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Feds’ Tariff Tussle Could Hurt BYD Bus Sales

A bill pending before the U.S. Senate could have serious implications for BYD Motors Inc.’s electric bus factory in Lancaster. The Senate’s version of the National Defense Authorization Act includes a provision that prohibits federal dollars from buying buses and rail cars made by companies owned or subsidized by the Chinese government. The House version of the bill only prohibits the purchase of rail cars. BYD Motors Inc., the U.S. subsidiary of Chinese electric vehicle manufacturer BYD Motors Ltd., has enlisted to educate federal lawmakers about the bill, said Frank Girardot, a company spokesman. “It’s letting them know that it appears to us that buses got caught up in this push against CRRC, (a Chinese state owned rail car manufacturer) and we are trying to educate them to show that this will have a devastating effect on this factory,” Girardot said in an interview with the Business Journal. BYD Motors, which opened its Lancaster plant in 2013, employs some 800 workers in the Antelope Valley. Many of those are union jobs. The plant has produced 385 buses as of early October, Girardot said. The company complies with all “buy American” rules, which are very strict and audited by an independent firm, he added. “What this ends up being is punishment because we are a company that is headquartered in China but building buses in the U.S. following U.S. rules to U.S. customers with a U.S. workforce,” Girardot said. It also has U.S. investors. BYD Motors Ltd., in Shenzhen, is traded on the Hong Kong exchange and counts as an investor Warren Buffet whose Berkshire Hathaway Inc. owns about 8 percent of the company’s shares. Local lobbyist Lancaster Mayor R. Rex Parris said the city has been talking with the two Congressional representatives from the area, Kevin McCarthy, the house minority leader, and Katie Hill, a freshman Democrat. It has also been in contact with the unions and the building trades who have gotten behind the issue with lobbying efforts. “It has become a much bigger fight than they were anticipating because labor took a real active role in supporting BYD,” Parris said. Attempts to reach a representative from McCarthy and Hill’s offices were not successful. Parris said that now that trade negotiations between the U.S. and China are starting to come about, a settlement might make the issue go away. It makes no sense for a transportation-related issue to be part of a defense bill, he added. “The Chinese can make all of our cell phones but cannot make our buses?” Parris asked. “It is a ludicrous argument.” The U.S. electric bus market was valued at $446 million in 2018, and projected to reach $1.6 billion by 2024, according to Prescient & Strategic Intelligence Pvt. Ltd., a market-research and consulting firm in India. BYD has sold buses to transit agencies in California and 13 other states. Its main domestic competitors include Proterra in Burlingame, and New Flyer of America Inc., a Canadian bus maker with manufacturing plants in several states, including Alabama, whose senator, Richard Shelby, supports the ban. Having a competing company, even from China, is good because the buses will perform better and come at a lower cost, said BYD’s Girardot. “What is happening is this is creating a situation where there won’t be competition and that will mean higher prices, less innovation and fewer electric buses on the road,” he added. There is no way that Proterra and New Flyer can compete in the marketplace with the product they are selling, Parris said. “Both of their buses when you put them head to head (with BYD) it is like comparing a Volkswagen to a Ferrari,” he added. The other problem this proposed legislation creates is that its ramifications will be felt for years to come, Parris continued. BYD might have invested up to $1 billion in its facility in Lancaster. Two years ago, BYD expanded its Lancaster factory to 450,000 square feet and a year ago added on a 100,000-square-foot warehouse that cost $5 million to build. Additionally, finding other Chinese companies willing to come to the Antelope Valley might be a tough sell, he said. “You know how hard it is going to be for me to go to China and get another company to invest in Lancaster?” Parris said. “I don’t know if it is doable now.”

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.
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