Buffett bullish on BYD's electric cars and buses

PUBLISHED : Friday, 01 October, 2010, 12:00am
UPDATED : Friday, 01 October, 2010, 12:00am

Warren Buffett yesterday said he was bullish on the potential for zero-emission buses and cars on the mainland and that his investment in green-car producer BYD would pay.

The confidence of the world's most successful investor comes despite continuing delays in the commercial launch of the Shenzhen company's much-touted pure electric E6 car.

Buffett owns 9.9 per cent of BYD through his company Berkshire Hathaway.

BYD unveiled its first purely electric bus - the K9 - yesterday at its Changsha plant and said it had signed a contract with the Hunan municipal government to provide 1,000 of the vehicles to the province. That is the company's biggest single delivery of any electrical vehicles.

Buffett, together with Microsoft Corp's Bill Gates and Berkshire's vice-chairman, Charlie Munger, took a quick ride on the bus and said such vehicles were a low-cost way to fight pollution. 'BYD will very likely find a huge market in the US,' Buffett said.

According to a company statement, the K9 can reach speeds of more than 40km/h and can travel 305 km/h on a single electric charge. The bus can be fully charged in six hours.

Despite the good news, BYD's overall sales dropped 19 per cent in August from a year earlier, while sales of its best-selling F3 car plunged 40 per cent.

The company last month slashed its full-year sales target by 25 per cent to 600,000 units.

Chairman Wang Chuanfu, who shared the stage with Buffett, has said that the company would be forced to delay mass-market sales on the mainland and in the United States of its highly anticipated, all-electric E6 because of a shortfall in battery production capacity.

BYD originally planned to start selling the car in California by the end of this year but pushed the target back to the second half of next year.

The company will provide 50 electric cars as taxis in Shenzhen.

Doubts about the commercialisation of BYD's electric car were somewhat offset by the launch of its electric bus.

In response to speculation that Berkshire will increase its stake in BYD, Munger said this was not a decision that could be taken immediately. 'But BYD is already successful without [Berkshire's] stake enlargement,' he said.

Asked if he had any plans to sell his BYD stock, Buffett told state-owned CCTV: 'No, no. I won't tell you what I'm buying, but I can absolutely promise you we are not selling. We'll own it for many, many years. Probably past my lifetime.'

'I have fairly simple principles for making investment,' he said. 'I look for business which I can understand, companies that have some kind of competitive advantage, management [which] we admire and trust and where the price is sensible.'

Buffett's whirlwind tour of the mainland, which has included Shenzhen, Huizhou, Beijing and Changsha, as BYD's cheerleader-in-chief has also helped fuel a rally in the company's share price.

The shares have risen almost 13 per cent during his four days on the mainland, including a 6 per cent gain yesterday to a three-month-high close of HK$62.35.

As a result, Berkshire's stake in the company is now worth HK$14.03 billion - HK$1.6 billion more than it was worth the day before Buffett arrived in China.

In top gear

In the four days that Warren Buffett was visiting the mainland, BYD's share price has risen 13 per cent to a three-month high

Berkshire Hathaway saw the value of its 9.9 per cent stake in the mainland carmaker rise this week by, in HK dollars,: $1.6b