Exclusive interview with BYD's chairman Wang Chuan Fu

Q: What made you start BYD, which is China's largest battery maker today?

A: It was around 1995 after China had liberalized its economy, and it was vibrant. Many people wanted to be entrepreneurs and venture into business in China. That was the trend at the time, and that's why we joined this entrepreneurial wave.

Q: You ventured into the auto business in 2003, with little knowledge about making cars. Why the bold move?

A: Yes, it's true that we didn't know much about cars back then and had very little research done on cars. But we saw opportunities in the future, especially in China. As petrol was set to create an (environmental) problem, we needed to start developing electric cars. The future of electric cars in China is very bright.

We see that this is the right direction to venture in, so we decided on this and bought an automobile company. But in the short term, we are still focusing on gasoline-powered cars in the market and we've been successful.

Last year, we hit 450,000 cars. As demand for electric cars in China and the world grows, this component of our business has also seen encouraging results.

Q: What do you tell skeptics who say electric cars won't take off?

A: I think it is precisely the opposite. I think the confidence in electric cars has strengthened increasingly. Looking at our 50 "E6" electric taxis in Shenzhen, questions of whether batteries could power electric cars have more or less been eliminated. That's because some of these taxis have traveled 40 thousand kilometers. That's equivalent to a normal sedan traveling for two years. The dream and the era of the electric car is upon us.

Q: How do you ensure quality in your factories?

A: We know the greatest threat to quality are the variables along the production line. Fighting the variables is the direction we're taking. We have a competitive labor force, and we make use of this quality labor force to exercise quality control, to analyze the variables. With manpower and automation, quality control is held to a high level of excellence. This is the method we use. When labor costs in China increase, we will also gradually bring in more automated machines to reduce our reliance on people, and also to cut costs.

Q: What drives you, what motivates you?

A: I think it stems from a curiosity. When we see something good, we wonder how come it's so good, and we want to find out why and how it's created, to find the root cause of its goodness.

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Accelerating Solar: A Look at the Next Decade

There is a lot of price pressure and cost pressure in the photovoltaics industry. Much of that is coming from the scale that’s happened and the capacity that’s been installed. We’ve seen costs come down fairly rapidly in addition to those prices coming down and that’s helping make this technology evolve and grow even faster. (Many) of the markets are geographically significant — Germany and Europe more broadly — but what we’re seeing is also a lot of change and growth happening in China, in India, in the U.S. and other parts of the world.

Many parts of the world already have electricity rates that are over $0.40/kWhr. Solar today averages $0.25/kWhr. In almost all of Africa, Pakistan, Hawaii, Italy and large portions of Japan, the price of electricity is already in excess of what the cost of electricity is coming from solar. Solar can make a difference and what’s exciting is that the markets can grow as the industry grows. We’ve had a lot of different opportunities to be able to scale this industry in an organic and continuous fashion.

Of the changes that are happening, we see a lot coming from China. We see utilities in China where there are basically less than 10 major utilities already getting actively engaged in solar and becoming vertically integrated. A utility in China is very different than a utility in the U.S. so those utilities are able to bring the market along with the manufacturing. Many of them today make their own aluminum, for example, as part of how they do load leveling. Rather than worrying about pumping water uphill for storage, they use that nighttime power to create other products. Several utilities have already taken large steps toward getting to large-scale manufacturing. Many of them are becoming significant players, able to bring down the total costs across the value chain.

I just visited BYD in China. You probably know that very well as a company that Warren Buffett invested in for their auto business. But they have a very large-scale LED manufacturing business, a very large-scale solar manufacturing business and a very large-scale advanced battery manufacturing business. They see a convergence happening here where storage–which they’re working on for their electric car–can be scaled in a way to meet utility needs. There are also companies like Nokia that are making everything from cell phones to large screen displays to cars. Give them an active involvement in the way manufacturing can be done and bring those together with the market expertise that they have. There’s a lot of change that’s happening and a lot of that is happening on ever smaller localized scales. That’s the parallel to the Internet. Those localized scale uses are now being connected to these manufacturing industries that can be sustained as local economies.

If we were to be able to change the cost of capital for solar just to match what the cost of capital is for rural electrical cooperatives across the U.S., where the cost of capital is 2 percent, then solar would not only compete with peaking power, but it would also be competing with load following power. Government policy and the ability to access capital are the two key drivers which have helped this industry grow at the rate at which it has grown in the last decade.

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