China is speeding up its economic transition by promoting greener industries and Shenzhen-headquartered car maker BYD is one of the major beneficiaries of these reforms.  The Asset interviewed Wang Chuanfu, founder, chairman and chief executive officer of BYD, to find out how the craze for electric cars is spreading to the world's largest car market.

Production of energy-efficient cars in China has been growing rapidly in the past few years pushed by government reforms as well as strong demand from consumers plagued by serious pollution problems. BYD, currently the leading maker of electric cars in China, estimates that there were 300% more 'new energy vehicles' sold in 2015 compared to a year earlier.

"This growth rate is likely to continue for the next few years as Chinese-led new energy innovators start to emerge onto the world stage," says Wang. 

Figures supplied by China’s Association of Automobile Manufacturers (CAAM) show that a total of 90,000 energy efficient cars were sold in the first four months of 2016, up 131% from the same period last year. This robust trend contrasts sharply with China’s overall manufacturing activity, reflected by a manufacturing PMI below the 50 mark over the same period.

Along with surging sales, the current wave of new energy cars represents a shift in preference among consumers in the Chinese car market, which is still dominated by conventional state-owned automobile manufacturers. The changing preference is resulting in a growing share of the car market by privately-owned manufacturers of electric cars.

“New energy cars already represent 1.3% of the whole market. Normally when a new market entrant obtains over one percent of the market share, it is assumed to be a critical turning point,” Wang says.

The market share of new energy automobiles is expected to grow to 10% by 2020, which means there will be 2.5 million electric cars in China in four years.

As the leading electric car maker in China today, BYD is helping to define trends in the country’s new energy vehicle market.

BYD announced on July 22 that it has completed its US$14.5 billion financing requirement for this financial year through a private placement. Among the investors was Japanese conglomerate Samsung which invested $500 million in BYD. The funds raised will go to strengthening the company’s electric vehicle parts and smartphone parts businesses.

Samsung is not the only foreign investor showing interest in BYD. Warren Buffet’s Berkshire Hathaway Energy also owns 9.09% of BYD, making it the largest foreign investor in the company.

In 2015, the Chinese company overtook Tesla as the market leader in new energy vehicles, with global sales of around 70 thousand units, according to Wang.

BYD currently sells its electric cars in 48 countries and over 200 cities in the world including London, Los Angeles, Brussel, Singapore, Sydney, and Tokyo, breaking sales records in many of these markets.

The stock price has risen thanks to its revenue increase, up from 15.2 billion yuan in 1Q15 to 20.2 billion yuan in 1Q16. Its A-share price, traded on the Shenzhen Stock Exchange, has risen 3.8% since the beginning of the year to June 30, while its H-share price increased 12.6% in the same period.

Prospects look bright for BYD’s future as China’s severe air pollution problem has been a new focus for the government. In the year 2015, more than 30 days of smog have been recorded in Beijing prompting authorities to impose strict pollution control measures.

At the Fourth Session of the 12th National People’s Congress held earlier this year, Chinese Premier Li Keqiang outlined a plan to cut waste gas emissions. This included the elimination of 3.8 million high-emission vehicles from Chinese roads over the next five years. One way of doing this is through a wider use of new energy vehicles.

Both China’s central and local governments have been granting subsidies to encourage more automakers to boost the development of electric cars. Under current regulation, each new energy car in China can enjoy a 25,000 to 55,000 yuan subsidy from the central government while some local governments propose even higher subsidies.

“The government has done a lot to replace the oil-consuming buses with the electric ones. The effect is obvious both in curbing the gas emission as well as cost saving,” Wang says.