Chinese Electric-Car Maker BYD’s Shares Plunge

The Wall Street Journal, December 18, 2014

A BYD Co. electronic vehicle is charged at an EV charging station at the company's campus in the Pingshan district of Shenzhen, China, Aug. 5, 2014. Bloomberg News

By Colum Murphy

Updated Dec. 18, 2014 10:03 a.m. ET

SHANGHAI—An executive at Warren Buffett -backed BYD Co. defended its business prospects after shares in the Chinese electric-car maker fell as much as 47% on Thursday.

In a conference call late Thursday, company secretary Qian Li said BYD’s operations were normal despite the share plunge and sought to dispel what he called rumors about the company. BYD’s Hong Kong-traded shares regained some ground later Thursday and finished at 25.05 Hong Kong dollars (US$3.23), down 29%.

Mr. Li described rumors circulating in the market about BYD—including suggestions that its founder and chairman had been arrested—as “ridiculous” and urged investors to ignore them.

He also dismissed talk of BYD having large exposure to the troubled Russia market, describing the company’s investment in that country as “very small.”
BYD also produces mobile-phone components and solar panels.

Asked whether the price movement could be related to a selloff in shares by Mr. Buffett’s Berkshire Hathaway investment vehicle, Mr. Li said BYD had been in recent contact with Mr. Buffett but there was no sign that Mr. Buffett was considering a sale. He added BYD didn’t reach Mr. Buffett on Thursday due to the time difference between China and the U.S.

Berkshire Hathaway owns a roughly 9% stake in BYD, according to previous company filings, including about one-quarter of its Hong Kong-traded shares. In the Chinese city of Shenzhen, BYD’s shares fell about 10% on Thursday, the daily limit.

In October, BYD reported a third-quarter profit drop of 26% and said it expects this year’s profit to fall by up to 22%. Auto-sales growth in China has slowed in recent months amid a broader drop in China’s economic momentum.

Overall in the first 11 months of 2014, BYD has sold 384,977 vehicles, down from 458,042 vehicles sold in the same period the year before—a 16% drop, according to data from research firm IHS Automotive.

While the company frequently touts its line of electric vehicles and plug-in hybrids—vehicles that can run on both gasoline and electricity—it relies heavily on sales of traditional gasoline engine cars for the lion’s share of its automotive revenue.

Bill Russo, managing director of consulting firm Gao Feng Advisory, said BYD, like many other Chinese car brands, need to create a brand that appeals to Chinese consumers. “It has to go beyond just being a cheap car,” he said. 

Mr. Li said BYD faces “hot competition” and decreasing margins in the traditional car market in China but said it was transforming into a manufacturer of new-energy vehicles.

China has a long-stated goal of reducing its dependency on imported oil by promoting new-energy vehicles, including passenger cars and buses. China wants half a million such vehicles on the road by next year and 10 times that by the end of the decade.

But in the first nine months of this year, fewer than 40,000 electric vehicles were sold in China, according to data from the government-backed China Association of Automobile Manufacturers. Around three quarters of these were passenger cars. By comparison, around 14.2 million conventional passenger cars were sold in the period.

IHS Automotive researcher Namrita Chow said the high cost of replacing batteries, lack of adequate charging infrastructure and range anxiety—where buyers worry about how far they can travel on a single charge—are all obstacles in the path to high sales growth rates.

She said that BYD had doubled sales of its pure electric e6 car to 2,203 vehicles in the first 10 months of this year compared with the same period last year. Sales for the hybrid Qin had so far reached just over 11,000 vehicles in its first year on sale.

Mr. Li dismissed talk that the Chinese government could be reducing its support of new-energy vehicles, including buses, saying BYD continued to see good order flow for them. “We’re confident on the future of electric buses,” Mr. Li said.
A nearly 50% drop in oil prices over the past six months has pressured green stocks in a number of areas.

“With the oil price down, the global outlook for electric vehicles looks very different from just a couple of months ago,” said Jochen Siebert, a Shanghai-based managing director at JSC Automotive Consulting. “BYD’s electric and hybrid car business will likely be impacted,” he added. 

Write to Colum Murphy at colum.murphy@wsj.com

China green-car makers see hope in subsidy revamp

The Wall Street Journal Market Watch, June 8, 2014

By Joanne Chiu

Despite being based in one of the world's biggest and most polluted car markets, Chinese electric-car maker BYD Co. until recently sold few of its hybrid or battery-powered electric cars outside of its home province of Guangdong, thanks to a system of local subsidies.

Those rules are now changing under a new effort by China's central government to push local authorities to treat equally all Chinese car makers when granting green subsidies. This year for the first time, big cities are relaxing subsidy rules that effectively prevented sales of electric and hybrid cars by local manufacturers that weren't based in their jurisdictions.

Such restrictions had been a drag on green-car sales in China, particularly for BYD, a midsize manufacturer of cars, buses and batteries. In 2008, BYD became the first Chinese auto maker to produce electric cars, a move that helped attract a $232 million investment from Warren Buffett's Berkshire Hathaway Inc.

This year "is an inflection point for China's electric-car industry," Li Yunfei, BYD's domestic sales executive, said in an interview. "We expect China's electric car sales will continue to record strong growth rates in the next few years," he said, without providing details.

BYD in March said it hoped to sell 20,000 electric vehicles in 2014, a big increase from some 2,000 sold last year. Mr. Li said sales in Beijing and Shanghai, one of the first cities to loosen regulations, have already helped push sales of BYD plug-in hybrid passenger cars to 3,294 in the first four months of this year, with 8,000 more on order. Plug-in hybrids are cars that can run on either gasoline or battery-power.

BYD's change of tone reflects a broader policy shift in China, as the country's leaders make a renewed push to stimulate demand for green cars in a bid to combat pollution and curb rising oil dependence. The nation has set for itself the ambitious goal of putting 500,000 plug-in hybrid and electric vehicles on the road by next year, and five million by 2020.

One example of the shift is the central government's recent push to have provincial governments extend subsidies for electric and hybrid cars to makers based outside, as well as inside, their regions. Such subsidies are vital because they make pricey green-cars affordable. When combined with national subsidies, they can cover around one-third of the cost of a car. BYD's flagship e6 electric car sells for around 380,000 yuan ($60,800) without subsidies. Foreign electric-car makers have limited benefits: Shanghai, for instance, pledged to offer 3,000 license plates free to buyers of imported electric vehicles.      

                                    

The governments of Beijing and Shanghai started offering subsidies for BYD green cars in recent months, and other major cities are expected to follow suit later this year. Other cities plan to build charging stations so electric car owners won't worry about being stranded away from home.

Plenty of hurdles remain. BYD's Qin hybrid car gets 70 kilometers, or 43 miles, on a single charge compared with 121 kilometers, or 75 miles, in a Nissan Leaf. BYD also is still heavily dependent on sales of traditional gasoline cars, and those are declining as more Chinese consumers flee to higher-quality foreign brands. BYD's first-quarter net profit plunged nearly 90% versus the previous period, to 12 million yuan.

At the Chongqing auto show on Friday, hundreds of would-be car buyers milled around the stands of foreign auto makers such as Volkswagen AG, while visitors to BYD's stand were noticeably fewer.

"How do you finance all these new technologies when you're not making money in your core business right now?" wonders Janet Lewis, an analyst at brokerage Macquarie Group who estimates that electric and hybrid cars accounted for only 3% of BYD's car shipments in the first four months this year.

The charging infrastructure for electric cars remains minimal in China, discouraging buyers. Once green-car demand does pick up, the chief beneficiaries may be foreign manufacturers like Nissan Motor Co., which have more-established electric-car businesses. Nissan later this year will produce electric vehicles for the Chinese market through a joint venture with Wuhan-based Dongfeng Motor Group, making it eligible for local subsidies as well. BMW AG and Tesla Motors Inc. also are making a green-car push in China.

"BYD isn't as well established a brand as a manufacturer like Nissan," said Bill Russo, president of Synergistics Ltd., an automotive-focused consultancy. "It will take BYD time to create trust in the marketplace to allow them to sell in significant numbers.

Mr. Li shrugged off potential competition, saying moves by others to ramp up electric-car sales in China will boost interest in green-cars overall. "It isn't a time to compete with each other," he said. "It's a time to develop a bigger market and create economies of scale."

Mike Ramsey contributed to this article.

Write to Joanne Chiu at joanne.chiu@wsj.com and Colum Murphy at colum.murphy@wsj.com

Click here to read the original article at marketwatch.com

BMW's i3 Has Chance for Success in China

Bloomberg Television, July 30, 2013

Click here to view this interview at www.bloomberg.com

Bill Russo, president of automotive consultancy Synergistics Ltd. in Beijing, talks about Bayerische Motoren Werke AG's launch of its new battery-powered i3 compact car. BMW will begin selling the i3 next year in China, which the world’s largest premium automaker predicts will become one of the top markets for electric vehicles. Russo speaks with Susan Li on Bloomberg 
Television's "First Up." (Source: Bloomberg)

Russo Presentation at Green Mobility 2011

Beijing, China, September 23, 2011


Bill Russo's presentation entitled "The Circuitous Path to Electrification of China's Automotive Industry".

The Circuitous Path to Electrification of China's Automotive Industry

View more presentations from Synergistics Limited

Chinalogue: Environmentally Friendly Driving

Blue Ocean Network, March 23, 2011

Click here to view the Chinalogue program

Getting stuck bumper to bumper in a cloud of exhaust is regular occurrence in China. Not only is it unpleasant, it's taking a toll on the environment.

As the world's largest car market continues to grow, the country aims to have more than 500,000 new energy vehicles on the road by 2015 and 5 million by 2020. It began spurring this growth with rebates of up to $9,000 dollars per energy efficient car and started testing electric charging stations in pilot cities from Beijing to Hainan.

What will the 200 million cars expected to be on the road at the end of this decade will be running on--Gas? Electricity? A little bit of both? Something else?

Bill Russo

President, Synergistics

Linda Luo

Executive Editor, China Auto Review

Klaus Paur

Managing Director, Synovate

Aired March 23, 2011