BYD pollution probe heaps pressure on China’s stuttering electric vehicle sector

Yang Yongbing is just 24 but requires near full-time care following a stroke he had two months after stopping work on the production line at a factory owned by Chinese electric vehicle manufacturer BYD.

The company is under investigation by local authorities after claims that harmful pollutants in paint used at the plant in Changsha, the capital of China’s central Hunan province, caused symptoms in residents nearby, including nosebleeds, breathing problems and vomiting.

The probe is the latest setback for China’s EV consumer market, the world’s biggest, which is attempting to make up for production losses after months of lockdowns stalled demand and economic activity.

“Everyone has been shocked by how long this lockdown has gone,” said Edison Yu, a China auto analyst at Deutsche Bank. “A lot of factories are having trouble ramping back up.”

For the car industry, the investigation has cast a cloud over the one EV company that had maintained more consistent production during China’s zero-Covid crackdown.

While other big EV makers such as Li Auto, Xpeng and Nio have been hit hard by the lockdowns, BYD — which is backed by Warren Buffett’s Berkshire Hathaway — managed to keep up production as its factories are not based in the regions and cities under the most severe restrictions.

Overall, car sales were hammered, slumping 36 per cent in April, with not a single car sold in Shanghai during the month, while production dropped 41 per cent, according to the China Passenger Car Association. Sales started to recover in May as lockdowns eased, but Nio, whose factory is in Shanghai, still sold only 7,024 in the month.

Even Tesla, the world’s biggest seller of electric cars that has typically outshone EV rivals, has not been immune. Citi analyst Jeff Chung noted in April that the US carmaker sold 1,700 locally made Model 3 and Model Y vehicles, a drop of 85 per cent from a year earlier.

The BYD pollution investigation, with a partial production halt, has also threatened to return the spotlight to allegations of environmental damage caused by EV suppliers, including Tesla.

The Institute of Public & Environmental Affairs, a Beijing non-profit organisation, said in an investigation last year that environmental violations in China had been caused by a range of suppliers to the EV pioneer, including lithium battery and chassis producers.

Tesla did not respond to requests for comment.

In the case of the BYD investigation, Bao Hang, a project leader at Greenpeace East Asia who focuses on the EV sector, said complaints were likely to stem from the use of paints that emit volatile organic compounds (VOCs), which are toxic at high levels.

“BYD was the first car manufacturer that announced a stop to the manufacturing of full combustion engine cars, which gave them a reputation as a greater contributor to the fight against climate change,” he said. “Now we see another side of this company . . . people are looking at the question of whether their manufacturing is very clean.”

Residents who live near BYD’s Changsha factory said they used detectors to measure VOC emissions in the air and found levels higher than national standards allow. They also said dozens of people, including children, had reported symptoms including nosebleeds, coughs, sore throats, rhinitis, breathing difficulties, abdominal pain and vomiting.

“As soon as I smelt it, I would have a fit of dizziness,” one resident told the Financial Times, referring to odours from the plant.

BYD did not respond to requests for comment, although it has previously rejected claims its factory was the cause of the nosebleeds and has said that its VOC emissions met national standards.

However, local authorities ordered the company to improve its paint coating production at the Changsha plant and required it to rectify high levels of VOC emissions last year, according to a document seen by the FT.

The company’s main production base in Shenzhen has also faced complaints about VOC emissions as recently as April, Caixin, a Chinese media outlet, reported. The Shenzhen government ordered the company to improve its exhaust emissions as far back as late 2016.

As China’s economic troubles worsen and as automakers restore production of EVs, which make up 23 per cent of the country’s car sales, some residents near the BYD Changsha factory fear the company will not be held to account over pollution levels.

“The government is now handling the issue, but my expectations are not very optimistic,” said a resident.

“They are bending over backwards to get [automakers] back online,” added Tu Le, managing director of advisory group Sino Auto Insights.

None of which offers any comfort to Yang, who said he suffered a stroke in November 2017 — two months after he stopped working at the BYD plant. He believes chemicals at the factory made him feel sick and dizzy, contributing to his illness, and wanted the matter to be investigated.

“[BYD] made my life worse than death,” he said. He raised his concerns in a social media video that he has since deleted after it prompted comments questioning his claims linking the stroke to toxic chemicals at the plant.

The ferocity of some of the reactions highlighted the intense debate over pollution. Some Chinese consumers insist local brands such as BYD need support in a difficult business climate of lockdowns.

Despite the claims of residents near BYD’s Changsha factory turning the spotlight on the company, the group delivered strong sales in May. But for the broader electric vehicle industry, the slowing Chinese economy still poses risks.