How Manufacturing's Mockingbird Sings

(Caixin Online) Auto technician Li Xuelin never dreamed of dismantling his boss' Mercedes Benz S300. But one day, that's exactly what the boss ordered Li and a half-dozen colleagues to do.

It wasn't easy. At first, the technicians just stood beside the shiny black car, daring not to touch it. But eventually their boss and BYD CEO Wang Chuanfu broke the stalemate.

Wang stepped up to the car and, with sweat on his brow, gouged the paint job with a car key. "Now you can start," he said.
 
Li's team disassembled the car, piece by piece, to reverse engineer the luxury car's electronic control system. It was a painstaking but money-saving project that's now become a trademark for Wang and BYD, a highly successful Chinese manufacturer that's proud to be a master copyist.

Since its launch in 1995, BYD has expanded from OEM battery manufacturing into various unrelated fields including IT products, autos and new energy. Li's experience with reverse engineering Wang's Benz has been repeated at many levels by BYD's army of about 30,000 engineers and technicians.

By reverse engineering products made by others, BYD pushed its way into manufacturing production, eventually expanding upstream and downstream in chosen fields to build a profitable, vertically integrated enterprise. BYD won big wherever its elbows went.

BYD's success as a revolutionary copyist has drawn mixed reactions, but of course business champions seldom pay heed to grumblings from those they defeat. When carmaking, for example, BYD found that reverse engineering can cut the cost of a new vehicle by more than one-third.
   
BYD-Style Imitation

Last May, the city of Xi'an started switching its taxi fleet to the BYD F3 car, which at first glance could be confused with a Toyota Corolla. Indeed, the F3 is an inside-outside copy of the Japanese manufacturer's small car but costs only half as much.
 
BYD isn't shy about its business practices. In the F3's introductory period, the company marketing department touted Corolla similarities as a sales point. At some service centers in the city of Zhengzhou, F3 owners could spend a few hundred yuan to have the exterior badge swapped with a Toyota logo. And last year, after just five years in production, annual F3 sales reached 300,000 units, making it one of China's best-selling cars.

To develop good cars in the shortest time possible, BYD spends tens of millions of yuan every year buying and then dismantling the newest models built by manufacturers around the world.

That's also how Wang set up the company's first battery production line. In those early years, a fully automated Ni-Cd battery production line from Sanyo cost tens of millions of yuan, so Wang decided to make one himself. He reverse-engineered the setup for an identical production line that cost only about 1 million yuan.

Wang decided to move into autos in 2002, and the following
January his company bought a 77 percent stake in Shaanxi's Qinchuan Auto Co. "A car shouldn't cost so much," he told his investors at the time, before revealing that he'd already dissected a large number of motor vehicles as part of his imitation quest.

Copying was in Wang's blood. After a 2003 visit to BYD's Songjiang laboratory in Shanghai, for example, a former Chery Auto expert noted that he saw only two pieces of lab equipment that had been imported; the rest were Chinese-made imitations of foreign equipment.

How can simple imitation win a market? The Chery veteran said BYD strategy's is based on focus, brazenness and precision.

Rather than waste effort creating new models for the sake of variety, a limited number of resources are spent on developing key products. That's the company's focus. As a brazen market player, BYD picks best-selling products and blatantly copies them, head to toe.

The company also works to rigidly control costs and quality, and learns by doing. "BYD's excellent quality imitation cars are tied to the fact that the company has accumulated experience in strict product control from its earlier practices in batteries and the IT sector," the Chery source said.

"Maybe it's right. They very well may become China's flagship auto manufacturer."