The Truth Behind China's BYD Car Company--And Warren Buffet's Investment

This is the most honest and insightful analysis of a leading Chinese company that I have ever read and it comes out of Caixin Online inside China, not the US, European or Japanese business press.

This is how the article begins: “From batteries to cars, BYD engineers have found that successful product manufacturing begins by copying others.”

Yes, Warren Buffet is investing in an auto company that cuts costs and generates value by reverse engineering Japanese, European and American cars, steals their technology and intellectual property, and resells it at a lower cost. Yes, BYD also use a lot of cheap human labor to keep costs low, but it begins by reverse engineering and not paying for the technology it takes.

As virtually every US, European, Korean and Japanese company knows but doesn’t publicly say, this model of copying but not paying for foreign technology is THE PARADIGM in China. I was on a plane flying home from Beijing recently and overheard a manager from a US company selling electric car-charging stations to China admit that he believed his technology would be copied in a year or two, without any compensation paid. But it was still worth it to his company and he hoped it could stay ahead of the high-tech curve.

I’ve seen true innovation and creativity in China. Lenovo, to my mind, is a truly innovative company. So is Haier. And there are thousands of creative people in social media and tens of thousands students graduating every year with great creative skills.

But the culture of copying remains the dominant one in China. It apparently is reinforced by government-condoned, if not sponsored, cyber-espionage on a vast scale that penetrates computers and steals technology from companies and governments all over the world.

I hope the forces of creativity win out over the forces of copying in China. For many industries, there may soon be a time when there isn’t anything left to copy from the West, but there will be no culture of creativity to move forward and build the new. I am encouraged in this by the fact that inside China, there are publications like Caixin online that can escape government censorship and publish the truth about the Chinese manufacturing and export “miracle.”

BYD is scheduled to sell all-electric cars in the US soon. They will be cheap. There is a reason for that.

Back to you Warren.

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