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Chinese manufacturer finds success in the U.S. by embracing local labor standards

Akiko Fujita

Netflix’s (NFLX) “American Factory” capped its award-winning run Sunday, taking home the Oscar for Best Documentary. The film, backed by Barack and Michelle Obamas’ studio Higher Ground Productions chronicles the challenges China’s Fuyao Glass Industry Group faces, while expanding in the U.S., over wages, unions, and long work hours. 

The film’s release last fall brought unwanted attention to U.S.-based Chinese manufacturers. But at least one company has taken a different approach to win over some big name clients.

In Lancaster, California, Warren Buffett-backed electric vehicle maker BYD has built out the largest electric bus factory in North America. Short for “Build Your Dreams,” BYD has expanded its footprint rapidly, growing from a staff of six in 2013 to a workforce that is nearly 1000 strong today. Unlike Fuyao, which resisted efforts to unionize in Ohio, BYD has embraced its relationship with labor groups, creating nearly 800 union jobs. It has also developed community training programs and actively recruited retired veterans. 

“We think that if we have the largest market here, we should contribute back to the community,” said Stella Li, BYD Motors President, who leads North American operations. “We need to do as the top international companies are doing. We have a very close relationship with the union. We also believe their resources can help us.”

That approach has proven a winning formula for BYD, until now. The company currently operates 423 electric buses in the U.S. now, and counts Facebook (FB), Stanford University, and regional transit systems as some of its big name clients. Last fall, it secured an order for 130 buses from the Los Angeles Department of Transportation, the largest single order of battery-electric buses in U.S. history. 

Peter Balin, a test-line specialist lead, works at an electric bus factory of China's BYD in Lancaster, the United States, May 1, 2018. BYD, one of the largest electric bus manufacturers in the U.S., set up the Lancaster factory in May 2013, employing some 800 local people. (Xinhua/Li Ying via Getty Images)

BYD’s success in electric buses here marks a departure from its business back home, where the company built its foundation on batteries and affordable electric vehicles for consumers. Founded by government researcher-turned businessman Wang Chuanfu, the Shenzhen-based company today, is the second largest EV maker behind Tesla.

Li says local climate legislation requiring cleaner public transportation has helped fuel BYD’s growth in the U.S., particularly in California. 

“We currently have more than 50 customers (in the U.S.) but half of them are repeat customers,” Li said. “After trying them for 3 to 4 years, they’ve built confidence in the product. When they come back, instead of buying 3 or 4, they buy 20.”

Suspicions toward Chinese companies

That success hasn’t shielded BYD from its critics amid increasing suspicions about how Chinese companies operate in the U.S. 

Last year, Congress moved to ban federal funds from being used to purchase Chinese buses and rail cars as part of its National Defense Authorization Act, citing national security concerns. That put BYD and its U.S. based employees in Washington’s cross hairs.

Supporters of the move, like Rep. John Garamendi (D-CA), chairman of the House Armed Services Subcommittee on Readiness, have accused BYD of being a part of the Chinese government’s “strategic and tactical plan to dominate the rail and transit industry.” 

A visitor inspects stacks of glass panes during a grand opening tour of the Fuyao Glass America plant, Friday, Oct. 7, 2016, in Moraine, Ohio. (AP Photo/John Minchillo)

Li says the move was driven by American competitors hoping to drive fear. 

“100% - because the competition could not win, they use this one,” Li said. “Unfortunately, we’re in the moment where China-US trade tension. People are nervous. Without understanding what they agree to on this bill, they just support it.” 

The legislation isn’t expected to take effect for two years, and Li says the company is in close contact with lawmakers to overturn the designation. Public agencies account for 60% of BYD’s customers in the U.S., though Li points out those transit agencies can still tap into local funds to purchase the electric buses, if Congress doesn’t reverse its decision.

Meantime, she says BYD plans to grow its market share in an electric-bus market that is expected to grow to $1.95 billion in 4 years, according to market-research and consulting firm Prescient & Strategic Intelligence Pvt. 

The Lancaster factory is aiming to exceed its production rate of 30 buses a month, while expanding into skyrail, solar energy, and battery technology in the U.S.

“Longterm, 50 years, you look back - this kind of temporary political issue will not last long,” Li said. “That’s only touching a small portion of our business here.”

Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita

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