makes five models of fuel-powered sedans and hatchbacks, ranging from $8,000 to $20,000.
For its electric cars, BYD developed a lithium-ion battery that uses iron. Using iron brings down the cost of the battery and offers a life cycle of up to 10years — five times a cell phone battery, Li said. The F3DM, BYD’s plug-in electric hybrid, will allow drivers to run on electricity and gas, seamlessly switching between the two. It boasts extremely low emissions, plugs into a household socket and can go 300 miles on a full tank and a full charge. The company has yet to set a price, but estimates range upward of $20,000.
The company is developing a purely electric vehicle that it plans to launch to Chinese consumers in 2009, Li said. It will be a matter of time before the E6, a full-size sedan that seats five, arrives in the U.S. In the company’s glossy showroom, a sign calls the car “Faddy, Faithworthy and Futuramic.”
“The hybrid is a good introductory product,” Li said. “Until electric vehicles are more popular, the charging stations don’t exist. This will allow people to drive farther without worrying about it.”
Workers live on campus
In a compound that sprawls four square miles, BYD headquarters in the lush and mountainous region of Pingshan, Shenzhen, offers a glimpse of a company with a serious competitive advantage — an edge that many Chinese companies maintain over their U.S. rivals.
An army of 30,000 workers lives on a campus the size of a small city. Dozens of dormitories tower dozens of floors above ground. Unlike its U.S. counterparts, BYD relies on human labor in an industry that has shifted to automation.
“The big difference here,” Kulongoski said, “is the process of manufacturing is so much hand labor. There’s not so much of the robotics that we saw in Japan. It’s mostly people, lots of young people.”
Rather than buy expensive machines, BYD has held down prices by relying on manual labor — which in the United States is usually a company’s largest expense. BYD workers’ wages start at 1,000 Chinese yuan a month, or about $150 U.S., said Elva Zhai, 24, a sales assistant in the export trade department. The workday is from 8:30 a.m. to 5p.m.
The company provides free housing, but the cost of three meals a day — provided at the cavernous cafeteria — come out of their salary for an unnoticeable amount. On Friday at lunch, thousands of employees, wearing stylish jeans, T-shirts and BYD lanyards line up for a dozen varieties of meat, vegetables, rice and soup. Zhai swipes her employee badge; she doesn’t know the exact cost of each meal.
“It’s very little,” said Zhai, who moved two years ago from her hometown of Xi’an, a city where BYD runs a plant. She holds a degree in international economics, and working at BYD feels a lot like being in college, she said.
With most of their costs covered, workers are able to save a fair bit of money, Zhai said. She and her friends sometimes go downtown to sing in the karaoke clubs or go shopping. Workers have 10 days of vacation each year, and they come from across China to work at BYD. The company offers housing for entire families and builds sports fields on-site. It also runs schools for employees’ children and has a technical school where many of BYD’s 11,000 engineers come from.
Zhai’s dream car is an F3R, BYD’s stylish coupe, though she admits she has little use for a car. Still, she yearns to buy a blue one, like the one on display in the company’s showroom.
“In China, cars are still a luxury item,” Zhai said. “But everyone has a cell phone.”