The Blurry Battle Lines Between BYD and Tesla
By Bill Moore
Consider the origins of these two companies. BYD began life building batteries for mobile phones. Tesla Motors started out as an upstart electric car company selling an expensive sports car.
Now Tesla plans to build the world's biggest lithium battery plant, consuming, estimates Goldman Sachs, 17% of the world's annual lithium supply. At the same time, BYD aims to become China's leading electric car company through its partnership with Germany's Daimler AG, makers of Mercedes-Benz luxury cars.
Tesla is seeking a toehold in China; BYD is aiming to do the same in the Americas, starting with its e6 taxis in Columbia, k9 buses on Aruba and Qin electric hybrids in Costa Rica.
Tesla now has opened a showroom in Beijing. BYD, based in south China, was just granted government approval to begin selling the Qin electric hybrid in Beijing, as well as Shanghai.
BYD has the backing of Berkshire Hathaway, the Omaha-based investment syndicate run by Warren Buffett, which also owns a broad portfolio of companies from Benjamin Moore Paints to the Norfolk Southern railroad, with jewelry, carpet, cowboy boots, cutlery, prefab homes, time-share jets, and insurance thrown into the mix.
Tesla builds the best car - electric and otherwise - in the world, according Consumer Reports, as well as does engineering work of Toyota and Daimler (more on this in a moment). It is also allied with SolarCity, installers of business and residential solar systems, and through SpaceX, it builds and operates rockets and spacecraft for NASA.
On the face of it, it would appear that these two technological powerhouses, both run by energetic entrepreneurs, are destined to come head-to-head in the marketplace, but will they? A closer look at both suggests the battle line isn't that clearly defined.
Take BYD's solar panel business, one that we seldom hear that much about. The company has four 100 MW photovoltaic (PV) panel production lines operating at full capacity in Shanghai, and it has ambitions of producing a gigawatt of PV annually. They are supplying commercial-scale projects in Australia and South Africa, and there has been speculation about establishing a plant in the USA to circumvent federal anti-dumping barriers. The company is also pairing its lithium iron phosphate (LiFePo4) battery modules with its PV panels, creating 1MW grid storage systems at $1 million a pop.
By contrast, Tesla doesn't build solar panels, but it does have both a business and familial relationship with SolarCity, which describes itself on its web site as an "all-in-one service provider, including custom engineering, financing, installation and ongoing system monitoring." Tesla CEO Elon Musk also is the chairman of SolarCity.
The interesting part of this Tesla-linked enterprise is that SolarcCity doesn't manufacture its own panels. Instead, they state: "SolarCity is not tied to specific suppliers or manufacturers which allows SolarCity to deploy the most cost effective products for each project. We evaluate and select the best new technology based on performance, quality and economics."
So, theoretically, SolarCity is free to buy panels from BYD, depending on the economics and availability.
Tesla's relationship with Daimler is also interesting. The German auto giant not only taps the company for its technical expertise, it also owns a 10 percent stake in Tesla. Curiously, this is roughly the same amount Buffett has invested in BYD. Toyota also owns a 10 percent stake in the Palo Alto company, as well as a stake in its own joint venture with Panasonic, which is planning to help Tesla build its gigawatt battery factory somewhere in the US Southwest. [We're betting on Texas, with Tesla and its partners using the economic leverage of a $5 billion investment and estimated 6,500 jobs to out-muscle the state's car dealership association and outflank state laws that currently prohibit direct sales to consumers. Not coincidentally, SpaceX has a development facility near Waco].
While Tesla was gearing up to launch the Model S, in 2010 Daimler announced it was forming a joint venture with BYD to create an all-electric car called Denza, a made-up word that supposedly means 'rising power and momentum' or 'winning potential' in Chinese, according to Wikipedia. The formal name of the joint venture is BYD Daimler New Technology, or BDNT. An estimated 100-or-so of the 250 engineers reportedly dedicated to the project are from Germany, as illustrated by the corporate video below.
Development of the car took place in facilities separate from, but adjacent to BYD's headquarters in Shenzhen, not far from Hong Kong. The first fruit of that partnership reportedly is based on the Mercedes-Benz B-Class chassis; and, it is assume, BYD LiFePo4 batteries. The team unveiled their prototype at the 2012 Auto China car show in Beijing.
The companies insist the car will be sold only through independent dealerships across China starting mid-year. No pricing has been announced at this time, though one source speculated it would be under the equivalent of $25,000US. That's probably too low, considering BYD's Qin - a plug-in hybrid with a smaller battery pack and gasoline engine - is supposedly going to sell in the USA for somewhere in the low $30,000US range before applicable subsidies and tax breaks. The Qin is reportedly available already in Costa Rica.
On the lithium battery production front, BYD currently is the world's second largest lithium-ion cell manufacturer and the largest LiFePO4 maker. Believing it needs to find a way to cut the cost of its electric car batteries in half, Tesla announced last week that it is planning to build the world's largest lithium battery plant, costing an estimated $5 billion and covering 500-1000 acres. Aiming both for sustainability and energy cost containment, the plant will be powered largely by renewable energy: wind and solar. An illustration of the proposed facility shows a massive solar farm adjacent to it, with a similarly huge wind farm in the distance, though the turbines are clearly too close together to be effective.
It is conceivable that those acres of PV panels might someday come from BYD.
While EV World certainly isn't in any position to state one way or the other, it is temping to speculate that some of the technology finding its way into the Denza might have had its origins at Tesla. It's also equally amusing to ponder the batteries in that future Model C will be fabricated using energy generated by BYD solar panels.
Consider this intriguing scenario. The year is 2019, a mere five years from now. You're looking for a new car and you have, among the growing number of EV choices, the option of buying or leasing either a mass market Tesla S or the second generation Denza. With competitive prices, each dealership is offering a solar home power package that includes panels from BYD and installation by Solar City.
Talk about blurry battle lines.
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