PRD pioneers: BYD Auto
How do you get the attention of Warren Buffett, the world’s most respected investor? For Wang Chuanfu, the founder of BYD Auto, one of China’s leading car manufacturers, the tactic was to do something rather dramatic. Meeting with a team from Buffett’s Berkshire Hathaway, Wang surprised his visitors with a demonstration of his green credentials. He took a glass of recycled electrolyte fluid from one of BYD’s rechargeable batteries and drank it. Talk about faith in your own product!
Buffett’s team turned down the suggestion of a sip themselves. But they bought 10% of BYD for $230 million.
Initially known for making mobile phone batteries, BYD gave its investors a jolt when it announced that it would be moving into the electric car industry in 2003. But news of the backing from Buffett, as well as a policy context in which the Chinese authorities were set on promoting greener cars, buoyed stock market sentiment.
Price that Warren Buffett paid for a 10% stake in BYD
In 2008 BYD brought its first full plug-in electric vehicle to the Detroit auto show. Combining its green technology business with its investments in gasoline-powered cars, BYD’s stock soared. Within a year Buffett had made more than a billion dollars on his stake.
Progress since then has been slower than Wang hoped and BYD’s share price fell by more than 80% over 2010 and 2011 as its investments in new energy markets failed to pay off. The government’s prediction of 500,000 new energy vehicles by 2011 fell flat (only 8,159 hybrid and electric cars were sold that year) and sales of BYD’s gasoline-powered vehicles – still the dominant contributor to its business – tailed off.
BYD had got too far ahead of the rest in predicting an explosion of electric car sales, while its critics carped that its electric cars were too expensive and that consumers needed more convincing about their reliability.
Nonetheless, BYD sold about 10,000 electric cars more than Tesla last year, delivering more than 61,000 vehicles, or three times the number for 2014.
The company’s shares were also boosted in December when the central government announced a ten-fold increase in its targets for electric vehicles on the roads by 2020, plus new promises to speed up construction of the all-important battery-charging networks across the nation.
In the meantime BYD has been concentrating on sales of its greener vehicles to public transportation systems, doing best in its hometown of Shenzhen, where its electric-powered models have been adopted in the local taxi fleet.
It has also sold buses to cities around the world, including London, Amsterdam and Tokyo, and Wang has set goals of doubling its sales of electric buses in the next three years.
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