Introduction and Firm Description
BYD Auto Co. Ltd is an automotive subsidiary of the Chinese automaker BYD Company, founded in 2003. Currently, BYD Co., Ltd. is regarded as a high-tech company with a key focus on technological innovation (Quan, Loon, & Sanderson, 2018). The company leverages its battery-making strength within the automobile manufacturing industry to develop electric and plug-in hybrid vehicles (PHEVs) and battery electric vehicles (BEVs). The company had previously dealt in the production of petrol engines, but production ceased in late 2021.
BYD has based the sales of its electric vehicles in mainland China. However, the company only began expanding into the global market in early 2022, but sales are modest outside of China. Furthermore, the company became the market leader in China by late 2021, with 3,500 EV Units sold in the second quarter of 2022. The company saw a 22.9% rise in BEV and a 31.2% rise in PHEV in 2022 (Meng, 2021). This report will focus on the performance of BYD Auto to assess its overall performance.
The Definition of Performance
BYD Auto’s performance in the market is defined and judged by internal and external factors that affect the company. Le (2005) states that firm performance is an economic category that reflects a firm’s ability to utilize human resources and materials to achieve its targets. Since it has been so inventive in production and strategies that satisfy the needs of local customers, China has been carefully spreading its mobile phone manufacturing to automobiles (Quan, Loon & Sanderson, 2018).
BYD Auto’s short-term and long-term goals include achieving higher sales in 2023 and expanding its global market presence. BYD, for example, has a long-term aim of producing and selling four million plug-in electric vehicles by 2023. Long-term goals include worldwide expansion and becoming the world’s leading vehicle market by 2030. The BYD firm stated that it anticipates a shift in the government’s support schemes for the company.
This will enable the corporation to devote more effort to manufacturing a car that is superior in terms of performance and has a longer driving range than the one it has previously produced (Cao et al., 2018). However, the corporation has made plans to ensure that the subsidies may be phased away. This strategy would mean discontinuing the sales tax exemptions that it has been providing to its consumers since 2014.
When there are no subsidies, rising NEV sales are interpreted to imply a certain drop in its operations. Businesses will experience greater losses, resulting in a decline in overall performance year after year (Shao et al., 2021). The company plans to sell approximately 4 million devices this year, driven by shifting consumer demand for sustainable practices.
The BYD Company can address its concerns by simply passing the cost on to customers, but this is challenging for BYD because more manufacturers are entering the EV industry over time. Foreign companies compete, each seeking a competitive advantage over their peers in the electric car industry. However, the Chinese government has made it easier for itself by establishing production norms for enterprises that produce electric vehicles.
PESTLE Analysis
Political forces have a significant impact on BYD Co., Ltd.’s long-term profitability and sustainability. The company’s international position makes it more sensitive to changes in the political contexts of different nations. Political stability provides a comfortable and stable atmosphere with predictable market tendencies. If there is political unrest in a specific location, investors will be deterred, and their ability to communicate with stakeholders will be compromised. The intensifying trade war between the United States and China raises market risks for foreign Chinese firms (Medeiros, 2019).
As a result, BYD Co., Ltd.’s activities in the United States are jeopardized. On the contrary, the Chinese government frequently defends its own sectors, providing a more secure environment for domestic corporate growth. The most notable political trend is the increasing tension between the East and the West. According to Medeiros (2019), the relationship between the US and China has been strained in recent years, influencing the extent to which the two countries regard each other as allies in the global market. This tendency has an impact on the flow of products and services between the two nations, as well as on industries and enterprises.
The increased environmental consciousness caused by changing climate conditions makes environmental factor analysis a critical component of PESTEL analysis. According to Zheng and Kahn (2017), China is one of the nations heavily impacted by environmental pollution; however, the government has implemented strict regulations to mitigate the environmental impact of businesses. According to Kuklinska et al. (2015), organizations in both the United States and Europe establish and execute regulations to control environmental pollution. Furthermore, there is a rising worldwide consumer awareness of effective waste management, renewable technology, and eco-friendly products.
BYD prioritizes the improvement of eco-friendly processes to maintain its reputation as an ecologically responsible company while fulfilling its responsibility to keep the world safe. To boost stakeholder satisfaction, BYD Auto Co., Ltd. has investigated implementing efficient waste management procedures within its manufacturing enterprises while developing renewable technologies.
The increased awareness of environmentally friendly behaviors among consumers is a primary trend in environmental considerations. According to Trudel (2018), climate change awareness has linked consumption to sustainability, as many people worldwide seek methods to reduce their carbon footprint and mitigate hazardous elements in the environment. It indicates that the environmental effect of a product and organizational practices now heavily influences customer purchasing behavior.
As a result, by replacing petrol engines with electric vehicles, BYD Auto aims to enhance corporate sustainability and foster a competitive market environment. Petrol is classed as a fossil fuel, which emits hazardous emissions into the atmosphere. By manufacturing electric batteries and engines, BYD Auto has been able to preserve and enhance environmental sustainability.
These actions easily qualify as ecosystem-friendly guidelines established by the United Nations’ mission to save the planet’s future. EVS aligns with the trend of a sustainable future, as the globe has witnessed significant advancements in technology aimed at protecting the environment. In general, BYD Auto will have a competitive edge in the global market, as customers and consumers are increasingly motivated to acquire and consume services and products that protect the environment.
Porter’s Five Forces
Due to the costly investment and limited return in technology used in the manufacture of lithium iron phosphate batteries, BYD Auto sees few risks from new competitors. The possibility of new entrants into the vehicle sector poses a major threat to BYD. To mitigate the risk of new entrants, BYD should leverage technical innovation to produce high-quality products that reinforce the company’s brand. As the Chinese government continues to allow more NEV companies to enter the market, a large number of NEVs will be released shortly (Yang, 2022). As a result, in order to sustain its brand awareness in the Chinese market, BYD needs to enhance its enterprise strategy and develop future NEV alternatives.
BYD competes with other private auto firms as well as foreign vehicle companies such as Tesla. To reduce market rivalry, BYD should continue to produce small-scale, low-cost vehicles that match consumer desires. State-owned and commercial automakers continue to produce cost-effective new energy cars, fostering market rivalry. For example, Geely, a privately held corporation, continues to make low-cost vehicles, making it BYD’s major competitor (Kowalska-Pyzalska, Kott, and Kott, 2020). However, there is little competition in China because other local EV manufacturers do not produce the same quality as BYD Auto.
SWOT Analysis
Strengths
BYD Auto’s extensive patent portfolio is its major competitive advantage, providing the firm with the exclusive rights to prevent anyone from importing, selling, producing, or replicating its product without permission. Patents have also been important in securing the corporation for a certain period, allowing the company to keep competitors at bay while utilizing its own resources.
BYD Auto leverages technological supremacy as a source of strength in the development and creation of its own batteries, which significantly contribute to its sales. For example, in 2020, BYD released a blade battery with an incredibly long battery life and better safety. Furthermore, in November 2020, BYD introduced the DM-I hybrid technology with a Xiaoyun engine, thereby accelerating the development of new energy cars (Abdelrahman et al., 2018). As a result, BYD’s exclusive technology is one of the elements driving the company’s rapid growth.
The price advantage has enabled BYD to produce its own batteries, utilizing them as materials for building new energy vehicles, which in turn results in lower NEV production costs. BYD produces lithium-iron-phosphate batteries that are both safe and affordable, providing the company a pricing edge over its competitors (Junqi et al., 2021). Furthermore, BYD benefits from pricing advantages across its various automobile models, making the firm more cost-efficient and increasing its likelihood of being selected by customers.
Opportunities
BYD Auto benefits from the Chinese government’s initiatives, which encourage EVs over petrol engines. Because domestic rivals’ characteristics do not match those of BYD, the firm has an opportunity to advance and capture the maximum market share. To improve its specialty sectors, establish its artificial intelligence network, and produce superior recommendation engines, BYD must develop artificial intelligence within its manufacturing lines.
Furthermore, there is a potential for BYD to have access to high-level personnel, which will aid in the company’s expansion into new fields of innovation (He et al., 2022). BYD Auto must enhance its market entry into global markets to lower its market entry costs by focusing on digital marketing and social media marketing, as this would reduce the chances of failure (Ma et al., 2021).
To ensure the firm retains its market share, the corporation should diversify its brands and introduce new features based on client preferences. Increasing consumer discretionary spending presents a solid opportunity for BYD to capitalize on by developing new business models that require users to pay progressively for using their products. This strategy is expected to yield increased sales and profitability in the supply chain.
Weaknesses
Domestic competitors such as Xiaopeng and Lixiang offer products with comparable price ranges and features. As a result, finding a distinctive selling point in the Chinese and global markets has proven hard for BYD. A lack of vital talent has resulted in a shortage of skilled employees in the fields of technology and digital transformation, posing a significant obstacle to BYD’s development of artificial intelligence and machine learning. BYD’s business model is easily replicable, making it less successful in repelling market competition.
Furthermore, BYD Auto lacks a broad staff, as the firm is less diverse and concentrates primarily on the Chinese domestic market, limiting its potential for global success (Rotaris, Giansoldati, and Scorrano, 2021). Customer dissatisfaction ratings from the internet reviews reveal that customers are disappointed with BYD’s products (Teece, 2018). To increase BYD Auto’s sales, management needs to improve customer purchase and post-sales experiences.
Maintaining Success in the Future
For BYD Auto Company to continue its success in the future, stakeholders must examine its internal corporate-level plans. BYD Auto Company Limited’s use of internal analysis will help management to develop strategies that optimize strengths and opportunities (Nguyen et al., 2021). Furthermore, the methods will address and strengthen vulnerabilities while also minimizing dangers. A corporate-level strategy is a strategic plan created by a firm to identify and compare itself to its rivals.
BYD Auto Company has the distinction of being a pioneer in low-cost automotive manufacturing and an efficient production method. This advantage goes from battery diversification to mobile phone and vehicle production. In terms of competitive analysis, BYD Auto Company Limited faces stiff competition from Tesla Company, which manufactures electric vehicles and energy storage solutions. To remain competitive, management should design company plans to increase its inventive capabilities. Market development strategies, market penetration plans, and new product development strategies are the three stages of corporate-level strategies (Colton & Poploski, 2019).
To remain competitive in the industry, BYD Company must execute at least one of these corporate-level initiatives. For example, new product creation is dependent on ongoing innovation and creativity, as well as the implementation of new technology developments in manufacturing. BYD Auto staff must constantly identify new product features to fulfill the needs of its customers. Furthermore, strong client feedback systems are required for successful new product development.
A market growth plan is another corporate-level strategy that will support BYD Auto’s successful market entry. This is a company’s growth strategy for identifying and entering new market niches with its successful goods. BYD Auto Company Limited has successfully established itself in the lithium-ion battery market, currently controlling around 15% of the global market. BYD Company will be able to expand and enter new market sectors if such a plan is implemented.
Finally, BYD Auto management may establish a corporate-level plan by implementing a market penetration strategy. Market penetration strategy is the process of creating a plan to expand sales of existing products in an already established market, aiming to increase revenue yield (Zulkarnain et al., 2018). This approach is competitive because it prevents competitors from quickly encroaching on the company’s existing market share.
When planning projects, project managers should use the critical path approach to examine the given data. CPM is a project management approach that helps identify critical deadlines and ensures projects are completed on time. The critical route is the longest distance between the start and completion points, taking into account all jobs and their respective durations (David, 2018). This method provides project managers with a clear image for project scheduling.
With so many distinct areas of concentration at BYD Auto, the critical path technique would be a valuable tool for the project managers. BYD Auto should have a supply chain risk management plan in place to prepare for any unexpected losses from its suppliers. Because the company’s goods are diverse, its supply chain is more sensitive to numerous forms of interruptions induced by uncertainty.
Conclusion
In conclusion, BYD Auto Co., Ltd. is one of the high-performing firms that has utilized technological innovation as a key element of success. The corporation is involved in the vehicle manufacturing sector and has operations in mainland China. According to the PESTEL study, BYD Co., Ltd. is influenced by external forces, including environmental, economic, and technological factors, which can sustain growth not only in its current market but also in the global economy. The company’s focus on technical innovation and developing a sustainable future is its key strength, enabling it to function efficiently in the face of external environmental forces.
However, for the company to continue enjoying successes in the future market environment, key stakeholders must incorporate internal corporate analysis, implement forecasting systems, and employ a critical path approach to the company’s projects. Although the decrease and withdrawal of subsidies have had an impact on the Chinese NEV market, BYD’s technology in research and innovation will make the firm more competitive. Furthermore, with proper planning, BYD will enhance its prospects in the development of NEVs and become a leading automotive manufacturer in the production of new energy vehicles.
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