Behind BYD’s Success With Chinese Customers

Ever wondered what BYD stands for?
“It stands for Build Your Dreams,” Xin Jin, a business manager at BYD’s Cupertino, California office told me.  Or that is what most people think. Definitely, that is what Warren Buffett thinks.

In a recent to trip to BYD’s headquarters in Shenzhen, Buffett gave the Chinese electric car maker a big show of support.  “I like the name,” he said, as cited by the Associate Press, “let us ‘build our dreams’ together.”

The America’s most famous investor owns a 10 percent stake in BYD, a $230 million investment that is now worth more than $1.5 billion.
It does not take much research to discover that BYD are the initials of the Chinese characters Bi Ya Di, which does not mean anything but sounds foreign or Western. Many Chinese companies use Western-sounding names to make their companies or product brands sound modern, or to imply their businesses have Western connections.

Despite some nationalistic tendencies among Chinese youths, most of China’s upwardly mobile middle class consumers favor Western brands because of their quality and reputation. A recent article in Harvard Business Review reveals that only 45 percent of Chinese consumers prefer local brands, down from 57 percent three years before.

In addition to quality considerations, Chinese consumers believe that Western products elevate their social status. This is extremely important to them because the Chinese are very status-conscious people.
Many Chinese companies eventry to position their products to have Western appeal. Metersbonwe, a Chinese casual-wear fashion company, uses Western models to showcase their apparel.  According to a survey by McKinsey, 90% of respondents believe that Metersbonwe is a foreign company.
So, here is a million-dollar secret for multinationals that want to capture Chinese consumers’ hearts, minds, and wallets: promote your flagship brands but tailor them to Chinese consumers’ tastes.
There are many success stories of companies that have followed this secret recipe. Kentucky Fried Chicken positioned itself in China as a Western brand with Chinese characteristics. It has highly localized menus, including congee, or Chinese-style porridge, for breakfast, Peking duck served with scallion and seafood sauce, and you tiao, or Chinese dough fritters. It has become the single largest restaurant chain in China, with nearly 2,600 restaurants in over 550 cities.
If fact, Chinese consumers’ preference for Western brands may be the very reason that BYD is experiencing a setback in its home market.  In late 2008, BYD launched China’s first homegrown hybrid car, the F3DM. It enjoyed a fanfare success, especially because of government subsidies for clean-fuel vehicles. Its gasoline-power F3 was the best selling sedan in China last year. However, BYD’s sales dropped by 19 percent this year as Chinese consumers rushed to purchase foreign-brand cars. The company has also scaled back its plans to bring the E6, a battery-powered, five-passenger crossover vehicle, to the U. S. market.
As for how Bi Ya Di became “Build Your Dreams,” the story goes back to 1995 when the battery company listed on the Hong Kong Exchange. Founder Wang Chuan-fu wanted to give the company name a visionary touch. He came up with the term “Build Your Dreams” for BYD to inspire his employees. Some investors joked that BYD might as well stand for “Build Your Dollar.”
“Build Your Dreams” has certainly worked. As Xin Jin told me, “We are dreaming big. What we are doing at BYD is not just electric cars. We are also working on battery charging stations and smart grids. In our Shenzhen headquarters compound, we have a green village, called ‘Village of the Future,’ where we use solar and wind power and recycle rainwater. We are building a green future!”
It remains to be seen whether “Build Your Dollar” works in the long run.

Charlie Munger Speech

Last week a video was posted of Charlie Munger speaking at his Alma mater, the Ross School of Business in Michigan. Munger spoke for about two hours. Since I assume most people did not watch the whole speech, I will post my summary of the speech.

“The best way to get what you want in life is to deserve what you want”, states Charlie Munger. In this conversation, Mr. Munger relates his personal views in an intelligent, new, and humorous account of the flaws in today’s politics and society. He begins with a take on envy as the fall of the economy, and states that it is the worst of emotions one can have, instructing his audience that “Envy is the least fun of the Seven Deadly sins” and to “Pick one of the other 6 to have.” With that in mind, the business philanthropist begins speaking up about his personal opinions regarding the “wrongs and rights” of government.

On the issue of Wall Street, Mr. Munger relays it was not a good move for those in high positions to have made “easy money”, and that those who had the ability to fix what was taking place, failed at fixing it. He now feels there is no intelligent way to reverse this predicament, and wonders; “How anyone who has any respect for human nature wouldn’t predict that those who were tempted wouldn’t be able to resist that temptation” (an obvious shot at the laissez faire policies that contributed to the current mess). Munger advises us that making it easy to steal causes good people to do bad things. Munger also feels the accountants are to blame; however, laying the responsibility on those accountants has escaped all of us. He believes that if people had concentrated on something sensible, we could have gotten behind each problem we are facing. Still, although slightly pessimistic, Mr. Munger has some hope for our future, and feels we may have the chance to redeem.

Pertaining to the healthcare industry, Mr. Munger wants nothing more than for hospitals to admit their mistakes the way his hospital in Michigan does. He brings to light the tiny percentage of healthcare workers who approach patients personally, when they have done something wrong. Munger also discusses the need to increase awareness of abuse in healthcare, and believes the only way to combat that is for the people in charge to stand up and speak up against it. He is adamant that we continue to criticize each other, insisting that it is a “huge mistake” for us to stop. The Munger affirms that we are in for a great change where Asia will become more important than the America, and though it may take some getting used to.

While Munger admits some of his prejudices aren’t fair, he considers the fact that he has seen so many mistakes in his time on the part of our philanthropic groups, but has also seen so much good done by creative individuals; especially, according to his personal principles, the governing style of Singapore. Mr. Munger reports that Singapore’s government is the correct and single most successful way to govern in that they put an immediate end to things that will spread quickly. He discusses the random drug testing, the law that passed concerning suggestions of favorability toward another country, dealing with the Malaria outbreak, and the history of Singapore’s first Prime Minister, Lee Kuan Yew – whom Mr. Munger speaks very highly of. Unfortunately, as he so eloquently puts it, “Nobody is going to do it ‘Munger Style’”.

The video can be found at the following link: http://rossmedia.bus.umich.edu/rossmedia/SilverlightPlayer/Default.aspx?peid=4d215177cbe44b1e8e94d0dd68f5058f

BYD unveils initiatives to spotlight new energy drive

By Alison Leung CHANGSHA, China, Sept 30 (Reuters) - Chinese car and battery maker BYD, backed by U.S. billionaire Warren Buffett, on Thursday unveiled two initiatives to spotlight its drive to become a clean energy specialist. In the splashier of the two, BYD, 10 percent owned by Buffett's Berkshire Hathaway, unveiled its electric K9 e-bus and signed a contract to provide 1,000 of the vehicles to the Hunan provincial government. Buffett attended a flashy launch ceremony for the buses, as one complete with a vivid BYD logo and nine guests inside drove out onto the stage for a ribbon cutting ceremony presided over by BYD founder and Chairman Wang Chuanfu. "K9 is truly zero emission and provides a green solution to the city," Wang said. The buses are being produced at a plant in Hunan that will eventually have annual capacity to make 800,000 vehicles. "This will greatly help decrease the air pollution in Hunan, and be a model for clean public transportation for the whole country," government officials said in a statement. At over 12 metres long, the e-bus can reach speeds of over 25 mph, travel 190 miles on a charge and be fully charged in six hours or in just a half hour using a special rapid charger. Company officials previously said that other buyers have expressed an interest in the buses, but that BYD wants to complete a trial in Hunan before moving forward. In the other initiative, BYD, whose clean energy vision helped to attract Buffett as an investor two years ago, said it has agreed to build an energy storage station in conjunction with the local government in the interior province of Hunan. Developed with the provincial and Changsha city governments and the Hunan Grid Corp, the station would be capable upon completion of providing 10 megawatts of energy for two hours to the Hunan power grid. The first phase of the facility would have capacity of 1 megawatt to be completed this year. The remaining 9 megawatts would be completed by the end of 2011. Buffett, 80, chairman of Berkshire Hathaway, and vice chairman Charlie Munger have been in China this week, visiting BYD's headquarters and production plants on Monday in Shenzhen in southern China. Bill Gates joined them in Beijing, where the pair met with wealthy Chinese businessmen to exchange ideas about philanthropy. Changsha is the last public stop of Buffett's four-day trip, his first to BYD, which stands for "Build Your Dreams", almost two years after Berkshire's affiliate MidAmerican Energy bought a 10 percent stake in the company for around $230 million. "Over the last few days, it's absolutely amazing," Buffett said, describing his brief but whirlwind Odyssey through China. During his visit, Buffett has been full of praise for BYD, which has earned a handsome profit for Berkshire whose stake is now valued at about $1.7 billion. Buffett and Bill Gates, who also attended the ceremony in Changsha, spent Wednesday evening in Beijing hosting a gathering for China's super wealthy for a discussion about philanthropy. "We have seen a very, very remarkable company at BYD," Buffett said at a Thursday morning media briefing in Beijing to discuss the philanthropy dinner. From that event, he went to visit a new outlet of Dairy Queen, an ice cream restaurant chain owned by Berkshire Hathaway, before flying to Changsha. Some analysts had speculated that Buffett might be considering selling down his stake in BYD following the stock's big run-up, and also after a series of recent miss-steps that saw the company pare back its 2010 sales target. But BYD tried to squelch any such speculation, with an unnamed official telling local media the company had actually raised the possibility of Berkshire raising its stake during closed-door discussions. Buffett himself declined to comment directly on any plans to boost or decrease his stake. (Reporting by Alison Leung; Editing by Ken Wills)

Life is like a snowball. The important thing is finding wet snow and a really long hill.........by warren buffett