Wednesday, March 23, 2011

Electric Vehicles: "China’s BYD Promises to Take Over the US Car Market." (BRK.A; BRK.B)

They have to do something, here were the headlines a couple weeks ago:
 Buffett-Backed BYD's Profit Plunges as Sales Slump- Bloomberg
BYD's Net Fell 34% in 2010 - Wall Street Journal
BYD's Q4 profits plunge as vehicle sales plummet- Taipei Times
At the time I wondered if Mr. Buffett was going to rethink the investment.
But then I remembered an old saying:
To a well-run insurance company the only quarter that matters is the next-quarter-century.
We'll see.
Here's the latest. First up, Mad Hedge Fund Trader via ZeroHedge:
For years now, I have been chronicling in exacting detail my quest to buy an all-electric Nissan Leaf automobile as the ultimate hedge against rising oil prices (click here for “Getting Something for Nothing” at  ). The crude price spike arrived right on schedule, with gasoline prices topping $4/gallon in San Francisco last week. My local Nissan dealer assures me that the car I ordered a year ago, along with my substantial $75 deposit, will be delivered in May.

Then I received a scratchy, badly echoing telephone call from the Southern Chinese manufacturing mega city of Shensen.  My friend had just driven BYD’s (Build Your Dreams) (BYDDF) new E6 all-electric sedan, and he could not sing its praises loudly enough (click here for their website at ). The car has a 200 mile range, versus the 100 miles for the Leaf. That is made possible by a 60 KwH battery, compared to the 24 KwH battery in the Leaf. Yet the E6 will be offered in the US for $40,000, close to the non-subsidized price for Nissan’s new vehicle.

The great barrier to competitiveness for electric cars has always been the cost of the batteries, which now run at $1,000/KwH. So $24,000 of the cost of the $38,000 fully loaded Nissan Leaf is just to cover the 600 pound lithium ion battery. However, by executing a globally integrated manufacturing model, BYD has been able to lower its costs to $500/KwH. This involves making its own chips, directly owning lithium mines, and operating in low wage countries like China and Eastern Europe. I guess this is what happens when a battery company builds a new car from the ground up, instead of a traditional car manufacturer.

BYD plans to launch mass marketing of the roomy, five passenger E6 in the US by the end of 2012. Safety specifications have already been satisfactorily upgraded to meet rigorous American standards. BYD is quietly setting up its own US dealer network. The cars will initially be offered to fleet users, and then the consumer market. It also will roll out a range of all-electric buses, which no one is currently producing here. The company’s goals are anything but modest. It plans to become the largest car maker in China by 2015, and the largest in the world by 2020, surpassing the behemoth Toyota Motors (TM).....MORE
Next a car salesman via China Car Times:

BYD Still Aiming for World's Number One Title
In 15 years time who will be the worlds number one car maker? Perhaps it will be VW, perhaps GM will retake its former crown, or perhaps a dark horse in the form of BYD will take it.

In 2008, Wang claimed they will be China’s No.1 in 2015 and world’s No.1 in 2025. BYD is a leading battery maker for cell phone, but as a carmaker, the target doesn’t seem that simple.

Let’s pay attention to these photos taken outside a BYD dealer. Two large banners remind every passerby that they will be world’s No.1 in 2025. Although Wang does not always repeat this slogan recently, these legible banners show that BYD is still aiming at world’s No.1 – the target haven’t been changed.

However, lower halves of the photos imply BYD’s hardship. In front of the showrooms, there are lots of unregistered new F3 waiting for their buyers – only F3, no F6, F0 or M6. In fact, among nearly 600,000 cars sold by BYD in 2010, more than a half are F3 (including F3R).

BYD F3 hit the market in September, 2005, followed by a hatchback version F3R in 2007. The corolla-like appearance and chassis are key factors of F3’s success. In 2010, F3 defended its sales title again, although the sales volume decreased. The five-year-old legend may cool down this year, but BYD cannot find a great successor. Perhaps, as time passes, plagiarisms will never be welcomed again by the increasingly mature consumers....MORE