By Julian Wong Sep.27.2008
In: automotive, capital and finance, transportation
1 comment

BYD Auto Hits the Buffet Line

Legendary investor Warren Buffet has had a busy, busy, busy week.  (That’s one “busy” for each of the high profile deals he has made and he certainly deserves to take a seat after that, as pictured, if even for a brief moment.)

In the midst of a financial meltdown in Wall Street, Buffet’s Berkshire Hathaway made bold investments in Goldman Sachs, Constellation Energy (which has a nuclear energy storyline) and now BYD Auto, the Shenzhen-based maker of batteries and electric vehicles that this blog has profiled a few times.  From Green Car Congress:

MidAmerican Energy Holdings Company, a Berkshire Hathaway Inc. subsidiary, will purchase 225 million shares, representing approximately a 10% interest, in China-based BYD Company Limited. BYD’s corporate focus is researching, developing, manufacturing and selling rechargeable batteries (Li-ion, Nickel batteries), automobiles, electric automobiles and related products. The investment is valued at 1.8 billion HK dollars, or approximately US$230 million.

We’ll keep tabs if anything more newsworthy comes out of the press conferences scheduled for Monday, Sept 29.  But the significance of this news cannot be overstated.  When you consider that BYD Auto appears to be among the first auto manufacturers to have electric vehicles produced on a commercial scale (2009 or 2010 in China), their ambitions to enter the Israeli market, and the plans for electric vehicle networks to be rolled out in various major Chinese cities, one gets the sense that Buffet is onto something big in BYD.   A comment on Green Car Congress (thanks “Henrik”) perhaps sums up better than I could what this investment means:

Wow! Berkshire Hathaway has managed to get a 10% stake in BYD for $230m USD. To be sure, this is cheap for a company that in my opinion has the potential to become the largest industrial company on the planet in perhaps as little as 10 years from now (yes bigger than General Electric). Currently BYD employs 130,000 people up from zero when they started in 1995. They are on a fast track to become the largest producer of rechargeable lithium batteries on the planet and they own an auto industry that will be the biggest customer for these batteries in 2 to 4 years from now. If they are able to produce their batteries at less cost than others they will also be able to sell their cars cheaper and grow faster than any other company. Their business philosophy is clearly to be profitable through mass production at small margins.

What is in it for BYD? They got recognized as a quality business by Berkshire Hathaway who is the most recognized investment company on the planet. Everybody knows Berkshire knows how to do a proper due diligence before they invest. Now it should be easier for BYD to do business beyond China, in particular, to sell cars in Europe, Japan and USA. It is very convincing to say Buffet is behind us, we can be trusted as a reliable and serious business partner.

I suspect we’ll hear more about BYD on this blog as China and the rest of the world gravitates towards the electron economy.  Stay tuned.

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