Buffett's China visit could bode well for BYD

Updated: 2010-09-27 21:30
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SHENZHEN - Billionaire investor Warren Buffett will spend much of his three-and-half day visit to China at BYD, the fast growing Chinese electric car producer he has invested in.

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After arriving in China's boom town of Shenzhen Monday afternoon, Buffett was scheduled to take part in a series of BYD marketing events and visit BYD's new energy research center, Xinhua learnt from a schedule obtained from Shenzhen-based BYD.

The value of Buffett's investment in BYD has risen six-fold.

Buffett's Berkshire Hathaway Inc. bought 10 percent of Hong Kong-listed BYD (short for "Build Your Dreams") for $230 million two years ago. That stake is now worth as much as $1.7 billion.

Reuters on Friday quoted Andrew To, sales director at Tai Fook Securities, as saying Buffett may break the news he plans to sell down his stake in the company during his visit, since the company's stock value is well off its peak of last October and that the return on his investment is impressive enough.

BYD issued a statement on Saturday saying reports that suggested Buffett may reduce his stake in the company were not based on fact.

Analysts' opinions differ.

Huang Yonghe, chief analyst with China Automotive Technology & Research Center, said during his China visit, Buffett is expected to reaffirm his support for BYD and very likely he would increase his investment in relevant sectors in China.

Buffett will attend a ceremony to celebrate BYD's inking of a deal to build electric charging stations with China Southern Power Grid.

He is scheduled to visit BYD's plants in the cities of Shenzhen and Huizhou on Tuesday and then leave for Beijing on Wednesday, where he will co-host with Bill Gates a charity banquet to meet about 50 wealthy Chinese.

His China trip will end in Changsha, capital of Central China's Hunan province, where he plans to visit BYD's electric bus production base.

Wang Jianjun, a sales manager of BYD, said Buffett's China visit shows the tycoon's confidence in BYD.

China is the world's largest auto market, and it is grappling with oil shortages and air pollution. The Chinese government attaches importance to developing non-fossil-fuel-powered vehicles, as evidenced by a raft of preferential government policies for electric car makers.

BYD, the battery-turned-auto maker, not only pioneered China's electric car industry, but does research and development on solar energy. The company's development strategy matches Buffett's investment tastes.

Established in 1995, BYD sold more than 400,000 units of vehicles in 2009, sustaining a 100-percent growth rate for the fifth straight year.

It reported a more-than-50-percent rise in sales revenue and profits in the first half of this year.

On Aug 3, BYD said it would lower this year's annual sales target 25 percent, to 600,000 units.

Du Guozhong, head of the company's media relations department, said the lowering in its sales target was because the company's expansion plans in Shaanxi province had become embroiled in dispute with a local government.

BYD's stock price has risen more than 20 percent on the Hong Kong Stock Exchanges over the past week, boosted by the news of Buffett's China visit. It added 4.4 percent on Monday to close at HK$57.6($7.4).