Chinese-style low-cost innovation
Wang Chuanfu semi-automatic production line of this invention was later BYD summarized as “human + fixture = robot” mode, it brings cost advantage to become a magic battery for laptopweapon for BYD, BYD makes fixed investment is similar companies in Japan 1 / 15 ~ 1 / 10, while the price of the product can be 40% lower than your opponents. Wang Chuanfu understands: the higher demand for equipment, inputs, the more products, BYD more advantage of this approach.
An inventor “Man + fixture = robot” mode
The outskirts of Shenzhen, has been verified to visit permits, production of mobile phones and cameras, reporters have been through a guard guarding the door, they entered a BYD factory in Shenzhen Baolong. In more than a dozen factories in Nokia, Motorola, Samsung, etc. These people are familiar with mobile phones, are being continuously produced.
Vertical and horizontal arrangement of a dozen production lines to make a bit crowded and messy workshop. In the one-meter-long line of sixties and seventies, the dense sat forty to fifty workers, holding fixture to accurately complete the spot welding, testing, labeling and so on. Workers Touyebutai, from work to work on an action. These young workers and is not aware of this boring, mechanical action is BYD then defeated a strong opponent of Japan’s secret weapon.
Back in 1995, BYD founded in the year. Left Beijing Nonferrous Metal Research Institute of Wang Chuanfu given to the cousin, Xiang-Yang Lü portfolio investment by 250 million as hp F4809A battery， hp F4812A battery， hp HSTNN-lB31 batterystart-up capital, ready to enter the Japanese companies a monopoly area of nickel-cadmium batteries. However, a nickel-cadmium battery production lines require tens of millions of investment in the hands of 2.5 million yuan Wang Chuanfu appear too trivial.
Capital in the dilemma of forcing Wang Chuanfu come up with a bold approach: Since can not afford to buy automated production lines, manufacturing equipment, why not yourself into a production line broken down into many different aspects, the core part of using automation and control, other links to complete by hand. Ultimately, this can be Nissan San Siqian a nickel-cadmium battery production line spent more than 100 million, but requires forty to fifty laborers. In Japan, producing the same product, an automated production line requires only a few workers.
In order to ensure the operation of artificial hands may be the same as the machine precision, Wang Chuanfu designed a number of fixtures, the cost, but a few dollars. For example, in the location of screws put a hole in the design, staffing as long as the screw into the hole will not be distorted out.
This semi-automatic production line was later BYD summarized as “Man + fixture = robot” mode. Able to invent such a production line, and Wang Chuanfu has a lot to the experience of the past: In 1987, Wang Chuanfu qualify in Beijing, China Nonferrous Metal Research Institute, 1992 was either broken Gatti, deputy director of the hospital 301, became one of the youngest Director . Then the direction of his research is the core technology of BYD’s rise: battery metallurgy.
For expensive equipment, Wang Chuanfu are racking their transformation, which later became a habit BYD. For example, Japan’s batteries are made out of pure dry room, BYD simply no money to build a pure drying room, just think of ways on the recipe, plus a way to enter the pharmaceutical absorbent, so that the products made out of the direct put the water to absorb the go, play a drying effect.
This semi-automatic, semi-artificial production lines have a cost advantage to become a magic weapon for BYD to make it from the early stage of the price difference of 40% severe impact on the price of the battery system for the Nissan. At that time, Sanyo lithium battery cost is a 4.9 U.S. dollars, while BYD’s just 1.3 U.S. dollars.
More importantly, this semi-automatic, semi-artificial production line to bring the chain BYD cost advantage: Due to very low input production line, making the corresponding depreciation costs also very low, and its depreciation costs only 3% to 4%, while the Sanyo fully automated production line to reach 30% ~ 40%; BYD to create their own production lines are a lot of flexibility, when to launch a new product, the original production line just to do The key part of the adjustment of the staff to do the appropriate technical training can be. The competitor’s fully automated production lines, each line can only be for a product, if you want to launch new products, it must be investment in new production line, investment from several thousand yuan, as many as several hundred million dollars.
In 2000, Motorola became the first Chinese BYD Li-ion battery suppliers, in addition to a strong cost advantage, there is also an important reason: BYD delivered very quickly. At that time, along with an updated phone models on the requirements of the battery structure, are also different. When customers put forward to replace the battery structure, Japanese companies from the introduction of automation equipment to the commissioning is completed, the less have a few weeks time. The BYD The Man + fixture = semi-automatic robot equipment, so long as people tune a tune, plus one or two small flow, a few days to more than one new species.
After such a chain reaction that makes a fixed investment is BYD similar enterprises in Japan 1 / 15 ~ 1 / 10, while the price of the product can be 40% lower than your opponents. Wang Chuanfu understands: the higher demand for equipment, inputs, the more products, BYD more advantage of this approach.
In Zeng Ming seems deceptively simple spin-off process is a reflection of the traditional research and development of different ideas. Many multinational R & D direction is how to improve the product, they generally do not do it in another direction, namely, how to use R & D to reduce costs. But with the way R & D to reduce costs, leverage is very great.
2 to reduce costs without relying on “screw water”, relying on R & D
For this production line by transforming the practice of reducing the cost of each one of the early employees BYD many examples can be cited, and even they are one of the inventors. For example, the BYD Li-ion battery production, the right production equipment requirements are higher, must have a clean vacuum production space, of course, this is a great cost. A technical staff with secondary education to a way to clean the vacuum chamber production space out as clean production lines, workers only need to wear gloves, dust-free environment, stretching from the operation can be achieved. Staff’s views were very simple: it would be able to save money.
BYD created according to its own line of swallowing a competitor’s market share in this process, Wang Chuanfu strongly to keep a low profile. But I got two scholars keen to tap out their view, the significance of this mode of production is far more than that, they began to in-depth BYD, and summarized from a theoretical height, she said.
Zeng Ming, a scholar (now Alibaba chief of staff), from 2001 began to study BYD, when he taught at the European Institute of Business Administration (INSEAD), research topics are: BYD is how to segment the market to become the world’s leading businesses. That year, in BYD under attack, in addition to Sanyo, the Japanese manufacturers outside of a comprehensive loss.
In the control of two completely different modes of production, took the Ming found that: “The Japanese lithium-ion battery manufacturers from the beginning, and left high-cost path, which will be subject to equipment to be able to take effective measures to reduce costs. While the long multi-national manufacturers to enter the field of lithium-ion batteries, but they are taking the old path of the Japanese, and even Japan to spend several hundred million dollars will buy the old production line. The result of the introduction of technology to replace any parts need to resort to Japan. ”
Zeng Ming will be China’s BYD’s unique to this approach is called “low cost innovation,” a typical representative: “It is characterized by the greatest disadvantage in the capital shortage, the use of reengineering, the battery in this capital-intensive manufacturing industry into a labor-intensive industries, to maximize the technology with China’s comparative advantage - combined workforce, access to foreign competitors prices and the cost advantage is difficult to quickly gain market share. ”
In Zeng Ming seems deceptively simple spin-off process is a reflection of the traditional research and development of different ideas. Many multinational R & D direction is how to improve the product, they generally do not do it in another direction, namely, how to use R & D to reduce costs. But with the way R & D to reduce costs, leverage is very great.
This is also the vast majority of Chinese enterprises did not expect the direction, many entrepreneurs think about how every day in the “twisted a towel inside the water”, but then again the fact that the “twisted a towel inside the water,” a limited role.
Wu Chang Qi, and the other one from the early BYD scholars began to pay attention. Peking University Guanghua School of Management, he was vice president of BYD in 2008 as an independent director, he will BYD model is defined as the modern industrial revolution: “The early industrial revolution, because only the development of human machine is too expensive; but Wang Chuanfu to do is to modern industrial revolution, with human leather machinery life. ”
In conclusion, the process of business model, BYD, Zeng Ming discovered an interesting phenomenon: While the BYD is successful, it will look at the pattern that seems to be easily imitated peers, that is, decomposition of the battery manufacturing process for many the details of each step of the workers just do a simple task can be. But that is not the case, then there hundreds of Shenzhen to do the battery, most people who go out and do BYD, but in silence. “No one company can do BYD cost, quality and efficiency of the balance. This is the middle of a lot of investment management, and organizational guarantee, there are a lot of experience accumulation, obviously not so easy to imitate.”
“The greatest value the company is not in the financial statements, the real asset is an accountant and reports can not see is our 12000 team of engineers developed the technology and a variety of business models, in particular, the human need for new energy and protect the earth technology, this is the company’s real value. What you are seeing is the company’s future earnings, in fact, the real promoter of human, technical, this is really the company’s growth momentum. “Wang Chuanfu said.
3 break through the technological phobia
BYD’s pearl from the factory back to Tsuboyama factory, here is the new headquarters of BYD, BYD Auto’s R & D and production base is also located here. BYD is often with the staff to show off the tone to tell you, here covers an area of more than 180 million square meters. If you do not feel the listener Mosha, they will immediately added: “This is the equivalent of 260 football pitches.” Later, the listener is often cheeky surprise.
BYD headquarters of the most distinctive building is known as “hexagonal Building” R & D center, whose name stems from its hexagonal design. Wang Chuanfu core leadership of the office are here, with the office here, Yang Zhao BYD public relations manager, said: “Now very few opportunities to see the boss, the boss was too busy, and every day, flying in all plant inspections . “November 18 each year, employees can be far from the podium, looking at the Wang Chuanfu. On this day, is a BYD factory-ching, the way is to hold a celebration of games, Wang Chuanfu the only high-level participation in project is the 400-meter race, which he asked each senior must participate in projects. “But he never Pao Bule first,” said Yang Zhao.
Hexagon Tower also kept to the outside world on alert. We can only Yang Zhao led to the corridor on each floor for the tour route. Fortunately, there is “open” office, all the glass is transparent, all the computers have been directed toward the corridor, a person can be right outside the employee’s work status at a glance inside.
In the hexagonal building, reception of foreign workers is the most “technology museum”, which shows the BYD’s products and their short history of each important stage. Every introduction to a product’s functionality, Yang Zhao should be added: “This easy to do, nothing difficult … …”
Come into contact with some engineers and found them with exactly the same tone of voice Yang Zhao. In their eyes, the technology is not the slightest fear. Hexagon building, there are eight characters can be seen everywhere: “Technology is king, innovation-oriented.” “This is not just a slogan, but our actions strictly follow the rules,” says BYD staff.
Two mandatory indicators can prove that this is indeed not only a slogan: in 2008, BYD’s R & D investment of 11.6 billion yuan, in 2007, up 66%; BYD employs about 14 million people, of which 12000 engineers to do the research and development infrastructure projects, accounting for 9% of the total number of employees.
Wang Chuanfu this 12000 as a competitive tool for engineers, “company’s real asset is an accountant and reports can not see is our 12000 team of engineers developed the technology and a variety of business models. What you are seeing is that companies how much money, in fact, the real promoter of human, technical, this is really the company’s growth momentum. ”
This is Wang Chuanfu words from others. “In the BYD, the most ‘beef’ staff has always been R & D personnel, Wang boss to remain with them the longest. He had attended a week will be the quality of reporting on-site meetings, and engineers face the problem of . BYD has an amount of 30 million President’s Award, presented annually, mainly as an incentive to R & D personnel. Since entering the automotive field, the marketing status of the persons also increased a lot. owners focus only on two: R & D and market, management positions are the least that he perceived it that way. “Wang Jun said.
Wang Chuanfu the importance of these R & D personnel, because he saw compared with multinational companies, Chinese enterprises R & D strengths - with a large number of low-cost R & D personnel. BYD to participate in 2009, according to an interim results briefing stakeholders said that in the easy battery conference, Wang Chuanfu reiterated the advantages of these low-cost R & D staff: “BYD has a ‘301 ‘formulation, is to 300% of the number of engineers in exchange for 1% of the lead, virtually impossible to just lead by 1%. We put these elite tied together to 300% of the number of confrontations with competitors, can not lead it? ”
In the BYD, for knowledge workers and workers in management style are completely different. Workers like the army of soldiers, gave an order, we must obey, but to use this approach to intellectual definitely not work. Intellectual autonomy is very strong, demand respect, requests the value of identity, cultural identity, so as to play an innovative role. These people sometimes late, or guilty of a similar small error, but the administrators do not fuss.
4 regardless of Engineers can not be too small error
Wang Chuanfu this argument with his own impression that a high degree of consistency in his capacity as president, compared with BYD, he more like a high degree of technology obsessed engineers. In his office shelves are automotive, electronics, chemical, physical aspects of books and magazines, not a management book.
BYD ready to do the car that period, Wang Chuanfu one on the plane began to see the car book, I saw a lot, I felt car is just a low-tech traditional industries, not terrible.
However, Wang Chuanfu dream car has not been successful. In 2004, the BYD brand car was finally available, and the feedback from dealers in front of Wang Chuanfu mood as gloomy as the weather that day. Subsequently, he began a “crazy” move - continue to buy from the Shanghai Waigaoqiao Free Trade Zone limousine to allow engineers to dismantle these cars, and after the conclusion to write, write reports, understand the car design from scratch. Many engineers was more than 20 years old, never been touched before these advanced cars and trucks to tear down such a good fundamental Xia Buqu hand. Wang Chuanfu Upon seeing this, immediately picked up the keys in the door on the force a few Road is zoned “Now you can dismantled.”
In 2009, BYD Auto to get a good report card: F3 with F3R become the number one selling single model; F6 displacement of its class at 2.0 years the same standing in the front, the Chery Eastar, Brilliance Czech Republic, Pinnacle Jianghuai than the combined sales of F6, however.
Those engineers involved in scrap full understanding of the time when the “dissect” the meaning of those luxury cars. A similar path every day occurrence, but with the development of BYD Auto, resulting in different manifestations. Gao Nan (a pseudonym) is a 2008 graduate BYD incurred from the Anhui Province, he told reporters, just one year, he came in contact with a large number of vehicle experiments. If you go to state-owned enterprises, we must first tighten the screws a year to clean up shop before the year may begin to touch car; If you go to foreign invested enterprises, may also be just a test driver. Therefore, when the high-nan has been able to independently deal with some practical problems, those who work at other companies the students even went to the back of the master not lend a hand.
In the BYD Auto Sales Company vice president Wang Jun’s eyes, Wang Chuanfu is a long line of people looking to give people time to do things. The only way to make good use of those engineers. Wang Chuanfu, said: “Chinese enterprises to give researchers the opportunity to provide innovative, newly developed products should never be expected to come out very perfect, it is a mistake. BYD is one such came - the product is very rough beginning, but we give R & D personnel the opportunity to gradually improve, can not be developed just completed, is still not perfect product killed a stick. ”
The BYD, for knowledge workers and workers in a completely different management style, “like the army of workers, soldiers, gave an order, we must obey, but to use this approach to intellectual definitely not work. Intellectual autonomy is very strong , demand respect, requests the value of identity, cultural identity, so as to play an innovative role. These people are sometimes late, or guilty of a similar small error, but not too much fuss about the manager. “said Wang Chuanfu.
BYD has already won in research and development dividends. Wu Chang Qi remember a few years ago, Wang Chuanfu to mention: “The why some companies can only earn 5% of the hard-earned money, while others can reach 25% of corporate profits? This is the role of technology. For example, production of nickel-cadmium batteries require a large number of corrosion-resistant nickel plate, while the price of nickel was up to 14 yuan / t, if the nickel plating film can be used to 1 yuan / ton, but this will affect the quality. BYD Battery R & D center specifically for the rehabilitation of chemical solution components, hp 338794-001 battery， hp 361742-001 battery， hp 371785-001 batteryso that is not susceptible to corrosion of nickel-plated sheet, nickel raw materials alone, improvements to make the monthly cost down to several hundred thousand yuan from Wuliubaiwan. While other areas can also be cost savings, such as traveling hotel stay Some difference, but this practice is not desirable, smart way is to take full advantage of the power of technology. ”
BYD company is best at is a combination of an accurate choice of role models, and then step on the “giants” jump back up. The BYD, there is a nearly 200 intellectual property rights and the legal department, it is important duty is to study how to break opponent’s patent barriers, and BYD each product division to supervise, keep me informed on what technology is the need to circumvention.
5 200 people’s intellectual property rights and the legal department: break through the EPN
Wang Chuanfu-called “technology” is not commonly understood, “a complicated, sophisticated, and disruptive technology.” BYD company is best at is a combination of an accurate choice of role models, and then step on the “giants” jump back up. Thus, while a million people in BYD team of engineers are mostly young people graduating soon, but also fully capable of “technology” for the transformation.
Then those who have just completed their engineers demolished the car, do measurement, decomposition, detection work, study its structure, test its performance, a careful analysis of its components. If you want to use a technology, look at there is no patent, there is the adjustment, to avoid off, has not brought to use.
“Motor vehicles are a traditional product, has developed more than 100 years, large patent has been gone, expired, and the remaining patents is the appearance, we head for a tail for no one who has a patent. But your product design is better . “Wang Chuanfu told the media.
Therefore, when listing BYD’s F3, was the outside world called “super-A version of the Toyota Corolla.” F3R with Shanghai GM’s Excelle HRV similar, F6 like the Honda Accord and Toyota Camry hybrid. However, this argument is frankly BYD, BYD Auto, Vice President Lian Yu-bo told the media, said: “We do not even do a good job of the court prepared, and 100% will not let opponents win.”
Lian Yu-bo why so emboldened? Hexagon Tower, to see a reporter anomaly - The manufacturing enterprises of the intellectual property rights and the legal department of an extraordinarily powerful, in the 3rd floor, intellectual property rights and the legal department’s office is almost occupied by automobile marketing department, there are as many battery for digital as 13. The nearly 200 people from the department constitutes an important duty is to study how to break opponent’s patent barriers, and BYD each product division to supervise, keep me informed on what technology is the need to circumvention.
BYD break patent protection method is to analyze the opponent’s patents, one a view. The appearance of the patent, if a car has 5 photos - front, back, side, are the top and oblique at the top of your design with these five photos all the same, it may be infringement, but as long as there is a completely different style photo , the other is not infringing on the same design.
The BYD in the original patent on the basis of further improvement, even self-developed technology. Rely on this method, BYD in China, a large number of patent applications. In 2008, BYD amount of patent applications came in the first four Chinese companies, the number of patent applications for the 1530, the top three respectively Huawei, ZTE and Hong Fu Jin.
This practice is already reached a pinnacle in terms of BYD. As early as BYD mouth take food from a Japanese company when the agreement, the two make BYD “proud” of what, until today, BYD is still willing to work with the staff to share these two stories to the outside world: First, and Sanyo’s lawsuit, and two, Sony’s lawsuit. Both lawsuits relate to “patent”, the ultimate in favor of those who are BYD.
Why can not Sony and Sanyo are nonetheless BYD? In particular, Sony is still sue in their own country. It is because BYD have a clear understanding of the patent. Like Sony, against which the two patented technology, a requirement for the battery fluid capacity of more than 0.4 milliliters, BYD put the battery fluid volume control in less than 0.4 milliliters; the other technical requirements for a proprietary battery metal thickness controlled at 80 mm ~ 250 mm, the BYD to avoid this range, re-design specifications slightly different battery. Even if the principle of the same opponents in the design to avoid the barriers and infringement can not be set up.
In fact, in Chinese imitators, and a minority, as long as there is no guarantee product quality of major mistakes, “cottage” were the days of life is good enough.
BYD’s auto margins high, F3, F6 are more than 25%. F3 and the international similar brands (Toyota Corolla), compared to half the price of it, why are 25% of the gross margin? Because each of BYD are themselves a product development, manufacturing and sales. The current vertical integration is only superficial, as the company further vertical integration, gross profit would be more stable. The more segments to be integrated, the overall gross profit more you will be going up.
6 “non-mainstream” vertical integration model
In the Technical Museum, displays a block of cells, a variety of mobile phone housings and internal components, the entire body, hard top convertible, engine, airbags, vehicle oxygen sensors, reversing radar, air-conditioning … … all of these things, there is only one manufacturer, That is BYD. In addition to these items of technology used to highlight BYD, it also shows the BYD another non-mainstream development model - vertical integration.
Many people say that this is a heads-Wang Chuanfu Guo Ming emperors in the foundry. However, BYD people do not agree with this view, they think that this is not a simple imitation, but because Wang Chuanfu see the Gate of manufacturing enterprises: most of the EMS (electronics manufacturing services) companies Zhizuo assembled links, can only get low-cost profits. However, if the vertical integration capabilities with a top-down and do, from design to assembly to parts manufacturing, the profit would be much higher.
With such a vertical integration model, Wang Chuanfu very clear what is the premise of its development? The answer is that R & D design. Designed to determine the quality of the product 70%. This is not a problem, it is BYD’s tens of thousands of engineers, the task lies. And opened the top-down all the links, the BYD can be in-house costs of the various components to adjust the control of the profits in their own hands. BYD’s customers have conducted such a comparison, the same program is assigned to an EMS company BYD and simple compared to the cost of BYD lower 15% ~ 20% completion rate faster than the others, a / 3.
When the BYD batteries and IT manufacturing from the successful experiences in deciphering out through “vertical integration” cost reduction “password”, the same gene copy again to the car manufacturing. At present, BYD Auto apart from glass and tires, other parts of the entire production of its own research and development.
Stand is not how a modern car production line next to the Wang Ke (a pseudonym) off the gloves, mouth blowing of blowing their own hands. BYD Auto assembly plant, he was a general assembly of workers, responsible for a good spray paint the bumper installed in the car body.
“We do a good job and directly transported to the bumper assembly plant, and put on the car when it comes to heat, while the general business only a bumper packaging costs and transportation fees are very substantial.” BYD CEO Wang Ke Wang Chuanfu to this a motion made comments.
This is of course exaggerated, but Wang Chuanfu went on to say “The difference is profit, that is, competitiveness” is a fact. If it is outsourced parts and components, need to supply thereafter, 5-day stocks, while the attachment assembly plant in all plant parts, as long as the day before 2:30 pm the next day you can meet the production schedule of orders, reduced inventory, logistics, and other human and material resources. Wang Chuanfu said in an internal speech, BYD’s auto industry strategies and tactics with the international common practice is totally different, and even a kind of collision. International automobile industry is a highly specialized division of labor, pay attention to small but fine, BYD pay attention to vertical integration, pay attention to large and comprehensive.
In addition to the design, vertical integration model, another key is to develop and manufacture mold components. This is Wang Chuanfu repairer at the same time at the beginning of the layout of the root causes of mold manufacturing industry. In May 2003, BYD Auto with Beijing Ji Chi Mold Co., Ltd. completed the reorganization of assets, the establishment of a new Beijing BYD Die Co., Ltd., the establishment of Beijing BYD Industrial Park. Acquisition of mold factory is an important step in BYD-made cars chess, car mold, 95% of the work must be completed manually by the workers.
F3’s Model cars stood before the Chao Yang calculations to reporters: “Such a Model cars, asked people to open mode, to spend 150 million yuan, which they can do as long as 90 million yuan, the light it may be a cost - save 40%. ”
In order to ensure that each vehicle parts and components to achieve a minimum cost, BYD integrated industrial chain for each sub-point. Wang Chuanfu that the only way to ensure low-cost high-quality BYD Auto. Because the upstream supplier’s profit is the cost of their own terms, we must strictly control the outflow of profits.
Indeed, the vertical integration is not only cost savings, but also improve productivity. “If it was outsourced, wish to change the car or on a component design, to constantly communicate with customers the program, followed by the implementation of its cycle and communication cost can be imagined. BYD encountered this kind of thing, but, Perhaps the first collective meeting solved. 1.5L, F3 reason why the 1.5L than other listed companies as early as a lot is because of our vertical integration capabilities. “Yang Chao said. A relevant background on the 1.5L is, before the introduction of the new consumption tax, there are some officials said, 1.5L, or split into different line rates. Who first started selling 1.5L A-Class car, whose market competitiveness will be greatly enhanced.
Since the vertical integration model has such advantages, why the business is being deviated from the vertical integration, greater reliance on outsourcing and professional division of labor? First, because the high cost of foreign labor; Second, vertical integration will increase the company’s possession of the proportion of fixed costs; three vertical integration model is more demanding of management.
7 Why is deviated from the vertical integration of the business community?
However, the absence of a vertically integrated automobile enterprises to use the mode of operation, making it recruits BYD entered the automotive industry since 2003, has been called into question at the atmosphere. 2009 BYD Auto is a lucky year, as of June 30, 2009, BYD’s three main business, automotive business accounted for the proportion of total turnover reached 55% for the first time last year the figure was 31%, Automotive parts and components are being replaced IT as a major source of profit for BYD.
This has been achieved for Wang Chuanfu has enough lung power to show that the success of its vertical integration model. Or August 31, held in Hong Kong in 2009 interim results wholesale electronics conference, BYD, Wang Chuanfu, said: “Our product gross margin is high, F3, F6 are more than 25%, F0 is lower, because of the Chery QQ market prices low, but there are also 10% of the gross profit. such as F3, and the international similar brands
(Toyota Corolla), compared to half the price of it, why are 25% of the gross profits? because we are a product of each their own development, manufacturing and sales. current vertical integration is only superficial, as the company further vertical integration, gross profit would be more stable. such as the engine, and now we are just doing cylinder block, cylinder head, it does not do the crankshaft, connecting rod, can be done later; gearbox now Zhizuo gearbox shell, gear, or purchased in the future once we have the energy, will make their own. more segments to be integrated, the overall gross profit more you will be going up.
But one question is, since the vertical integration model has such advantages, why the business is being deviated from the vertical integration, greater reliance on outsourcing and professional division of labor? First, because of higher labor costs abroad, as compared with the large and comprehensive model to focus on their core business more cost reduction; 2 is due to vertical integration of what it means to do everything myself, not only will increase the company’s fixed costs of proportion, will increase the company’s operating leverage, the company risks go up; three vertical integration model is more demanding of management. Prior to this, there are also some domestic enterprises to adopt vertical integration model, but the result is both parts enterprises are to grow up lazy and will not get a good product, became the costs of these enterprises Shuoshu.
OEM fortune by BYD different, it is very aware of their advantages, is not the first development of the market, but rather the efficiency and cost. Therefore, when we follow the “Profit = Price - Cost” of this formula, BYD has reassortment into a “cost = Price - Profit.” From this perspective, it means that the vertical chain of production before the parties had been aware of their targets, and will not be cost-Shuo Shu. Moreover, vertical integration mode of operation for many years, but also to find out the BYD Mingmen this model, and its management in the doorway.
Of course, this does not mean that there is no financial pressure BYD. It is eagerly looking forward to A-share market, JP Morgan Chase expects BYD will be able to raise 36 billion yuan. BYD’s net debt, after raising rates, would be able to present about 60% ~ 65% to about 30%.
BYD adhere to this pattern is also one of the reasons is that, if passed, the development of vertical integration, exit costs will be higher, and external relations are also blocked. This is also mentioned on management “Bad Apple” (rotten apple) problem, a local bad, you bad to other places. Therefore, BYD, only continue to improve the vertical contact management, establish a sound system in this section of road ahead, not back way.
Wang Chuanfu sitting in economy class and wanted a second aircraft meal requirements have not been met. This has a net worth of 35 billion yuan in China’s richest man, has not the slightest embarrassment, because it used to.
This performance could hardly compete with his “arrogant” link: “In my opinion, the car is only just a pile of iron and steel”, “BYD Auto in 2015 to achieve China’s first, in 2025 to be a world first “” Patents are the paper tiger “… … 43-year-old Wang Chuanfu more than once, so that. A similar rhetoric of arrogance or the business community in China do not lack, and will be categorized as “to attract public attention” as a means. But when Wang Chuanfu say this, few people questioned this, because he had a period of 14 years continuously can not become a reality.
Many people want to decipher the password for the success of BYD, but found the process so difficult to decipher. BYD spokesman, deputy general manager of BYD Auto Sales Company Wang Jun said: “I see a lot of articles describing BYD, BYD to imagine they were too complicated, but in fact we are very simple, we will to follow a principle: the simple things to do that is the ultimate trick. This is the Wang and continues to tell us. “