BYD Autos – Strategic Marketing Analysis and Marketing Strategy

Introduction

BYD Auto is a manufacturer of hybrid and electric automobiles based in China. The company’s business model is based on swift innovation and the company manufactures auto parts, electric cars and plugin-in hybrid cars. Its leadership in the hybrid category started in 2008 when it launched the F3DM dual-mode electric car that did not depend on specialized charging stations. In 2010, the corporation produced the e6 pure electric vehicle, which led to the manufacture of eTaxi and K9 electric bus. BYD has established cooperation with Daimler, which is the most experienced traditional car manufacturer in the world, to become competitive in the market. The company’s prowess in the electric and hybrid categories has given it an advantage over other competitors in the world. Current paper will assess the company’s market, competitiveness, customers and strategic objectives to gain success in the market and provide recommendations for success.

Market Analysis

The changing trends in the automobile industry where people are shifting to vehicles powered by other fuels sources apart from oil have influenced the focus on the electric vehicles. China, which is one of the largest car markets, is facing pollution challenges. As such, both the citizens and the government have realized the need for clean energy sources to avert an environmental disaster. BYD’s largest market potential is in China and thus, has a motivation to create alternative energy driven cars. The increasing population of people in the developing countries with disposable income will inflate the demand for vehicles. The number of cars on the road by 2050 will be approximately 1.5 billion compared to 750 million in 2010. Consequently, the amount of oil required to power the automotive will strain the oil sources, which are limited and non-renewable. The alternative sources, such as electricity, have become an integral part of current and future vehicles. Although the electric car market has enormous potential, it is relatively new and few people have adopted its products due to poor electricity infrastructure. Additionally, the switching costs from currently gasoline driven vehicles to the electric cars are very high, which have impeded the fast adoption of the electric cars. Short driving ranges and battery maintenance problems are some of the reasons the consumers have been reluctant to purchase electric vehicles.

The largest markets for electric vehicles are found in Europe, the United States and China, accounting for 57% of the total market share. In North America, 83, 647 units of electric vehicles were sold by the end of 2014. About 55% of all the electric vehicles sold in America are plug-in hybrid vehicles. Chevy Volt and Nissan Leaf form 50% of the American market share. Ford C-Max Energi, Toyota Prius and Ford Fusion are all hybrid plug-ins and own approximately a third part of the American market share. By 2014, 72, 419 electric car units were sold in Europe. Mitsubishi owns approximately 23% of the European market share with the Mitsubishi Outlander, which is a plug-in hybrid car. BMW i3 and Nissan Leaf accounted for 28% of the European market. The number of units sold in China during the same period was 42, 493, which represents approximately 0.33% of the total Chinese auto industry. The Chinese government has been aggressively supporting the adoption of the electric vehicles through tax exemptions and subsidies for people who purchase the vehicles. Although there are numerous foreign competitors in the Chinese market, domestic companies are the market leaders. Among all the three markets, China has the greatest potential due to its labour cost advantage, the need for alternative energy due to high pollution and advanced innovations. Moreover, the government of China is supporting such strategy by engaging private corporations to use innovative approaches in the electric vehicle industry. On the other hand, the United States’ government involvement is mostly through legislation. As such, the Chinese effort is more promising than the United States’ and is likely to yield better results.

BYD Autos Competitiveness

China is one of the largest automotive markets in the world, which increases the competitiveness of BYD. Secondly, BYD has taken advantage of its location in China to produce low-cost vehicles. One of the challenges affecting electric car manufacturers is the increase in the cost of the vehicles compared to the gas-driven cars. Since the prices may reduce the acceptance of the vehicles, corporations must find ways to reduce production cost and thus, the price of cars. Besides, BYD manufactures in China where the labour costs are relatively minimal compared to other countries. As such, it has succeeded in reducing the prices of its products.  The price of its F3DM is $ 21, 700 compared to its equivalent – Toyota Prius, the price of which is $ 40, 600. The low-cost location provides BYD Auto with a competitive advantage. Since BYD Auto started manufacturing hybrid vehicles a year earlier than their competitors, such as Toyota and General Motors, it has a competitive advantage of market leadership in penetrating the market.

Foreign market penetration poses tremendous challenges for multinational corporations. High tax levels and tariffs may limit the number of foreign companies in a given country. As such, one of the most effective market entry strategies is a joint venture with local companies (Allen 2014). Joint ventures help mitigate the effects of local restrictions because the local partner in the venture can help overcome the challenges. Competitive advantage emerges from such cooperation by eliminating the market entry barriers. BYD has gained the advantage by partnering with Daimler, one of the most experienced automakers in the world. Consequently, BYD can sell its products in all markets where Daimler has established presence without facing the challenges that a new entrant would encounter.

BYD Autos can maximize its success by taking advantage of the supportive government environment in China. Electric mobility has become a national economic goal. As a result, the government has offered support to local corporations to help realize the objective. Since BYD Autos is a leader in innovation technologies related to electric cars, it has competitive advantage over other foreign competitors in the Chinese market. The government support can help the organization establish a firm foundation domestically. It can help launch a successful global market expansion. Being a leader in technological innovations increases the profitability of firms because their products are of high demand at profitable prices before the imitators enter the market.

Another competitive advantage that BYD Autos has over other competitors is that it has experience in the production of rechargeable batteries. The batteries are critical components of the electric vehicles. Among the challenges limiting the growth of the electric vehicles industry is the low quality of batteries in terms of longevity and maintenance. Since BYD has been manufacturing the batteries, it has competence that other companies may not have. Consequently, its cars can have the most advanced batteries. When customers are purchasing products, they consider functionality as one of the purchase motivations. Consequently, BYD can capitalize on its experience and innovation in the battery manufacturing to market its electric vehicles.

One of the core competences of BYD Autos is its constant design optimization and reverse engineering capabilities. A large extant of its technological innovations come from reverse engineering and improvement of competitors’ products. The company has a highly trained workforce and programs to educate and retain them. Their capabilities enable the company to create new designs and be at par with competitors. The employees are critical success factors of any organization. Motivating and retaining employees reduce their turnover rate and replacement costs. As a result, the profitability increases over time. The company’s focus on internal learning empowers it with economies of learning, which reduces the cost of training (Chen & Wang 2014). The reduction in the cost is translated to the low prices of products.

The supply of raw materials influences the ability of a manufacturer to deliver high-quality products to the market in a timely manner. Having reliable suppliers is, therefore, mandatory for organizations that aim at leading the competition. BYD Autos has secured its supply chain by vertically integrating with its suppliers. Vertical integration allows the company to control access to raw materials. China owns approximately 17% of world’s lithium deposits.  Lithium is a core component used in the manufacture of batteries that store the electric power to drive the cars. In addition to its supply ownership, China has a rich source of automotive suppliers. The suppliers are located in China because approximately 70% of world’s top automakers have subsidiaries in the country. Due to it, BYD Autos has an advantage over its competitors without such access to raw materials.

Competitor Analysis

Since the BYD Autos was a pioneer in the e-mobility sector, it aims at leading the competition, both locally and internationally. However, the competition is complicated by the fact that in China, there are numerous local and multinational corporations. In 2014, BYD Qin led in sales volumes, which were 30% of the total sales. The second position was secured by Chery QQ EV with 8.5% of the total sales. BYD e6 was third with 6.6%, Zotye E20 and Chery eQ were fourth and fifth with 6.4% and 5.5% respectively. Although the competition is extremely dynamic, the 2014 sales results indicated some of the top performers in both the hybrid plug-in and all electric industry in the Chinese market.

In the international arena, the Nissan Leaf and the Chevy Volt represent the fiercest competition for BYD in America because they own approximately half of the American market. The strength of two competitors depends on their market penetration in America and heavy investment in research and development. Since they are multinationals, they have gained economies of scale, which may limit other competitors from venturing into the American market. Other competitors in America that have taken a one-third of the market share are Toyota and Ford with their hybrid plug-in products, such as Toyota Prius, Ford C-Max Energi and Ford Fusion. Mitsubishi Outlander, BMW i3 and Nissan Leaf lead the competition in Europe. Their firm foundation in the market prevents others companies from entering the market successfully. They have created attractive brand images that BYD must dilute to acquire a considerable market share. Such venture requires time and aggressive marketing tactics through an integrated marketing communication.

The only advantage that the BYD has is that its focus on the eBus and eTaxi has differentiated the company from other automakers. The two market segments are relatively new. BYD Autos’ success in selling the eBus and eTaxi in China provided it with platform for representing the two products abroad. The unchallenged market segment, coupled with BYD’s lithium battery technology, puts it at the top of the competition in two segments.

Customer Analysis

Modern global customers are keen on the products they purchase and how they affect the environment. The increased awareness of pollution has influenced buyers to seek vehicles that do not emit pollutants. Such clients form an attractive market opportunity for BYD Auto. In addition, the customers seek efficiency and performance, which can be achieved by the electric car. Approximately 80% of the population of developed countries will be living in cities by 2025 (Hooley, Saunders & Piercy 2014). Consequently, there will be a change towards smaller city cars using new technologies. As a result, the BYD Auto is positioned to take advantage of such changes to increase its market share. There is a rising middle class in both China and India. Such demographic group will increase the demand for cars in the world and consequently the amount of fuel usage. The middle class represents an educated group that demands corporate social responsibility from corporations. One of the greatest concerns in China is air pollution due to industrialization. The growing middle income earners will put pressure on automakers to produce vehicles with the least carbon influence on the environment.

The large number of competitors in the electric car market will shift the power to the customers. The power of the customers in the electric vehicles industry will be high due to the alternatives available. Additionally, the increased competition will provide numerous substitutes in the market that will reduce the switching cost from one competitor to another. Therefore, the customers will have the power to influence innovation by demanding the best technological innovations.

Strategic Marketing Objectives

Given the increased competition in the electric vehicle market, it is imperative that BYD establishes marketing objectives that will empower it to penetrate new markets and maintain the current ones. The objectives must be consistent with the company’s goal of becoming a leader in the electric vehicles industry.

The first objective is to acquire and maintain a majority market share in the eBus and eTaxi segments. The company can achieve the objective because it has gained the market leadership already. The potential of current market share is worth the attention of the organization, since public transport is enormous around the globe. Institutions and public transport companies are potential customers with great purchase power.

The second objective is to create a brand image and awareness by offering high-quality product. Since other competitors, such as BMW, have an excellent brand awareness, BYD Autos must strive to convince the clients that it can deliver its products better that such renowned brands (Das 2011). The joint venture with Daimler and the company’s prowess in the lithium battery production are vital aspects to assist the company realize the objective.

The third objective is to offer support services and infrastructure to the clients and increase the ease of use. BYD Autos should promote the popularity of its cars by ensuring that there are charging stations within reasonable intervals in the market. Customers must enjoy the experience and benefits of the electric cars by having an efficient charging system. Unfortunately, many countries do not have such stations because the development of the electric vehicle market is still low. For BYD to prove its authority in the market, it must build the stations before convincing customers to purchase the vehicles. Since the stations may be expensive to construct, the company should collaborate with other players in the market to create common charging stations for their customers. The realization of such objective is vital because it will determine the acceptance and growth of the electric vehicles market. In other case, The customers will be concerned that there is no infrastructure to support the electronic vehicles. Such concern can prevent customers from considering the eTaxi and eBus during their purchase decision-making.

The fourth objective is to target institutions around the globe with eBus product. When government institutions become customers, they experience the benefit of the eBus first and can become motivated to initiate the upgrade of their electricity grids. Political will is essential in acquiring the market because governments control the electricity grid systems. The political mileage in improving the electricity system is vital for the eBus market and other electronic vehicles’ markets.

Recommendations to Enhance Success and Marketing Strategy

BYD Autos should focus to become a market leader in China, since it is relatively new. The Chinese market has promising potential due to its large population and upcoming middle class with disposable income. Success in China can provide the company with leverage to pursue an expansion strategy as the local market in China can support the overseas operations until they become profitable. BYD Autos is the market leader in innovation. The company should use such unique advantage to provide the local market with affordable cars. The company can convince the Chinese customers about the importance of adopting e-mobility. It is easy to convince the Chinese buyers because they used the e-Bicycle during the SARS outbreak in the country in 2003. Since people avoided public transport, they opted to use electric bicycles that proved beneficial under specific circumstances. The marketing campaign should highlight the functional aspects of the electronic vehicles and their positive impact on the environment. Additionally, the marketing strategy should utilize integrated marketing communications with a similar message through various media highlighting the benefits of driving an electronic car. The integrated marketing communication is essential because it reinforces the company’s message and ensures all the target customers are informed. It may be extremely difficult for customers to decide from which competitor to buy. Availing convincing information to them reduces their information seeking stress and increases their confidence in the company’s products.

The public relations’ aspect of the marketing strategy should deal with environmental concerns by depicting the company as a responsible organization concerned with the environment. The pollution in China is a great concern for the entire population. As a result, the public relations campaign should deliver the message in an encouraging manner to take responsibility for the environment by purchasing the pollution-free electric vehicle.

The Chinese consumers are known to prefer foreign companies to local manufacturers. BYD can overcome such challenge by highlighting its eBus and eTaxi success and acceptance in America to the potential customers. Additionally, the marketing strategy should showcase the success the company has achieved by forming a joint venture with Daimler.

The second recommendation is to maximize its economies of scale to lower the prices of the cars. The company has additional advantage for being a Chinese firm, since the government has provided $ 100 billion grant for electric cars. Such grant, low labour costs and its internal efficiencies can help the company outperform competitors through cost leadership. The low prices that result from low cost of production subsequently reduce the switching costs from the oil-driven cars to the electric vehicles (Kurtz & Boone 2010). The low prices can be an essential selling point for the company because foreign companies’ products are expensive in the international market due to high production costs. Since the company manufactures high-quality products, affordability can help it penetrate foreign markets. For instance, the American market can benefit from the low prices because American manufacturers sell equivalent products at inflated prices.