How Buffet-Backed BYD is Changing Public Transport, One Electric Bus at a Time
Ask people outside of China if they have heard of BYD, and many will respond with a shrug. Whether internationally recognized or not, however, the company is already the world’s largest producer of electric buses and is quietly beginning to transform urban transportation across the world.
Electric buses represent just one side of the Shenzhen-based firm. Founded in 1995 by billionaire entrepreneur Wang Chuanfu, BYD (Bǐyàdí 比亚迪, or “Build Your Dreams”) first became a global manufacturing leader in the rechargeable batteries market before expanding to other areas including solar panels, mobile phone assembly and new energy automobiles.
For many of the past several years, BYD has claimed the title of world’s largest manufacturer of electric vehicles (EVs). Now, it’s leveraging this expertise in the field of electric buses, forging partnerships with public transit authorities both within China as well as an expanding list of foreign countries. As global demand for green transportation solutions continues to increase, the company appears poised to play a central role in the widespread transition away from fossil fuel-based buses towards more eco-friendly alternatives.
Bringing public transport into the new energy era
A study published in April by EV battery charging firm IES Synergy predicted that in 2025, 99% of the world’s electric buses in circulation will be in China. Much of this dominance can be explained by the country’s advanced charging infrastructure network, which dwarfs its European and American counterparts.
Chinese new energy companies have benefited greatly over past decades from a series of favorable domestic factors. First, the country’s rapid economic development since the 1990s has sparked a wave of rapid urbanization and a dramatic expansion of consumer purchasing power. Secondly, spurred on in part by a need to curb the growing problem of air pollution, hefty government subsidies for the new energy automotive sector were rolled out, giving a serious boost to China’s burgeoning EV industry.
Apart from these factors, however, BYD had another secret weapon. In 2008, Berkshire Hathaway, the investment firm of billionaire American entrepreneur Warren Buffet, agreed to purchase a 10% stake in the battery firm to help it achieve its ambitions of providing environmentally friendly automobiles for the mass market. The move saw BYD’s shares skyrocket at the Hong Kong Stock Exchange at the time, and the partnership has endured to today. In his most recent annual letter, Buffet claimed an 8.2% stake in the company.
Meanwhile, various local authorities across China have embarked on an ambitious effort to phase out fossil fuel-guzzling public buses in favor of new electric models. 2017 saw the southern metropolis of Shenzhen, with a population of over 17 million, complete a full transition to electric buses with a fleet of more than 16,000.
BYD, which is headquartered and operates a major production facility in Shenzhen, provided the bulk of the orders for this undertaking with its battery-charged K8 and K9 models holding a maximum single-charge range of roughly 155 miles.
In the last few years, however, BYD’s once relatively unencumbered path to the top of the global electric bus industry has become more challenging.
In 2019, Tesla surpassed BYD to become the world’s top producer of new energy vehicles. Furthermore, increasing pressure from a host of domestic competitors and moves by Beijing to reduce subsidies for the new energy vehicle sector have sparked concerns that the firm will struggle to maintain its breakneck pace of growth.
Amid this shifting context, BYD now sets its sights on less saturated foreign markets as the primary locale for the further development of its electric bus business.
BYD buses go global: Lancaster, CA
“This expansion of BYD’s electric vehicle manufacturing facility is a true testament to the commitment of BYD to the southern California region, California, and indeed this nation,” Mayor Rex Parris of Lancaster, U.S., said in 2017 at an event commemorating the enlargement of a local BYD factory.
As early as 2013, BYD established the electric bus production facility to supply North American public transport networks with zero-emission alternatives. This year, the plant was reported to have sold over 1,000 buses in the U.S. market so far.
According to a report published in April by research firm Markets and Markets, North America is expected to be the world’s fastest-growing market for electric buses between now and 2027. Although BYD remains the global leader in terms of scale and reach, new competitors in the region threaten to overtake it, such as California-based Proterra, which completed a listing on the Nasdaq in June.
The Biden administration has been pursuing the same strategy of subsidies and tax exemptions that Chinese authorities previously used to help cultivate domestic firms such as BYD. In President Biden’s proposed $1 trillion infrastructure and jobs plan, $7.5 billion has been earmarked exclusively for the construction of a domestic network of EV charging stations.
However, BYD now finds itself in a difficult predicament as a Chinese company holding significant ties with the American domestic consumer market, even while relations between the countries continue to sour. Biden himself has been explicit in the past about the need to ramp up domestic EV production as a means of competing internationally, lamenting in April that the U.S. was “running way behind China.”
One massive hurdle for BYD is the 2020 National Defense Authorization Act, which, at the end of 2021, will prohibit the use of U.S. government funding by local transit authorities to purchase vehicles from “nonmarket economy” suppliers, a classification that includes Chinese-owned firms. In BYD’s accelerating competition with Proterra for command of the growing North American market, this blow could prove fatal.
Another market offering substantial potential for the international expansion of BYD’s bus business is Latin America.
Earlier this year, a new record was set for the largest order of all-electric buses outside of China, as Colombia’s capital city of Bogotá secured a deal with BYD involving the purchase of 1,002 individual units, with delivery scheduled to be completed in the first half of 2022.
According to Colombia’s top transit authority TransMilenio, the country’s ongoing partnership with BYD “will reduce 83,433 tons of carbon dioxide and 9.63 tons of particle emissions per year,” assisting the country in achieving its climate goals.
At the same time, BYD’s experience in Bogotá has raised some red flags that may hamper future forays into foreign markets.
A report published in 2019 by the WRI Ross Institute for Sustainable Cities showed that the company’s bus design initially struggled to cope with the unique local driving conditions of the Colombian capital, including “aggressive driving, constant overcrowding, and rough pavement.”
The study, which identified key global barriers to the widespread adoption of electric buses, continued, “while this experience did lead BYD to adopt stronger materials for its future e-buses in Bogotá, these design issues have implanted concerns among local stakeholders about the feasibility of adopting e-buses at scale.”
So far, these worries appear not to have had a lasting impact. Last year, the marketing director of BYD Brazil, Adalberto Maluf, commented that the Latin American electric bus market is undergoing a period of significant growth, adding that “it is not the size of the European market, or the U.S., but it’s already very close.”
One of the most progressive regions in the world when it comes to tackling the climate crisis, Scandinavia has also set records recently for orders of electric buses.
Earlier this week, BYD announced that it had carried out a delivery of 76 units to leading regional transport company Nobina, in the Finnish capital of Helsinki, completing the largest order for electric buses in the country’s history.
Managing Director of Nobina Finland Petri Auno said, “although this is a big step for Nobina, our passengers and for the PTAs [public transport authorities] in Finland, this is only the beginning. By this time next year, our ambition is to double the number of electric buses operated by Nobina in Finland.”
The comments indicate that BYD still has room to grow in the Scandinavian region, which has not yet become as competitive as other markets such as North America.
The company currently operates three electric bus production facilities in Europe, in the Netherlands, France and Hungary, as well as a jointly-run factory in the UK with leading British bus maker ADL. The partnership claims to represent “the largest share of the London and whole UK market for electric buses.”
BYD faces increasingly stiffer competition in its mission to bring emissions-free transport to cities around the world. However, as demand for electric buses continues to accumulate – the global market is expected to grow from $19.27 billion in 2020 to 34.75 billion in 2028 – the firm appears well-positioned to play a vital role.
SEE ALSO: BYD Delivers Tang EV in Norway, Initiating Plan to Enter European Market