1. Present your company's value chain (Model - what do they do? How do they do it?

Value chain: BYD

Primary activities: Research and Development - Manufacturing - Managing and Distributing

Inventory - Marketing and Sales - Service

BYDs research, development and manufacturing are both incredibly important in their value
chain as BYDs advantage is in their technology and their ability to maintain below market
pricing. They control the majority of their supply chain including key technology of batteries and
are trying to get into microchips as well. The rest of their value chain is fairly typical of car
manufacturers other than the fact that they own their car carrier ships. BYD uses all different
types of marketing strategies to reach the most amount of customers and continue to provide
valuable services to their customers after the initial sale of the car.

2. Where are they creating value for their customers?

It’s in their operations that BYD created great value for their customers. It’s doing that by
adding new advanced technologies in their electric cars. BYD is on the edge of
technology innovations and artificial intelligence for cars such as self-parking,
self-driving, internet-communication and connection of the car with customers’ phone
features, and with amphibious car innovation for their luxury SUV. These critical values
are created in their primary activity of operation.

3. What are the important relationships among your Company's value-chain activities?
What are the important interdependencies? For each activity, identify the relationships
and interdependencies.

BYD’s success in the electric vehicle industry is largely connected to the strong
relationships among its vertically integrated value chain activities. One of the most
important relationships is between its battery production and EV manufacturing. BYD
produces its own batteries, including the Blade Battery, which enhances energy
efficiency and safety. This integration allows BYD to reduce costs, innovate more easily,
and differentiate its products.

There is also another crucial dependency between BYD's production of essential EV

parts, such insulated-gate bipolar transistors. They make up an large amount of
production costs and are essential for regulating power in electric vehicles. BYD gains a
pricing and supply chain control advantage by manufacturing IGBTs internally, which
also decreases production costs and reduces the need for external vendors.
 In addition, BYD's established government ties, particularly in China, have allowed it to
take advantage of tax breaks and subsidies, which have strengthened its capacity to
increase production levels and expand globally. However, as BYD enters new areas, it
encounters difficulties with legal compliance and brand recognition, which emphasizes
how crucial it is to match its marketing and legal tactics with the demands of whatever
area they are in.

Cite: Wang, J.G., Yang, J. (2013). The Power of Batteries: The Story of BYD. In: Who
Gets Funds from China’s Capital Market?. SpringerBriefs in Business. Springer, Berlin,
Heidelberg. [Link]

BYD: How the Former EV Pioneer Will Win the New Battle - Volta Foundation

4. What resources, activities and relationships enable your company to achieve a

sustainable competitive advantage?

BYD’s competitive advantage has resulted in its leading 37% share of the Chinese EV
market and its status as the third ranked battery producer in the world in 2023. One of the key
aspects of BYD that allows it to sustain competitive advantage is its relationship with the
Chinese government. Their status as a company in the EV industry has especially been
supported since the Chinese government’s introduction of their “Made in China” campaign in
2014, which saw the EV industry in general receive benefits from government policy such as
loans, subsidies, and government contracts. BYD in particular received around $3.5 billion in
subsidies from 2018 to 2022. Federal and municipal governments in China have also been
some of the biggest customers of BYD for EV taxis, buses, and other public transportation.

Another important benefit BYD enjoys from its relationship with the Chinese government
is that it allows them easier access to natural resources required in the manufacture of their EV
products. China is home to about 70% of the world’s rare metals used to produce batteries and
80% of the world’s refining capacity for raw materials. This has allowed Chinese EV companies
like BYD to secure a significant cost advantage and accelerate their technological capabilities
against their international rivals. BYD has also formed relationships with international
organizations to further their prosperity. For example, in the early 2000s they formed
partnerships with Japanese and German companies Toyota and Daimler which resulted in
exchanges of those companies’ expertise in manufacturing in exchange for BYD’s expertise in
battery technologies.

BYD’s operations activities are a significant part of their ability to sustain a competitive
advantage over other EV companies. Unlike several of their rivals, BYD manufactures their own
batteries so that they do not have to deal with trying to find the right supplier and negotiating a
price with them. This is an example of BYD’s efforts to internalize their operations as much as
possible while minimizing outsourcing. They have gone as far as consolidating their EV
manufacturing in a walled company town in Shenzhen, where facilities such as factories and
worker accommodations are connected by monorail. These efforts have strengthened their
vertical integration so that the production cost of their cars is around 25% less than their
Western rivals.

Another example of strategic activities used by BYD to sustain competitive advantage is

how they offer a broad range of battery and hybrid vehicles under the Dynasty and Ocean series
of brands. The Ocean series is marketed towards younger buyers, while the Dynasty series
includes higher-end models such as the Yuan Plus, their top-seller, with the two series covering
a price range of $9,700 to $27,000. They have even released a $230,000 electric sports car
called the Yangwang U9. This enables BYD to target a wide scope of consumers of various
income levels and their low costs allow them to be competitive against their EV rivals in just
about any segment of the EV market, as proven by the fact that BYD manufactures 4 of the top
10 selling EVs in the world.

Source: Andrew Inkpen, Kannan Ramaswamy: “BYD Targets the World” (Main Case)

5. How are they able to retain the value created for themselves?

BYD is able to retain the value it creates through a combination of strategic initiatives that
ensure long term profitability and competitive advantages. One of its strategies is vertical
integration, where the company manufactures 78% of the parts in its flagship models in-house.
This not only reduces costs by eliminating reliance on external suppliers, but also allows BYD to
maintain control over the entire supply chain.

Additionally, BYD benefits from the economies of scale. By producing large volumes of batteries
and EVs, the company is able to lower its per-unit production costs. This enables BYD to offer
competitive pricing while maintaining profitability. Their continuous investment in R&D,
especially in battery technology like the Blade Battery, further enhances their value retention.
Patents and IP protections also serve as a barrier to entry.

Brand loyalty and customer relationships also play an important role in BYD’s value retention.
Their focus on after-sales services fosters trust, especially in sectors such as public
transportation. Customers who rely on BYD for electric buses and vehicles often become repeat
buyers which secures a steady revenue stream for the company. Lastly, BYD’s global
diversification across automotive energy storage and electronics reduces its dependence on a
single [Link] diversification helps the company hedge risks and retain value across
different product lines, further ensuring sustained profitability and growth.