China’s BYD Seeks to Build Your Dreams Based on Someone Else’s Designs: Special Report

Reuters‘ Ben Berkowitz and Kevin Krolicki just posted a special report on Chinese car maker BYD Co. Ltd. (1211.HK). It says that at the depths of the financial crisis, U.S. billionaire Warren Buffett put $232 million into BYD, taking a 9.9 percent stake in the nascent Chinese auto business. But diplomatic cables revealed by WikiLeaks and provided to Reuters by a third party, as well as interviews with industry consultants and execs who have examined the co.’s operations, raise a number of questions about the fledgling carmaker. Among other things, they describe a record of stealing designs from rivals, using those savings to undercut competitors on price and scrimping on safety.

[via Reuters] “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,” Guangzhou Consul-General Brian Goldbeck wrote in an October 30, 2009 cable that was unclassified but marked for U.S. government eyes only. It was submitted just days after BYD shares hit a new peak, driven by Buffett’s backing.

BYD’s questionable behavior went beyond copying designs, though. According to the consulate, the company also sold some vehicles almost at cost to boost its market share and may have advertised safety ratings for one model it did not have.

The scorching assessment of BYD by U.S. officials: “BYD seeks to ‘Build Your Dreams’ — based on Someone Else’s Designs.”

Read the whole report here.

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