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when Buffett-BYD: World’s First DM Electric Car F3DM probing foreign markets
By Amarendra Bhushan for CEOWORLD Magazine Updated:April 13, 2009
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Buffett, the American billionaire investor, made his first investment in a Chinese company last September by buying a 10 percent share of the Hong Kong-listed BYD for HK$1.8 billion.
Marc Gunther writing for Fortune Magazine reported that Warren Buffett is famous for his rules of investing: When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is usually the reputation of the business that remains intact. You should invest in a business that even a fool can run, because someday a fool will. And perhaps most famously, Never invest in a business you cannot understand.
So when Buffett’s friend and longtime partner in Berkshire Hathaway (BRKB), Charlie Munger, suggested early last year that they invest in BYD, an obscure Chinese battery, mobile phone, and electric car company, one might have predicted Buffett would cite rule No. 3 above. He is, after all, a man who shunned the booming U.S. tech industry during the 1990s.
China is making a big push to become the world’s leading producer of electric cars, trucks and buses. The project carries major pluses for the country’s economy and its ranking in the world, but also some serious minuses.
The hybrid electric plug-in car, called the F3DM, is already being marketed in China for about $22,000 and is slated to go on sale in the United States and Europe in 2011.
The manufacturer, BYD Co., headquartered in the southern coastal city of Shenzhen, has a lot going for it. Chinese Premier Wen Jiabao gave the industry a send-off two years ago by his unusual appointment of a non-Communist as minister of science and technology. Wan Gang, a former Audi engineer in Germany, already had led Chinese research on electric vehicles. And the American billionaire Warren Buffett has invested in a 10 percent stake in the company.
“The market potential for the F3DM might be much bigger in the United States because of the country’s better sense of social responsibility and environmental protection. And electrical charging might be less of a problem in the US because many car owners have their own garages,” Wang said in a recent interview with sina.com’s auto website.
The F3DM is currently marketed at government and corporate buyers in China and sells for about 150,000 yuan.
BYD targets corporate and government buyers because of government subsidies (implemented on a trial basis in 13 Chinese cities including Beijing, Shanghai and Shenzhen) for hybrid, electric and fuel-cell cars used in public transport, especially taxis and postal and urban sanitary service vehicles, said Xu.
The subsidies can be as much as 50,000 yuan for small hybrid passenger cars and up to 600,000 for large fuel-cell powered commercial buses.
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