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UNCLAS SECTION 01 OF 07 GUANGZHOU 000612 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM, EEB/IPE; EEP/TPP; EEB/CIP 
STATE FOR INL 
STATE ALSO PASS USTR FOR CHINA OFFICE; IPR OFFICE; AND 
OCG 
STATE PASS White House OSTP Ambassador Richard Russell 
STATE PASS FTC for Blumenthal] 
STATE PASS CPSC for International Office O'BRIEN 
COMMERCE FOR MAC AND MAS 
Commerce for National Coordinator for IPR Enforcement 
USPTO FOR INT'L AFFAIRS 
FBI for LBryant 
DHS/ICE for IPR Center - THipelius, TRandazzo 
DHS/CBP for IPR Rights Branch - GMcCray, PPizzeck 
ITC for LLevine, LSchlitt 
NSC for JBader, JLoi 
 
E.O. 12958: N/A 
TAGS: ETRD KIPR ECON PGOV CH
SUBJECT: CHINA IPR: CARMAKER BYD SEEKS TO "BUILD YOUR 
DREAMS" BASED ON SOMEONE ELSE'S DESIGNS 
 
REF: Guangzhou 314 
 
(U) This document is sensitive but unclassified. 
Please protect accordingly. Not for release outside 
U.S. government channels. Not for internet publication. 
 
¶1. (SBU) Summary and comment.  Boosted by a major 
investment from Warren Buffet and poised to apply its 
world-class battery technology to automobiles, Chinese 
automaker BYD has been heralded as one of the most 
promising carmakers of the future.  However, even a 
cursory look at the BYD product line reveals that most 
of its models draw heavily on the designs of other 
carmakers.  The letters, BYD, come from the phrase 
"Build Your Dreams."  With a focus on price 
competitiveness, BYD makes it possible for Chinese 
consumers to realize dreams of car ownership at 
significantly lower cost than similar foreign brand 
models.  BYD dealers can even help consumers who have 
their hearts set on ownership of a foreign brand car. 
Right at the dealership, buyers can arrange to have 
the BYD brand marks removed from their new BYD cars 
and replaced with the brand marks of the similar model 
foreign brand. 
 
¶2. (SBU) Comment continued: While BYD has certainly 
achieved a measure of success based on a business 
approach of copying and then modifying car designs 
just enough to convince Chinese courts that the 
company has not infringed on patents, it is far less 
certain that foreign courts will be as sympathetic. 
Especially as the company eyes overseas markets and 
gears up to export its models, including electric cars, 
to the United States, the likelihood of legal 
challenges related to intellectual property and safety 
or liability issues would appear to loom larger and 
larger on the horizon.  End summary and comment. 
 
The Midas Touch 
--------------- 
¶3. (U) Chinese carmaker BYD's dealerships in China 
prominently display enlarged pictures of a smiling, 
elderly foreigner shaking hands with BYD's 43 year-old 
Chairman Wang Chuanfu.  So there is no mistaking the 
identity of the pictured foreigner, beneath the 
picture is a caption explaining that the foreigner is 
none other than billionaire investor Warren Buffet. 
Buffet's decision to buy a 10 percent share in BYD, 
 
GUANGZHOU 00000612  002 OF 007 
 
 
based on expectations that the company is poised to 
parlay it's expertise in making cell phone batteries 
into becoming a world-wide leader in electric cars, 
sparked massive interest and investment in the company. 
BYD share prices increased by five-fold making 
Chairman Wang, with assets estimated in excess of 35 
billion RMB (or over US$5.1 billion), the "richest" 
person in China according to the Hurun business report. 
¶4. (U) If there is anything to the investment frenzy 
and the media hype, Shenzhen-based BYD is poised to 
become the world's leading manufacturer of electric 
cars and a major manufacturer of conventional cars 
(see reftel).  Headquartered in Shenzhen, the 
company's car manufacturing facilities are located in 
Xian.  With sales increasing rapidly in China, the 
company is beginning to focus on overseas sales.  This 
year the company launched its first major advertising 
drive in the U.S.  The ads feature California Governor 
Arnold Schwarzenegger test driving a BYD e6 electric 
model.  BYD also hopes to export the hybrid model of 
its F6 to the United States.  Domestically, BYD is set 
to launch a Chinese version of the low-cost Indian 
TATA's Nano with a projected retail price of less that 
RMB 20,000 (just under US$3,000).  BYD claims it will 
be the "cheapest car on earth" and expects it to gain 
exceptional popularity in rural China.  Chairman Wang 
claims his company will surpass Toyota in terms of 
turnover and net assets by the year 2025. 
 
Darker Side to the BYD Story 
---------------------------- 
¶5. (SBU) Like many of China's homegrown automobile 
manufacturers, the BYD conventional car manufacturing 
model is based on closely copying successful foreign 
car models - thus eliminating the need for costly 
spending on design and functional testing.  BYD's 
current line up includes gasoline-engine models that 
very closely resemble the Toyota Aygo, Toyota Corolla 
EX, Toyota Camry, the Toyota Previa, and the Mercedes 
CLK240 convertible.   One model incorporates the rear 
design from the Buick Excelle HRV hatchback, while 
other models incorporate, separately, a Peugeot 206CC 
tail design or a Honda Civic tail design.  In many 
instances, the interiors, as well, match the cars from 
which they were copied.  BYD has made some minor 
modifications in some of the car designs and, in other 
cases, as noted above, has combined the design 
features of a several foreign models into one car 
 
GUANGZHOU 00000612  003 OF 007 
 
 
(BYD's F3 model has a Toyota Corolla front, a Buick 
HRV hatchback rear, and a Mitsubishi engine).  Still, 
many of the BYD cars bear a remarkable resemblance to 
the foreign models on which they were patterned, with 
almost identical size specifications for copied parts. 
Where BYD models differ - and differ significantly - 
is in price.   BYD models are at least 30% cheaper 
than the foreign brand model on which they are based, 
while some models are two or three times less 
expensive. 
¶6. (SBU) Comment:  The copied designs are modified 
just enough that BYD apparently feels confident that 
they can withstand intellectual property infringement 
cases in Chinese courts.  For a young company, BYD has 
considerable experience in the area of intellectual 
property rights violations.  In 2008, Taiwan-based 
Foxconn filed a lawsuit against BYD alleging that the 
company had stolen thousands of classified technical 
documents that BYD claims "accidentally" ended up on 
BYD's development plan.  BYD also lured 400 of 
Foxconn's highly-trained technicians to switch 
employers.  Foxconn claimed damages in excess of 10 
billion NTD (US$307 million) and says BYD's actions 
have inflicted revenue losses of 85%.  End comment. 
 
The Costs and Risks of Price-Cutting 
------------------------------------ 
¶7. (U) Price competitiveness stands as BYD's primary 
selling point.  Industry analysts say the company 
sells cars at exceptionally low profit margins.  One 
online marketing source claims that BYD is currently 
selling their F0 model at a profit of less that RMB 
1,000 (US$146) per car. The pressure to keep costs low 
apparently applies throughout the production process. 
Another online source reports that the average monthly 
salary for a BYD employee is RMB 4,000 (US$586) - 
lower than the average salary of other automobile 
manufacturers in China.  Others note that the BYD 
models generally have older-style motors.  BYD's F3 
and F6 come equipped with an older Mitsubishi 4G15S 
engine manufactured by Dong'an, a company in Shenyang. 
Mitsubishi no longer uses the 4G15S engine model in 
its own cars.  Some analysts claim that BYD saves 
money by eliminating spending on safety testing. 
According to online sources, BYD claims that the F0 
received a China Consumer Association (C-NCAP) five- 
star (highest) rating were rebuffed by the C-NCAP, 
which told reporters that it had not yet tested the 
 
GUANGZHOU 00000612  004 OF 007 
 
 
BYD F0 at that time. 
¶8. (SBU) A rough inspection of the finished BYD car 
interior and exterior features - even to the 
unseasoned eye - suggests that there are differences 
in the quality and workmanship of the BYD cars and the 
models that they imitate.  The BYD models tend to have 
larger gaps and less-refined fits between different 
parts of the cars, and some of the interior fittings 
appeared rougher and less finished.  Because most of 
the BYD models weigh significantly less than their 
competing models, some analysts suggest that it is 
likely that BYD utilizes more plastic instead of steel 
parts or utilizes a lighter grade steel in order to 
cut costs, increase fuel efficiency, and reduce the 
cost of repair parts.  Comment:  While some of these 
cost-cutting measures may work in the Chinese market, 
it is unlikely that they will receive a similar 
welcome in more safety-conscious and litigious 
countries.  Even in China, some purchasers have 
complained of sub-standard workmanship in their BYD 
cars, and several news reports cite fatal mechanical 
failures and air bags that have failed to inflate in 
BYD cars.  End comment. 
 
Building Your Dream Q BYD Style 
------------------------------- 
¶9. (SBU) Like car buyers everywhere, Chinese consumers 
are very price conscious.  This appears to be 
especially true for the growing number of first-time 
car buyers.  Notwithstanding the marketing onslaught 
of foreign car brands, many buyers simply want the 
best deal.  For buyers who had their hearts set on 
buying one of the foreign brand automobiles but find 
them too pricey, BYD has a "convenient" solution. 
It's possible to arrange, right at the dealership, to 
have all of the BYD markings on your look-alike BYD 
model removed and replaced with the foreign brand 
markings.   At several dealerships in Fujian Province, 
ConGenOff was told that for only 600 RMB (US$88), all 
of the BYD marks, symbols, and model plates on a BYD 
F3 could be replaced with Toyota symbols.  It costs 
slightly more - up to 800 RMB (US$117) - to have the 
markings replaced on BYD's more expensive models.  One 
enthusiastic sales person proudly directed ConGenOff 
to a wall display in the sales office that was filled 
with snapshots of new BYD owners standing in front of 
their new BYD cars Q a number of which the brand 
markings had already been changed.  Another 
 
GUANGZHOU 00000612  005 OF 007 
 
 
salesperson showed ConGenOff a just-sold car parked in 
front of the BYD show room on which the brand markings 
had just been changed.   For all appearances, in style, 
form, shapeQand brand markingsQthe BYD car looked like 
a Toyota. 
 
How Many Fake Toyotas are on the Road? 
-------------------------------------- 
¶10. (U) According to online media reports, BYD has 
over-reported F0 and F3 sales in order to mislead 
consumers as to the popularity of BYD vehicles. 
According to information provided by BYD to the China 
Automobile Association, the company sold over 51,000 
F3 cars in the first half of 2007.  However, according 
to the Public Security Bureau's Traffic Administration 
Authority (the agency responsible for registration and 
licensing of automobiles in China), only 30,000 F3 
models were licensed during the same period.  Comment: 
Since the registration paperwork clearly indicates 
that the vehicle make is BYD, it is unlikely that re- 
branded BYD models were registered as some other make. 
End comment. 
 
The BYD Line-up 
--------------- 
¶11. (U) BYD F0 - The BYD model F0 closely resembles 
the Toyota Aygo, except for slight modifications in 
the design of the headlights, rear lights, and rear 
fender.  The basic package of the car, excluding sales 
taxes, retails for RMB 36,900 (US$5,400).  Although 
the Toyota Aygo is not currently available in China, 
in Britain, it retails for the equivalent of RMB 
69,600 (US$10,192).  BYD expects to sell over 100,000 
of the F0 in 2009 and claims the design has been 
sufficiently modified to preclude IPR-related 
challenges if and when the car is exported to Europe. 
¶12. (U) BYD F3 and F3-R Q Except for its Honda Civic- 
like tail design, the BYD F-3 looks almost identical 
to the Toyota Corolla EX.  The BYD's basic package 
price of RMB 59,800 (US$8,757) compares very favorably 
with the Corolla's basic package price of RMB 99,800 
(US$14,614).  The People's Daily online statistics on 
car sales suggest that the sharp growth in the sales 
of the BYD F3 has undercut sales of the Toyota Corolla 
EX in China.  Sales of the Toyota Corolla EX model 
peaked at 80,100 units in 2006 and fell to 52,247 in 
¶2008.  On the other hand, BYD claims to have sold 
42,000 of its F3 models in 2006, but this number 
 
GUANGZHOU 00000612  006 OF 007 
 
 
jumped to 136,782 in 2008.  In the first half of 2009, 
BYD sold almost five times more F3 model cars than 
Toyota sold of the Corolla EX.  The F3R model retains 
the Corolla-like front but utilizes a Buick Excelle 
HRV hatchback-like rear design.  Whereas the Buick 
Excelle HRV basic package costs RMB 112,800 
(US$16,518), the F3R basic package costs only 59,800 
(US$8,757). 
¶13. (U) BYD F6 Q Built to appeal to higher-end buyers, 
the F6 combines a Lexus LS460 (2006 model) front with 
a Mercedes S300 tail and has sides, doors, and overall 
dimensions that are almost identical to the Toyota 
Camry.  The car comes with a DVD player/GPS, Bluetooth 
telephone port, extra-large sunroof, leather seats and 
rear radar for backing up.  Analysts say that F6 sales 
have doubled in 2009, with BYD hoping to sell 50,000 
by the end of the year.  The BYD F6 basic package is 
set at RMB 79,800 (US$11,685).  By comparison, the 
Toyota Camry is priced at RMB 189,800 (US$27,793). 
¶14. (U) BYD M6 Q BYD's only multi-purpose vehicle, the 
M6 was apparently copied, almost in entirety, from the 
Toyota Previa.  The design of the M6 and the Previa is 
so close, that without seeing the brand markings, it 
is hard to tell the two models apart.  Whereas the 
basic package price for the imported Previa is 469,800 
RMB (US$68,794), the BYD M6 sells for approximately 
200,000 RMB (US$29,287). 
¶15. (U) BYD S8 Q With a price tag averaging RMB 
200,000 (US$29,287), the BYD S8 convertible is one of 
BYD's most expensive products.  From the front, the 
car bears a remarkable resemblance to a Mercedes 
CLK240 convertible.  From the back, however, the car 
looks a lot like a Peugeot 206CC.  Compared the 
Mercedes' basic package 598,000 RMB (US$87,568) price 
tag, the BYD basic package appears to be quite a 
bargain at 165,800 (US$24,279).  Dealerships visited 
by ConGenOff did not have the car in stock; sales 
representatives noted that the car had to be ordered 
from the factory. 
¶16. (U) BYD G3 Q Officially launched on October 26 of 
this year, the G3 front and interior appear to be 
based on the newer model Corolla design, while the 
tail resembles the Lexus ES350.  Although the newer 
model Corolla retails for RMB 127,800 (US$18,714), the 
new G3 sells for only RMB 76,900 (US$11,261). 
According to online analysts, BYD has a number of new 
models in development including two SUVs:  BYD's S6 is 
reportedly based on the Toyota RAV4 and the Lexus RX, 
 
GUANGZHOU 00000612  007 OF 007 
 
 
while the BYD T6 is based on the Porsche Cayenne.  For 
the visually oriented, Consulate Guangzhou has posted 
on its blog, South China SEZ, pictures of the BYD cars 
along with the foreign brand cars on which the BYD 
cars are modeled.  Please see QBYD Picture Report 
link on the blog at 
http://www.intelink.gov/communities/state/sou thchinase 
z/ 
 
 
GOLDBECK