Secret to Succeeding with Chinese Consumers: Reflections on BYD

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Forbes: Helen H. Wang

Ever wondered what BYD stands for?

“It stands for Build Your Dreams,” Xin Jin, a business manager at BYD’s Cupertino, California office told me.  Or that is what most people think. Definitely, that is what Warren Buffett thinks.

In a recent to trip to BYD’s headquarters in Shenzhen, Buffett gave the Chinese electric car maker a big show of support.  “I like the name,” he said, as cited by the Associate Press, “let us ‘build our dreams’ together.”

The America’s most famous investor owns a 10 percent stake in BYD, a $230 million investment that is now worth more than $1.5 billion.

It does not take much research to discover that BYD are the initials of the Chinese characters Bi Ya Di, which does not mean anything but sounds foreign or Western. Many Chinese companies use Western-sounding names to make their companies or product brands sound modern, or to imply their businesses have Western connections.

Despite some nationalistic tendencies among Chinese youths, most of China’s upwardly mobile middle class consumers favor Western brands because of their quality and reputation. A recent article in Harvard Business Review reveals that only 45 percent of Chinese consumers prefer local brands, down from 57 percent three years before.

In addition to quality considerations, Chinese consumers believe that Western products elevate their social status. This is extremely important to them because the Chinese are very status-conscious people.

Even many Chinese companies try to position their products to have Western appeal. Metersbonwe, a Chinese casual-wear fashion company, uses Western models to showcase their apparel.  According to a survey by McKinsey, 90% of respondents believe that Metersbonwe is a foreign company.

So, here is a million-dollar secret for multinationals that want to capture Chinese consumers’ hearts, minds, and wallets: promote your flagship brands but tailor them to Chinese consumers’ tastes.

There are many success stories of companies that have followed this secret recipe. Kentucky Fried Chicken positioned itself in China as a Western brand with Chinese characteristics. It has highly localized menus, including congee, or Chinese-style porridge, for breakfast, Peking duck served with scallion and seafood sauce, and you tiao, or Chinese dough fritters. It has become the single largest restaurant chain in China, with nearly 2,600 restaurants in over 550 cities.

In fact, Chinese consumers’ preference for Western brands may be the very reason that BYD is experiencing a setback in its home market.  In late 2008, BYD launched China’s first homegrown hybrid car, the F3DM. It enjoyed a fanfare success, especially because of government subsidies for clean-fuel vehicles. Its gasoline-power F3 was the best selling sedan in China last year. However, BYD’s sales dropped by 19 percent this year as Chinese consumers rushed to purchase foreign-brand cars. The company has also scaled back its plans to bring the E6, a battery-powered, five-passenger crossover vehicle, to the U. S. market.

As for how Bi Ya Di became “Build Your Dreams,” the story goes back to 1995 when the battery company listed on the Hong Kong Exchange. Founder Wang Chuan-fu wanted to give the company name a visionary touch. He came up with the term “Build Your Dreams” for BYD to inspire his employees. Some investors joked that BYD might as well stand for “Build Your Dollar.”

“Build Your Dreams” has certainly worked. As Xin Jin told me, “We are dreaming big. What we are doing at BYD is not just electric cars. We are also working on battery charging stations and smart grids. In our Shenzhen headquarters compound, we have a green village, called ‘Village of the Future,’ where we use solar and wind power and recycle rainwater. We are building a green future.”

It remains to be seen whether “Build Your Dollar” works in the long run.

(This article is adapted from The Chinese Dream, due in October 2010).

P.S.:  I will be interviewing Liam Li, Sr. business director of BYD America, this weekend at the HYSTA conference. Please post any questions that you would like me to ask in the comments. Thanks!

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10 thoughts on “Secret to Succeeding with Chinese Consumers: Reflections on BYD

  1. It’s interesting that Chinese preferences for home-grown brands have *decreased* over the past three years. If I had to guess, I would have guessed they increased. This is all the more fascinating because the quality of China’s domestic branded autos has increased during that time.

    As for the F3DM, actually, it has not been successful at all. Prior to the announcement of subsidies for new energy vehicles, BYD had sold fewer than 100 to consumers. (Several hundred had been sold to Shenzhen government and taxi fleets.)

    However, the F3 (the gasoline-powered version) was the best selling sedan in all of China last year. Isn’t it interesting that a company supposedly known for new energy vehicles makes all its money from traditional internal combustion vehicles? :)

  2. I can’t believe it. Warren Buffett’s op-ed was pure political drivel. If he wants to pay more taxes no one is stopping him. Does he really think The President can spend the money better than he can?

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