Industrial Policies, the Business Model of BYD and the Chinese "Green New Deal"

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This paper aims to examine the industrial policies on new energy vehicles in China, while taking into account new changes in the US-China economic relationship in the context of the Chinese Green New Deal.
There was remarkable progress in the US-China relationship in the fields of new energy and the environment, which are the centerpiece of the "Green New Deal" policy advocated by President Obama. Typical examples of agreements between the US and China is the series of agreements on the environment signed during President Obama's visit to China in 2009.

In the latter case, the leaders of the two countries announced the launch of a US-China Electric Vehicles Initiative. This initiative will include joint development of standards, demonstration projects in a dozen or more cities, formulation of a technology roadmap, and citizen education projects—all based on the US-China Electric Vehicle forum first held in September 2009. The leaders emphasized that their countries have a shared interest in accelerating the dissemination of electric vehicles in order to reduce crude oil dependence and emissions of global warming gases, and to promote economic growth. The US and China will build a green partnership based on the mechanism of the Strategic Economic Dialogue.
On the other hand, China has its own Green New Deal which takes new energy and environmental industries to be a field for future growth. A notable trend in 2008 was the "Green Car Project" implemented as one aspect of the "Olympic/New Energy Model Projects" during the Beijing Olympics, as part of the "Green Olympics." Chinese automakers such as Chang’an, Chery, Dongfeng, FAW and Foton collaborated with Tsinghua University and other universities, and provided new energy vehicles they developed themselves for the Olympics. These included 55 electric vehicles equipped with lithium-ion batteries, 25 hybrid microbuses, 75 hybrid passenger cars, 20 fuel cell vehicles, and 410 electric carts for use at competitions.

The spirit of the Green Olympics continues at the 2010 Shanghai Expo. The concept of the Shanghai Expo is to be a low-carbon, green expo, and the Expo makes extensive use of low-carbon technology. This automobile industry promotion policy which was announced in 2009 should be highly praised as an industrial policy which is cognizant of the future development of new energy vehicles.
The Chinese government has also developed a series of incentives to promote purchasing and dissemination of new energy vehicles. In February 2009, the Ministry of Finance and the Ministry of Science and Technology announced a policy to provide subsidies for the use and dissemination of new energy vehicles. In order to promote energy efficiency and support the industrialization of new energy vehicles, the government will take the initiative in adopting new energy vehicles in the public sector, e.g., for city buses, taxis, government vehicles, environmental project vehicles and postal vehicles. The aim is to disseminate such vehicles nationwide, based on experience in demonstration cities. The first group included 13 demonstration cities and the second group doubled.
At the moment, the competitive advantage of BYD's business model, which focuses on cost-performance and cost leadership, is clearly evident in both its battery business and automobile manufacturing. In terms of product technology, high added value engines are made by Shenyang Aerospace Mitsubishi Motors, but mass production models use engines developed or improved by BYD, and BYD is innovating to reduce costs by manufacturing in-house. For example, in the assembly plant for the gasoline powered F3, crucial press equipment is made by Fagor (Spain), welding equipment by Ogihara Manufacturing (Japan) and painting equipment by Durr (Germany). Assembly and inspection are done with machinery made by Banzai (Japan), and stamping dies are Japanese made. In March 2010, the German firm Daimler AG announced that it had signed a technical tie-up with BYD for development of electric vehicles for the Chinese market.
Another bottleneck for dissemination of electric vehicles is development of charging infrastructure, but this must rely on the leadership of the government and the electric power industry. The 8 major goals for the Chinese automobile industry were stipulated for the three years from 2009 to 2011 in the "Automobile Industry Adjustment and Promotion Plan" promulgated in March 2009:
We found finally that as a new industrial revolution unfolds based on new energy, the aim of China is to line up on the same starting line as the other major countries of the world. For the short term, China is taking bold fiscal action as a pump-priming measure to overcome the international financial crisis, and for the long term, this will serve as strategic investment to secure a strategic position in international competition.