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Buffett can boost BYD's stock price, but not its EV sales
Yang Jian | 2013/5/17

SHANGHAI -- BYD Co.'s stock price has jumped more than 80 percent since April, after U.S. billionaire Warren Buffett said his Berkshire Hathaway Inc. has no plans to sell its stake in the company.

Investors doubtless are thanking Buffett for his kind words during his visit to China this week.

But BYD could also use some kind words about its electric cars, which languish unsold on dealership lots. Most likely, though, it wouldn't matter.

Five years ago, Berkshire Hathaway invested $230 million (1.4 billion yuan) for a 10 percent stake in BYD. With that investment, BYD began to think of itself as a world-class maker of EVs.

In 2010, BYD announced plans to sell EVs in the United States. But years have passed and the company has yet to sell any cars in the United States.

Lately, several foreign bus operators have expressed interest in BYD's K9 electric bus, which has undergone road tests in a number of countries.

But BYD hasn't sold any overseas, and it's not doing any better at home. In China's EV market, the automaker faces three tall hurdles.

The first is high sticker prices. After government subsidies, BYD's e6 electric car sells for 180,000 yuan ($29,000), which is three times the average price of comparable gasoline-powered vehicles sold by Chinese automakers.

BYD's second hurdle is the lack of battery charging stations. For all the excitement that EVs have stirred up, few stations have been installed in Chinese cities.

The third hurdle is government protectionism. Each Chinese city favors its own EV maker, which is why BYD's electric car is sold only in Shenzhen, where the company is headquartered.

Last year, BYD sold only 1,690 e6 cars, and the main buyer was a taxi company owned by the Shenzhen government, according to LMC Automotive.

BYD's lackluster EV sales are unlikely to improve anytime soon, since none of these hurdles can be easily overcome.

So one might wonder why Buffett finds BYD to be an attractive investment.

In fact, Chinese reporters asked him this question during his visit to China this week. And he told them that BYD Chairman Wang Chuanfu is a highly capable businessman.

That's true. In 10 short years, Wang has transformed BYD, a manufacturer of rechargeable batteries, into a major automaker.

Though the EV market has fizzled, BYD still sells plenty of gasoline-powered vehicles. But neither Buffett nor Wang can work miracles.

BYD has spent a lot of money developing EVs, and it's not at all clear when it will earn that money back.

Pictured: Yang Jian is managing editor of Automotive News China.

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