Tesla hits China speed bump, BYD turns around
BYD's latest results show it is running out of time for its EV push, while Tesla is likely to negotiate a deal to regain the rights to its trademark in China.
Let's start with a look at BYD, which started its life as a cellphone battery maker, then expanded into cars and most recently has placed big bets on the new energy vehicle sector. That big bet helped to attract billionaire investor Warren Buffett, who purchased 10 per cent of BYD in 2009. His investment sparked a massive rally in BYD shares, though they later gave back most of the gains as the company's traditional car business sputtered.
But despite those upbeat figures, it's interesting to note that BYD didn't include any individual mention of its electric vehicle (EV) business in the highlights section of its report, which reflects the tough road that business has faced. Despite earlier strong hopes for the business, BYD has yet to make much major inroads with consumer buyers. Instead, it has had to rely on fleet buyers of taxis and electric buses for most of its sales.
The number of those fleet buyers has been growing steadily, though most programs are currently in the trial phase and it's unclear if any will ultimately result in the bigger orders the company needs to make some profits from its big EV investment. It's probably still a bit too early to call the BYD's current line of EVs a failure. But time will start to become a major enemy soon as BYD's current technology starts to become obsolete. Accordingly, I suspect that the company will have to make some major write-downs on its EV campaign in the next two years.
I suspect the government got involved in that case due to its high profile and helped to broker the settlement. This Tesla case is far lower profile, meaning it will probably have to go through the usual legal channels if Tesla wants to resolve the matter in courts. Rather than face such delays to its China plans, I expect the company will probably negotiate with the squatter to get back the rights to its name, though it will probably pay far less than the $60 million (HK$465 million) Apple paid for the iPad trademark.
Bottom line: BYD's latest results show it is running out of time for its EV push, while Tesla is likely to negotiate a deal to regain the rights to its trademark in China.