Abstract: Transition and upgrading theory of traditional manufacturing emphasizes technological innovation, but only through technological innovation, it will lead to produce path dependence for companies thus causing difficulties to achieve the transition and upgrading. Business model innovation theory emphasizes on obtaining value through systematic business innovation, which can be an effective way to break through path dependence of technology innovation for manufacturing enterprises transition and upgrading in backward countries. This paper made an research on the transition and upgrading of BYD Company, and the results show that the business model innovation is an effective way to transit and upgrade the backward manufacturing enterprises, and entrepreneurship, market opportunities and policy incentives are the power sources of business model innovation for backward manufacturing enterprises. The main ways of business model innovation include product or service innovation, alliance networks, customer demand analysis, etc.