Can electric vehicle maker BYD Auto put its India dreams back on track?

To reach anywhere close to the 30% target, BYD will have to introduce affordable electric cars that can generate substantial volumes, and back it up with a strong network

At the Auto Expo in January this year, BYD Auto, the world’s largest maker of electric vehicles (EVs), showcased its premium luxury electric sedan, BYD Seal.

The Seal offers an innovative cell-to-body technology that integrates the battery pack top cover into the floor of the vehicle. That crea­tes more space and enhances safety. BYD did not reveal the Seal’s price, but only said it would go on sale in India in the last quarter of 2023.

The Chinese company expands its name to “Build Your Dreams”, a slogan that adorns its vehicles. Globally, its dream of becoming the world’s largest electric EV maker came true when it overtook Elon Musk’s Tesla in 2022.

What it was doing at the Auto Expo was presenting a dream of high-technology and innovative EVs to Indian consumers. 

In the process, it could be weaving its own India dreams.

BYD India Senior Vice President Sanjay Gopalakrishnan spoke in media interactions about a target to sell 15,000 vehicles in calendar year 2023, compared to just above 700 in the previous year. The 2023 sales were to be fired by the Atto 3, a sports utility vehicle whose deliveries started in January, and the five-seater multipurpose vehicle, e6. Gopala­krishnan also talked about grabbing a 30 per cent share of the EV market in India by 2030.

Nine months later, those dreams look distant.

Distant dreams

BYD had adopted a top-down market strategy in India, first introducing its premium vehicles and then the cheaper ones. These are assembled in its plant near Chennai, which can churn out 15,000 vehicles a year from completely knocked down (CKD) units. The intent was to establish the brand in India before entering the high-volume segments. Gopalakrishnan had said the expansion would be undertaken in the second phase in 2025.

However, sources say BYD’s proposal to invest $1 billion in a car factory in India has not found favour with the government and could be stalled. This was in a joint venture with Megha Engine­ering and Infrastructure Ltd (MEIL), to which BYD provides technology for e-buses.

BYD is now said to be looking at a new plan. It wants to sign a contract manu­facturing agreement with MEIL, according to people in the know. This manufacturing is proposed to be based on either CKD units or simply knocked down (SKD). The Customs duty on CKD and SKD units is lower than on completely built units. The proposed capacity is said to be 65,000 vehicles a year, which would be achieved in stages.

This proposal, too, is shrouded in uncer­tainty, amid the sharpening needle in the diplomatic and business relations between India and China. This uncertainty can be seen in the registrations of BYD vehicles in India, which, since the beginning of this year, stand at 1,642, according to VAHAN data — way behind the targets Gopalakrishnan had talked about.

BYD India did not share its sales numbers, nor did it respond to other queries from Business Standard.

That BYD would face such issues in India could have been anticipated. Under the revised foreign direct investment policy, the government has been scrutinising investments from China closely, including those in the mobile devices supply chain involving China, and has taken a stringent approach to clearances. A similar stance has pushed MG Motor, a British marquee now owned by China’s SAIC, to seek an Indian joint venture partner to operate in the country.

This is not the first setback to BYD in India. It opened an office in the country way back in 2007, as an electric vehicle manufacturer with licensed technology for making electric buses and as one of the contract manufacturers of mobile phones at its factory in Chennai. It is the same factory that houses the car plant.

For mobiles it currently has clients such as Xiaomi, which shifted some of its capacity from Foxconn, and has also tied up with the makers of the Nothing Phone (2) to assemble here.

In 2016 BYD made its first attempt to become big in the EV space, when it signed a comprehensive agreement with the BK Modi-owned Smart group to assemble electric buses, taxis and cars, but the collaboration never took off.

In 2020, BYD was planning to apply for manufacturing mobile devices under the government’s production-linked incentive (PLI) scheme. However, it decided not to apply — say sources — on the basis of hints from certain quarters. The following year its electronics arm, the largest assembler of iPads in China, looked at setting up a unit to do the same in India and diversify its production base. However, it once again shelved its plan to apply for the PLI scheme for IT products. Sources say the proposal was dropped because there was little hope of it getting approved by the government. BYD decided to shift the iPad assembly plant to Vietnam.

BYD Auto

 

Course correction?

Does BYD have to change its script in India?

Experts believe its plan to control 30 per cent of the EV market by 2030 is too ambitious. Industry estimates project the entire EV market would be 6 million to 7 million a year by that time. To corner 30 per cent of that, BYD will have to sell nearly 1.8 million to 2 million units, which would be more than three times the target of Maruti Suzuki, the country’s largest carmaker by far.

“Chinese carmakers will find it difficult to sell, with potential dealers staying away. Consumers will face major challenges on spare parts if the China-India tension continues,” says an industry veteran.

To reach anywhere close to the 30 per cent target, BYD will have to introduce affordable electric cars that can generate substantial volumes, and back it up with a strong network, a network far larger than its current chain of 25 distributors, which it plans to double by the end of the year. Currently its models are priced between Rs 29 lakh and Rs 34 lakh — a price segment where total sales of all brands are not even 50,000 a year.

BYD can pin its hopes on the Seagull, its small city electric hatchback that retails in China for under Rs 10 lakh. One Seagull variant claims to have a driving range of 305 km and the other 405 km. Both are powered by the special blade batteries equipped with fast-charging capability. It sold more than 35,000 units in China in September and promises to become the hottest EV there.

BYD has not yet talked about launching the Seagull in India. But experts say bringing it to India will entail smart supply chain mana­gement, creating a battery ecosystem, fast localisation, and tying up with a manu­facturing contractor willing to invest a substantial sum for assembling the vehicles in India.

Unless, of course, BYD gets lucky with the government’s clearance process. That will fast-track its dreams.