BYD Co. struggles, sales drop

Warren E. Buffett, one of the richest men in the world, has supported BYD Co. since it began to promote its electric battery technology in China four years ago; Buffett bought a 10% stake and hailed the company’s prospects, but things have not gone well for BYD. Co. and stocks are down 43% from February’s high. Analysts and investors are now concerned that the company may not have the technological and manufacturing capabilities that will enable it to compete in the Chinese market. The company’s sales of its commercial mainstay, gasoline-powered cars, have dwindled this spring as Chinese consumers moved toward more expensive and better-quality cars produced by its rivals. BYD has come to terms with the fact that the future of the auto industry is more likely to lie in hybrid gasoline-electric cars and not in all-electric cars, because of the issues of battery range and recharging time. The company’s battery technology came under intense scrutiny after a Nissan GT-R sports car speeding at more than 177 kilometers an hour slammed into the back of a BYD electric taxi in southern China and set the vehicle aflame, killing all three passengers. BYD issued a statement saying that no car, electric or otherwise, could have survived such an impact and BYD’s shares bounced back after the explanation, which investors appeared to accept. Still, the company’s long-term challenges remain. BYD had to shelve plans to start exporting electric cars to the U.S. within two years partly because of the global economic slowdown, but largely due to the fact that automakers are now convinced that gasoline-electric hybrids are more promising. “More and more companies are certainly going to do it like this,” said Wang Chuanfu, BYD’s founder and chairman. Over the past years, BYD grew rapidly as a manufacturer of cheap and very basic cars for the country’s fast expanding middle class. But middle class buyers have since become more discerning and now favor offerings from multinational companies over locally designed cars. Although other Chinese carmakers are also struggling, BYD has been among the hardest hit and car sales fell by 8% during the first four months of 2012, while the overall Chinese car market grew by 6%. (June 19, 2012)