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Electric vehicle maker BYD (HKEx: 1211;
Shenzhen: 002594; OTC:BYDDF)
has been zipping in and out of the headlines this past week,
including its latest announcement that it will open a
manufacturing plant in Brazil to service the BRICS country and the
broader Latin American market. The company’s EV business, a major
factor that attracted billionaire investor Warren Buffett as a
major backer, also got good news from Beijing this week with word
of a major government drive to boost new energy vehicle buying.
Despite those positive moves, the company still has yet to
received its first major overseas order, though it has certainly
set up many pilot programs. Such programs make good headlines,
even though they result in very limited actual business. And those
programs receive far less attention when they end in failure,
which is what recently happened to a high-profile trial in a city
near Los Angeles.
Despite the rocky road these last few months, investors seem to
be turning bullish on BYD once more after a prolonged slump for
its stock due to tumbling profits and poor performance for its
older gas-powered car and battery businesses. The company’s shares
have more than tripled over the last 2 years, and are up more than
20 percent this year as optimism returns to its EV business.
In its latest piece of upbeat news, BYD announced it will open
its first factory in Brazil, with an investment of about $90
million and 450 workers. (company announcement) Operations will begin
next year at the plant, which will have an initial capacity to
produce 1,000 electric buses each year. BYD made a similar
investment announcement for a plant in nearby Argentina in 2011. (previous post)
The bigger news that got investors excited came earlier this week
when Beijing announced a major drive to promote EVs through strict
quotas for government vehicle buying. Under those quotas, China
will require that new energy vehicles account for 30 percent of
all government vehicle buying by 2016. (English article) Beijing has also announced
a wide range of other new incentives recently, including cheap or
free licenses for such vehicles and low tax rates.
China has announced similar incentives in the past, though few
have had much effect among the broader consumer market. The
mandating of such high quotas for government vehicle buying looks
a bit more promising, as it relies on non-negotiable directives
rather than financial incentives. But governments can always find
ways to get around such quotas, for example by buying cheap
electric motorcycles or other cheap low-tech EVs to meet their
Anyone looking for a better indicator of the longer-term
viability for BYD’s EV business would be better to focus on the
company’s international programs, which are truly market driven. A
company spokesman recently told me BYD is on track to deliver
around 4,000 electric buses this year, though it may have to delay
some deliveries due to constraints in its manufacturing capacity.
The company has 3 pilot programs going in California, and a number
of programs in Western Europe and other markets scattered around
But its drive into California also received a major setback
earlier this year when the city of Long Beach canceled a
high-profile pilot program for the company’s buses. That program
had been the subject of previous controversy over accusations of
labor law violations, though the spokesman said the cancellation
was due to lack of funding rather than labor or technology issues.
Loss of that contract highlights the very real possibility that
some or perhaps even many of BYD’s overseas pilot programs could
end without any big orders. We’ll have to wait and see if and when
any of the pilot programs finally results in one such big order,
though I’m sure BYD will make sure that everyone knows when that
Bottom line: A string of positive developments
could help maintain a rally for BYD stock, but the real sign of
long-term viability for its EVs will be a big order from one of
its global pilot programs.
Doug Young has lived and worked in China for 15 years, much of
that as a journalist for Reuters writing about Chinese companies.
He currently lives in Shanghai where he teaches financial
journalism at Fudan University. He writes daily on his blog, Young´s
China Business Blog, commenting on the latest
developments at Chinese companies listed in the US, China and Hong
Kong. He is also author of a new book about the media in China, The
Line: How The Media Dictates Public Opinion in Modern China.
The recently released 2014 U.S. Clean Tech Leadership Index from Clean Edge, the research and advisory firm where I am senior editor, finds the U.S. clean-tech market making impressive strides in many areas, while still hampered by inaction …