Initially enthusiastic about Chinese electric car maker BYD
Co. Ltd. (
has been silent about his investment in the company more
recently. But the company's first quarter results showed drastic
improvement, and Buffett's holding in the company has become more
profitable after languishing several years.
BYD for the first quarter of 2013 announced that earnings tripled
from the third quarter of 2012, on the release of new automobile
models. The company's net profit increased to 112 million yuan
for the January-to-March quarter, from 27 yuan a year previously.
BYD was expecting net profit of 100 million to 140 million yuan.
The number of cars sold also increased 25.1 percent year over
year, to 142,851 in the first quarter.
Buffett purchased a 10% stake in BYD for about $1.02 per share in
2008. In total, he paid $232 million for the 225 million shares,
according to his 2010 annual letter, through Berkshire Hathaway (
) subsidiary, MidAmerican. The purchase placed MidAmerican as the
fourth largest shareholder in the company.
"MidAmerican is pleased to make an investment in BYD - a
high-caliber organization, committed to making a dramatic
environmental impact with their products," said then-chairman of
MidAmerican, David Sokol. "As worldwide discussions relating to
global climate change and environmental respect continue, the
technologies being developed by BYD will be an integral part of
Specifically, BYD is dedicated to "researching, developing,
manufacturing and selling rechargeable batteries (Li-ion, Nickel
batteries), automobiles, electric automobiles and related
By the end of 2008, the year Buffett invested in the company, BYD
had launched the first dual mode vehicle with no reliance on
specialized charging stations. BYD also looked forward to
multi-million yuan government subsidies in coming years.
The next few years, however, proved challenging. BYD net profit
decreased 89% to 275 million yuan in the first half of 2011. For
the full year, the total number of cars sold at the company
slipped 13.3% from 2010, which the company attributed to a
downturn in the domestic automobile market and a decline in the
overall market share of domestic brands. The year ended with
revenue down 0.8% and profit down 44%.
The company fared worse in 2012, as net profit fell by 94% year
over year to 81 million yuan, and revenues fell by 4.29% to 46.73
billion yuan. Auto sales were flat due to continued weak demand,
while sales at its solar cell and mobile phone fell.
New car models boosted sales in the first quarter 2013, as BYD
released the Suri compact car and S6 SUV in the second half of
2012. Sales in its solar cells business, which hampered full-year
2012 result, continued but narrowed, due mainly to less
competition in the global photovoltaics market and rapid growth
in the rechargeable battery business. The company reported that
it also saw new orders for smart phones from existing customers
and new smart phone projects with handset manufacturers expanded,
along with new tablets and other products, which drove increase
and profit in the assembly services and handset business.
While other segments have been weighing on results, automobile
sales have increased to 51% of BYD's sales in 2012, from 32% of
total sales in 2008.
Another bright spot for the company is a return of government
subsidies, which should begin as early as April or May, BYD
chairman Wang Chan fu announced in March. The previous subsidy
extended from 2010 to 2012, and ended on Dec. 31, 2012, Reuters
Buffett is finally enjoying a return to substantial gains on his
BYD holding. Having bought his shares for around $8 Hong Kong
dollars in 2008, the stock quickly went as high as more than $85
in 2009, giving his $225 million U.S. dollar investment a market
value of $1.986 billion at year-end. The stock soon plunged to
slightly more than $12 in 2011 and 2012, taking it under the $1
billion value reporting threshold for his annual letters.
BYD shares year to date, however, have gained 7.94%, pushing the
price to $24.15 Hong Kong dollars, and Buffett's profit to
slightly over 200%.
Buffett's other auto holdings are General Motors (
) and Wabco Holdings Inc. (
). He also owns energy companies National Oilwell Varco Inc. (
), ConocoPhillips (
) and Phillips 66 (
See Warren Buffett's portfolio here. Also check out the
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