By Eric Peterson | May 13, 2019
Lancaster, California (Worldwide HQ: Shenzhen, China)
Publicly traded (Hong Kong Stock Exchange: 1211)
Employees: about 800 in California (750 in Lancaster; 240,000 worldwide)
Industry: Industrial & Equipment
Products: Electric buses
It began with batteries.
BYD (an acronym for Build Your Dreams) Company Ltd. launched in China as a manufacturer of rechargeable batteries for mobile phones. Within six years, the company was the largest battery manufacturer on the planet, with 50 percent of the mobile phone market.
The growth strategy included diversification into markets beyond smartphones, and BYD's leaders sought to prove its technology in new applications, leading it to manufacture cars, trucks, forklifts, monorail systems, and buses. BYD is now not only the world's largest manufacturer of batteries, it's the largest electric vehicle manufacturer on Earth.
The plan went off without a hitch and established operations in 300 cities in 50 countries and six continents.
After the company planted a flag in Los Angeles for its North American headquarters, BYD picked Lancaster for its bus factory. Lancaster Mayor R. Rex Parris had been intrigued with BYD's technology since touring an off-grid subdivision in China. Parris saw that the company needed to manufacture in the U.S. in order to pursue the country's transit market and successfully lured the company's bus manufacturing operation for North America to the Antelope Valley in 2013.
BYD acquired a shuttered 100,000-square-foot former Rexhall Industries RV plant, which it has since expanded to 550,000 square feet. More than 600 employees work on the production floor. Beyond buses, heavy-duty trucks are made in China and finished in Lancaster, and there is potential for monorail production for the North American market.
The shop is unionized, a rarity in the industry as part of SMART Local 105. "We're proud of the fact that we are a union manufacturing facility," says Bobby Hill, VP of sales for BYD North America. "I believe we're tho only union bus manufacturer in the United States."
The plan is to also target at-risk populations for employment, with a 30 percent target. "We're proud of that aspect as well," says Hill.
It's been a rapid scale-up at as BYD looks to meeting demand for transit agencies nationwide moving towards electric buses. "What's really driven the growth is the United States' adoption of battery electric buses," says Hill. "The U.S. is a slow adopter on any technology that doesn't involve fossil fuels."
When Hill started with BYD in 2015, orders were one bus, maybe two or three. Four years later, transit agencies are ordering 50 or more buses and often looking at replacing entire fleets.
"We've seen a steep incline in demand," says Hill. "The orders are going up as far as numbers. LA Metro has ordered 60. LAX ordered 20."
The largest delivery to date was 36 buses to RTD in Denver for the agency's free MallRide shuttle on the 16th Street Mall.
The local transit agency in Antelope Valley has bought 40 buses via two orders. "They'll be the first transit agency in the whole world to go fully electric," says Hill. "It's not a fad. It's now a proven vehicle."
Buses cost $750,000 to $1.2 million, with BYD's catalog spanning vehicles that range from a 30-foot transit bus to a 60-foot articulated model to roomy motorcoaches. "This year, our goal is to deliver 187 vehicles," says Hill. "In 2020, our goal is to double that 187 to 370 to 400 buses."
"For us, our strongest suit is we are the battery manufacturer," says Hill. BYD's differentiator is chemistry: BYD uses lithium iron phosphate. "By all accounts -- not just our testing but third-party testing -- it's one of the safest chemistries you can put in a passenger vehicle," touts Hill. "There's no thermal runaway -- it can't explode."
Hill says 30 years of life is not uncommon, and the warranty for buses is 12 years. "That's the longest warranty in the industry," he says.
For its California-made buses, battery cells and components are imported from BYD's China operations for final assembly in California. "We have a battery plant in Lancaster as well," says Hill. "That's our second factory." The facility has about 30 employees.
BYD's battery technology has been a catalyst for the broader company as well, he adds, noting that diversification into transportation, LED lighting, and other markets spurred growth. "That's when it started to take off and that's what got the attention of Berkshire Hathaway and Warren Buffet."
Hill sees a long runway for growth. "The capacity of our plant is 1,500 buses a year," he notes. "At all the transit agencies now, it's all about sustainability. It's about zero-emission vehicles running through the cities."
Another side effect: lower maintenance costs. "There are fewer moving parts. There are no belts. There are no liquids. There are just fewer things that could go wrong on an electric bus."
This is no minor line item: Hill says an electric bus can cost about $400,000 less to maintain compared to a diesel bus over the lifespan of the vehicle. "It's significant, especially when you talk about 10 buses, 20 buses, 30 buses," he says.
BYD North America bought 150 acres about four miles from the current facility in 2018 with the plan of expanding its manufacturing footprint in Antelope Valley. "We're willing, ready, and able to build more manufacturing facilities in Lancaster," says Hill.
Challenges: Cash-strapped transit agencies in the U.S. "The biggest challenge for us is always in funding," says Hill. "It's even more so on the electric buses side." Transit agencies almost never have the money to flip an entire fleet at once, he notes.
Opportunities: Of more than 5,000 transit buses sold in the U.S. in 2018, only 300 were electric. "The growth curve has been really rapid in the last year or two," says Hill. "It's going to skyrocket over the next few years."
Hill says he expects electric buses will approach 50 percent of the market in the next decade, and sees windows of opportunity opening for over-the-road coaches, double-decker buses, and other vehicles to be manufactured in Lancaster. "BYD is on the move all the time, always ready for growth," he says.
Needs: "It's growing so quickly, not only from us, but aerospace is back alive and well in Lancaster," says Hill of the local economy. "Now the need is affordable housing. That's going to be the struggle as the economy grows and our industry grows. It's even hard to find a hotel room right now."
Most BYD employees find local housing, but he notes, "We have people who drive an hour and a half to get to the plant."
The community has an opportunity to foster a workforce by focusing on housing, Hill adds. "There's a lot of land and a lot of potential for development."