Daimler and BYD Team Up to Develop an Electric Vehicle in China

The BYD e6 Electric Vehicle








Germany's Daimler AG will work with BYD Co. of China to develop an electric vehicle to be sold on the Chinese market.

Under the agreement, Daimler and BYD will develop a new electric vehicle specific to the requirements of the Chinese market. The vehicle will be marketed under a new brand jointly created and owned by Daimler and BYD. In addition, a common technology center will be established in China to develop, design and test this electric vehicle.

The agreement follows Daimler's deal with Tesla Motors, the California EV-maker, to partner to manufacture electric vehicles. China last year became the world's largest market for cars, and its many densely populated cities make it a desirable location for electric cars.

Wang Chuanfu, BYD's chairman and president, said in a statement issued today that "with this technology partnership, we have created a win-win business model with complimentary competences. We are very excited about this opportunity to work together with Daimler, the inventor of the automobile."

Dieter Zetsche, Daimler chairman and the head of Mercedes-Benz Cars, said BYD's experience in battery technology will help the team produce a competitive car.

"Daimler's know-how in electric vehicle architecture and BYD's excellence in battery technology and e-drive systems are a perfect match. Thus, we will be able to participate in the potential growth of electric mobility in China, currently the largest auto market of the world," Zetsche said.

Outlook and Implications

BYD already has an alliance with Volkswagen to develop vehicles with alternative powertrains and it is perhaps strange that VW did not look to pursue this opportunity itself.

Despite its relatively young age, BYD has made significant progress so far in both battery manufacturing - where it is now one of the top manufacturers of nickel-cadmium, nickel-metal hydride, and lithium-ion rechargeable cells - and the manufacture of passenger cars.

The automaker received approval for mass production and sales of its F3DM plug-in hybrid vehicle in the Chinese market at the end of 2008 and is now following this up with the e6 pure-EV. BYD aims to launch its e6 model in the U.S. and Europe during the second half of this year. The company is also exploring the possibility of tapping into solar energy to power its future range of EVs.

Meanwhile, Daimler has already revealed that globally it will focus on using alternative powertrains and other fuel-efficient technologies to combat the intensifying competition from local rivals such as BMW and VW's Audi brand.

Daimler recently introduced the electric version of its Smart compact car and is due to launch a pure-electric version of its Mercedes-Benz A-Class, and it has been looking at the potential for launching these vehicles in the Chinese market over the past few months.

With its many metropolitan areas, China has the potential to be among the world's largest markets for zero-emission vehicles. Moreover, Daimler already has an alliance with Tesla Motors to develop alternative-fuel vehicles, and this agreement with BYD will help its pursuits in the sector further.

However, the key challenge for the new Daimler-BYD alliance will be the intense competition from Japanese majors such as Toyota, Nissan, and Mitsubishi, as well as the fast-growing own-brand portfolios of smaller Chinese automakers such as Chery Auto, Geely Group, and the like.

The Japanese automakers already have their battery-supply alliances for alternative-fuel vehicles in place with Panasonic, NEC, and GS Yuasa, respectively, while the Chinese peers are eyeing sourcing from Taiwan under the impending cross-strait import treaty.

Chinese automakers Shanghai Automotive Industry Corporation (SAIC) and Geely Group have also formed alliances with U.S.-based suppliers to increase the development of EVs.

The support infrastructure is being put in place across China to make EVs commercially viable in the months and years ahead, with a growing network of charging stations being rolled out across the country. In addition, the government has already announced a $1.5-billion package to promote the usage of alternative-fuel vehicles in public transport, taxi services, and other sectors across 13 local cities including Beijing and Shanghai. There is no doubt that this JV is an exciting development for both companies, with Daimler particularly proactive in investing in its alternative-powertrain and electric-car strategy. This new alliance is a huge opportunity for both companies to exploit the massive growth potential for EVs in the world's biggest automotive market.

Source: Edmunds.com