Byton - Company Strategy

Byton does not regard itself as a pure automobile manufacturer, but much more as a technology startup. The Byton BEVs are seen as high-tech cars, which do not only focus on the car as a means of transport. Technologies such as Artificial Intelligence (AI), facial recognition and data analytics play an important role here.

Alongside the car, a core component of the company is the Byton mobile application.

It is used by customers to create profiles, customer support, purchase cars and other services.

As aforementioned, according to Porter (1998), the access to dealerships is one of barriers for entry. However, similar to other startups, Byton sees the non-existent sales network more as an opportunity rather than an entry barrier. According to the company, the sales network is seen more as an enormous problem in the industry rather than an entry barrier. Firstly, the operation of a sales network is a huge cost factor and secondly, there is no data transfer between the customer and the manufacturer, which can be used to create individual services for the customer by applying data analytics. The classic way of selling a car in Europe or the US, for example, is for manufacturers to sell the cars to their retail partners and they resell them to the customer. This means the retail partner is the customer's sales partner.

Therefore, the contact and partner for the potential data exchange is the dealership and not the manufacturer.

However, if a company wants to offer its customers tailor-made offers, it needs certain information from the customer. In this case, both the app and the car are the data suppliers. It is instrumental that manufacturers are contractual partners

can take place. According to Byton, this is currently the great difficulty in traditional dealer networks. For Byton it is, therefore, a great opportunity not to have so many large sales networks to negotiate with, but to be able to design it from the ground up in their digital business areas.

In addition to online distribution, Byton is building a modern dealership network similar to many emerging manufacturers. This is seen by the startup as a great opportunity and is not really comparable to the classic car dealerships. The so-called

"Byton Places" are more like a lounge or a café, where the primary aim is not to sell cars, but to give the customer a positive experience with the Byton brand. At Byton Places, the focus is more on technologies that customers can try out in a positive and informal atmosphere in order to create the image of a high-tech brand. With this, the Chinese startup wants to overcome the next barrier to entry, namely the problem of non-existent brand identification and customer loyalty. The Byton Places are considered a getaway for all Byton drivers, where customers should feel comfortable and meet other people with the same interests. Byton Places are clearly used to connect the customer with the brand in order to develop customer identification and brand identity. Moreover, Byton invites customers, who have already reserved a BEV, to its co-creation events. This management tool is used with the goal to engage the customer directly in the beginning and to let them part of the R&D process in the long-term. This logically contributes to a higher brand identification and gives the customer the feeling that the manufacturer is "more accessible".

The automotive industry is a very capital-intensive industry, which is generally known as a high entry barrier. Byton has also developed a strategic solution for this from the outset. Looking at the list of investors, it is striking that Byton has chosen its investors very strategically and with a clear forward-thinking.

Table 12: Byton Investors

Source: Author’s Chart, According to (Crunchbase, 2019)

In total, Byton was able to raise $700 million fund in several investment rounds. In its Series B funding round, Byton attracted both the battery manufacturer CATL and the state-owned automobile manufacturer FAW Group as investors. According to Byton's spokesperson, the company also has very good access to the expertise of its

investors. As the largest battery manufacturer in China, CATL supplies the batteries for the BEVs and thus facilitates this supply. For Byton, the problem surrounding the battery has therefore been solved very rapidly. The company is therefore not in need of building any expertise in this area and can focus fully on its digital services.

In addition, Byton has access to FAW's entire supplier network, which is usually much more difficult as a standalone startup with lower volumes. At the same time, the company also gets more favorable conditions from the suppliers, which reduces costs. As a result, Byton can more easily afford its own production factory and produce its own cars.

In addition, the startup has the advantage of being located in Nanjing, where they get enormous support from the provincial government. For example, the construction of the production plant took significantly less time than in Europe, as the local government has approved the necessary licenses much faster. The local government also supports the company financially in the form of subsidies.

All in all, according to the press spokesman, the entry barrier of capital requirements is not so strong in the case of Byton.

Another barrier, often being identified are switching costs, in case the company has to change the supplier, for instance. First of all, the production of an EV is much less complex compared to an ICE model, which significantly reduces production risks (Erriquez, Morel, & Moulière, 2017). If one looks at the Byton BEVs as a vehicle concept, then it is first of all a relatively classic car (in terms of materials, doors, etc.), which means no complex components such as gullwing doors. This avoids creating complexity that cannot be mastered later. This significantly simplifies production and minimizes switching costs.

For Byton, the Unique Selling Point (USP) is defined via the user experience and digital solutions, rather than the car itself. Similarly to Apple, Byton is trying to develop a digital ecosystem in which all digital services are offered and where customers are constantly connected to the company. Applications, data and intelligent devices are linked via the digital platform, called "Byton Life". AI is used to serve certain preferences of the current driver, such as appointment reminders or online shopping interests. Drivers are identified via voice and facial recognition. As a result, all data remains centrally in the digital ecosystem, which is stored on the customer's profile. This means that tailor-made services can be offered on the one hand and the data can be used for a better user experience on the other.

If one looks at the Byton models, there is no classic dashboard with hard buttons, but instead a large screen replacing it. Assuming the customer opens the door and is recognized as a driver based on his or her voice and face, the car automatically adapts to the customer's preference, which is stored centrally in the ecosystem. As a result, the seat position and the screen/dashboard change. The screen can be compared to the screen of a smartphone, which can be designed flexibly and

individually. This is also the reason why the company name is derived from "Bytes on Wheels".

The screen has two important advantages. Not only can the car’s software be updated easily and frequently similarly to a smartphone, but also, the driver always feels like driving in his/her car in the case of sharing use, because all settings adapt automatically. In a future scenario, this takes away the customer's feeling of not being in his/her own car.

Furthermore, the BEVs has already been designed for an autonomous and shared future. Consequently, it can be concluded that the revenues are not only supposed to be generated from car sales, but more from digital solutions.