BYD Is in Battery-Supply Talks

• MARCH 31, 2009

BYD Is in Battery-Supply Talks
Chinese Plug-In Car Maker's Chairman Looks to Put Its Technology in U.S., European Cars

By NORIHIKO SHIROUZU

BEIJING -- Fledgling auto maker BYD Co. is in talks to supply its batteries to car companies in Europe and the U.S., Chairman Wang Chuanfu said in an interview.

A deal could solidify BYD's growing prominence in the electric-car market after it surprised the automotive world by launching a plug-in car in December, ahead of more established foreign rivals.

Mr. Wang, BYD's top executive and founder, and other BYD officials declined to identify the companies the Chinese company is negotiating with. Mr. Wang said BYD is negotiating with one U.S. auto maker and two in Europe about supplying lithium-ion batteries it produces in Shenzhen, where BYD is based. Companies including Toyota Motor Corp., General Motors Corp. and Nissan Motor Co. have chosen battery suppliers for their electric cars, but others are still talking to various companies or haven't announced who their suppliers are.

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BYD hopes to sell to other car makers the same batteries it uses in its F3DM plug-in hybrid, which it began selling on a limited basis in December.

Mr. Wang said the batteries it is considering supplying are the same ones used in its F3DM sedan, a plug-in hybrid that BYD started selling in December to Chinese fleet customers, such as state-owned enterprises and government agencies. The F3DM's limited release hit the market about a year ahead of a similar car, also initially for fleet customers, being planned for late this year by Toyota. BYD plans to start selling the F3DM to consumers in June.

A deal to supply its batteries to other car companies could put BYD -- a battery producer that began selling cars in 2005 -- in competition with battery companies with similar technology, such as A123 Systems Inc., a closely held company based in Watertown, Mass. A123 Systems couldn't be reached for comment.

Mr. Wang said BYD's ability to produce lithium-ion battery cells at relatively low cost, in part because of its choice of technology and inexpensive Chinese labor, gives the company an advantage over other battery makers. Last year, a company controlled by investor Warren Buffett invested $230 million in BYD, chiefly because of BYD's cost-effective technology.

Concerns over gasoline shortages and climate change have prompted a global race to commercialize affordable electric-battery cars and plug-in hybrids like the F3DM that get most of their power from their batteries. Those efforts have been limited largely by immature battery technology.

While lithium-ion batteries are seen as the technology that will ultimately work, their successful use has been hindered by relatively high price, limited durability and safety concerns. BYD says it has largely resolved those issues by turning to a safer, more cost-effective technology called iron-phosphate-based lithium-ion.