A Study on BYD's Ups and Downs: Strategy of BYD and Institutional Factor for Electric Vehicle of China
A Study on BYD’s Ups and Downs: Strategy of BYD and Institutional Factor for Electric Vehicle of China
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Recently the interest on BYD’s ups and downs is more and more growing at stock market. BYD began the automobile making business by acquiring a State Owned Enterprise (SOE) in 2003, and it made a splendid performance until 2010. However it faced with a big risk while the revenue and the operating profit largely reduced after 2010. In particular the performance trend in 2009~2014 showed a clear difference from the trend in 2004~2009. This study tried to access the BYD’s ups and downs with considering that a poor performance of Alternative Fuel Vehicle (AFV) promotion policies of China was closely concerned with BYD’s slump. Most of all, the sales performance of BYD for electric vehicle or hybrid vehicle has been very poor even though it could start the vehicle making business successfully by diversifying its rechargeable battery business. So this study accessed BYD’s ups and downs from three perspectives; diversification strategy, business strategy of vehicle business, institutional factor. In result BYD achieved the cost leadership in automobile business but still stayed on a weak position for the product differentiation. Also it turned out that the revenue to profit ratio has been unstable, and its domestic market dependency has been too high. However BYD could recover from the management hardship by using the institutional factor, the AFV promotion policies of Chinese government. In future the sustainable growth of BYD depends on a feasible and differentiated business model for its vehicle business covering the AFV operation.
Abstract
Recently the interest on BYD’s ups and downs is more and more growing at stock market. BYD began the automobile making business by acquiring a State Owned Enterprise (SOE) in 2003, and it made a splendid performance until 2010. However it faced with a big risk while the revenue and the operating profit largely reduced after 2010. In particular the performance trend in 2009~2014 showed a clear difference from the trend in 2004~2009. This study tried to access the BYD’s ups and downs with considering that a poor performance of Alternative Fuel Vehicle (AFV) promotion policies of China was closely concerned with BYD’s slump. Most of all, the sales performance of BYD for electric vehicle or hybrid vehicle has been very poor even though it could start the vehicle making business successfully by diversifying its rechargeable battery business. So this study accessed BYD’s ups and downs from three perspectives; diversification strategy, business strategy of vehicle business, institutional factor. In result BYD achieved the cost leadership in automobile business but still stayed on a weak position for the product differentiation. Also it turned out that the revenue to profit ratio has been unstable, and its domestic market dependency has been too high. However BYD could recover from the management hardship by using the institutional factor, the AFV promotion policies of Chinese government. In future the sustainable growth of BYD depends on a feasible and differentiated business model for its vehicle business covering the AFV operation.
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