Tuesday, May 18, 2010

Public-Private Partnership Introduces Electric Taxis in Shenzhen

BYD, a private, Hong Kong listed, automaker based in Shenzhen, announced Monday (17 May) it had put 40 all electric taxis into service in the city of Shenzhen.

The taxi is BYD's E6 model, a cross-over vehicle with a lithium-ion battery that, according to BYD will travel up to 300 km (186 mi) on a single charge. By comparison, Nissan's Leaf all-electric vehicle is expected to travel about 100 miles on a single charge. This is also the model with which BYD plans to make its entrance into the North American market later this year.

BYD expects to have as many as 100 E6 taxis plying the streets of Shenzhen by the end of June.

These taxis are being operated by Pengcheng Electric Taxi Company, a joint venture between BYD and the Shenzhen Bus Group (SBG).

Shenzhen Bus Group is a large operator of bus lines, taxis, and related businesses in the southern Guangdong region. Its largest shareholder (55 percent) is the Shenzhen City SASAC (State-owned Assets Supervision and Administration Commission). In other words, BYD's partner in this joint venture is none other than the city government of Shenzhen.

I recently asked a former BYD employee to describe BYD's relationship with the local government, to which he replied, "feichang, feichang, feichang hao (very, very, very good). Without local government support, it would be hard for BYD to have any success. Wang Chuanfu (BYD's CEO) devotes a lot of time to nurturing this relationship. BYD's relationships with the Xi'an government (where BYD's first auto factory is located) are also feichang, feichang, feichang zhongyao (very, very, very important)."

This blurring of the lines between public and private is not that unusual in China. In fact, no auto company would survive long outside the influence of its respective local government. Though a local state-owned automaker would be expected to have a close relationship with its owner, a privately owned automaker's relationship with the local government is nearly as close.

Because BYD's E6 costs the equivalent of about US$40,000, and because the technology is still fairly new and untested -- and because taxis drivers tend to drive their vehicles far more aggressively than the average driver -- one might guess that this joint venture between BYD and the City of Shenzhen will lose money for the foreseeable future. But this is where the public-private partnership proves to be a win-win.

BYD gets to test its vehicles in real-world conditions and gather a lot of data for improvements. Shenzhen gets publicity for its support of green technology and recognition from Beijing for supporting a company on the forefront of carrying out Beijing's policy for electric vehicles.

And this kind of partnership isn't unique to China. I recently spoke with Mark Perry, VP at Nissan USA, who told me that Nissan is also working with various local governments in the US to provide some of the infrastructure necessary to support electric vehicles in their cities.


  1. Hello Greg,

    So the Shenzhen electric taxi deal comes off at last!

    Did you discover if there is going to be any third party involvement in testing BYD's claims on vehicle performance? 100 units is hardly representative but might at least provide some insight into whether the E6 does what BYD says it will.

    But I suppose a positive report is more than likely, given the local government's interest in seeing BYD do well?


  2. Hello Will. Interesting questions.

    Part of the challenge for third party services in China (such as JD Power) is a real lack of trust. People have a hard time believing that third party reviewers haven't somehow been influenced by money.

    I'm not sure whether this is a Chinese phenomenon, or a late developing market phenomenon. Maybe the likes of JD Power and Consumer Reports were viewed with skepticism in their early days in the US as well. If so, then perhaps with time, they will gain trust in China too.

    While I was in China during the past year, I picked up a lot of consumer auto magazines (and there are a LOT of different titles in China). Though I cannot claim to have read every issue out there, nor can I claim to have read them thoroughly, I do not recall seeing much negative press on vehicles.

    Most of the reporting tended to be very objective: car A has a 2.0 liter engine and car B has a 2.1 liter engine. Car A has a larger trunk than car B, etc.

    I guess this shouldn't come as a surprise since the heaviest advertisers in these auto mags are the auto companies themselves.

    This would be a fascinating issue for a sociologist to pursue. How have US consumers developed trust for third party reviewers and auto magazines that accept ads from auto companies? To what degree are Chinese consumers more/less skeptical than US consumers?

  3. I'm just keen to see some of the claims of technology leadership actually tested across wider usage! From chinastakes.com (link below)

    "Among the recently launched new energy vehicles, how many are really low-carbon oriented cars? The answer is: None... Some carmakers, however, blow hard. In 2009, more than 20 domestic auto makes announced their successful development of pure electric cars, surpassing even Japan, the leader in electric car development."


  4. My sense is that there's a bandwagon effect going on here. Beijing has signaled through policy that new energy vehicles are important, so everyone wants to be seen as devoting serious effort to this kind of development. Obviously some are more serious than others.

    For the short- to mid-term at least, I'm not so certain that these vehicles will gain a lot of traction in China. Beijing seems to have already decided that pure electric is the way to go, but making charging infrastructure available to high-rise dwellers will prove to be very difficult.

    The aim, I think, is for export. If the Chinese can make electric cars cheaper than Japan or Detroit, they may gain some fans overseas. The internal combustion engine will rule on the mainland for the foreseeable future.


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