Chinese Battery-Maker BYD "Could Be World's Biggest Automaker"
Berkshire Hathaway's David Sokol with BYD's Wang Chuanfu in Detroit (Reuters)
Buffett on Board
BYD, the Chinese battery maker-turned-automaker that stunned the world with the first mass-market electric plug-in car late last year, remains something of a wild card. The car, the F3DM, goes 62 miles on a single charge -- farther than other electric vehicles -- and sells for around $22,000, less than the plug-in Prius and much-hyped Chevy Volt are expected to cost when they come out in late 2010. But a number of questions remain, like when the car will come to the US (if at all), and how safe are its batteries.
But as we've noted before, super investor Warren Buffett's a fan, and the Chinese government is pouring huge subsidies into clean cars. According to a feature in Fortune this week, Buffett thinks BYD "has a shot at becoming the world's largest automaker, primarily by selling electric cars, as well as a leader in the fast-growing solar power industry."The piece offers a closer look at the Shenzhen-based company, which has been turning many heads on TreeHugger.
You Are Already a BYD Customer
Wang Chuanfu, the company's charismatic CEO, launched BYD in 1995 with $300,000 and a mission to make cheaper rechargeable batteries than those that were being imported from Japan and Korea. Having survived a few copyright infringement suits from other Asian batterymakers, by 2000 the company had became one of the world's largest producers of cell phone batteries, selling its product to Motorola, Nokia, Sony Ericsson and Samsung. Now the iPod, iPhone and the One Laptop per Child use BYD's batteries.
In 2003, BYD acquired a Chinese state-owned car company and began building cars.
Revenues for the company have grown by about 45% annually during the past five years, reaching $4 billion in 2008. That year, net profits -- for batteries, mobile-phone components, and autos -- were around $187 million. On the Hong Kong exchange, BYD has a market value of about $3.8 billion -- less than Ford ($7 billion at the beginning of April), but more than General Motors ($1.3 billion).
Wang is, according to Buffet’s business partner Charlie Munger, is a "combination of Thomas Edison and (former GE chairman) Jack Welch- something like Edison in solving technical problems, and something like Welch in getting done what he needs to do."
The company's name is an acronym for its Chinese name, Biyadi 比亚迪, but it has been re-branded as "build your dreams."
No Private Jets
Despite his success, Wang says he has little interest in accumulating wealth. He was paid about $265,000 in 2008. After the company went public, he distributed about 15% of his shares in BYD among 20 other executives and engineers at the company. (He still owns roughly 28% of the shares, worth about $1 billion.)
His big-ticket items? A Mercedes and a Lexus, bought, he says, so that he could take their engines apart to see how they work.
Wang's frugality extends throughout the company, in a way that would embarrass the high-flying executives of GM or Ford. Until recently, executives always flew coach. When BYD executives last traveled to the Detroit auto show they rented a house in the suburbs to save on hotel rooms.
On top of plug-in electric hybrids and full electric cars, one of Wang's goals is to make BYD's batteries 100% recyclable, in part by using a nontoxic electrolyte fluid.
To underscore the point, Wang poured battery fluid into a glass and drank it. "Doesn't taste good," he said, making a face and offering a sip to Sokol.
BYD is also researching a product it calls a Home Clean Power Solution -- a set of rooftop solar panels with a battery pack for backup power.
Meanwhile, the company is pondering whether to enter the U.S. market, where the economics of electric cars are not as attractive. Instead, the company could become a battery supplier to global automakers.
Only 80 (!) Plug-Ins Sold So far
Aside from the viability of its electric cars overseas, questions remain about how successful BYD will be on home court in the short term. According to Xinhua, the F3DM has sold only 80 units since its launch last December, and only to fleet buyers like the Shenzhen government and China Construction Bank's Shenzhen branch.
The safety of their batteries and the viability of their cars overseas also remains a concern.
Warren Buffett's Berkshire Hathaway acquired a 10 percent stake in the firm last fall. It was less than he wanted -- proof, he says, of the company's strong outlook.
[Wang] wanted to be in business with Buffett - to enhance his brand and open doors in the U.S., he says - but he would not let go of more than 10% of BYD's stock. "This was a man who didn't want to sell his company," Buffett says. "That was a good sign."
In acquiring a stake in BYD, Buffett broke a couple of his own rules. "I don't know a thing about cellphones or batteries," he admits. "And I don't know how cars work." But, he adds, "Charlie Munger and Dave Sokol are smart guys, and they do understand it. And there's no question that what's been accomplished since 1995 at BYD is extraordinary."