In some ways you have to admire BYD (HKEx: 1211; Shenzhen: 002594), the Warren Buffett-backed car maker, for its ability to stay on message despite a rapid fall from grace that will likely see it post its first quarterly loss in a long time in the second quarter. (previous post) Despite all its setbacks, including a crash that has seen its Hong Kong-listed shares lose about two-thirds of their value from a 52-week high, the company is continuing to focus on its dreams of becoming the world’s first company to make serious money from electric vehicles, as evidenced by its latest announcement that it is providing the world’s biggest EV fleet to its hometown of Shenzhen. (company announcement) At first glance the numbers look impressive: a new series of agreements have seen BYD provide Shenzhen with a fleet of 200 electric buses and 300 electric taxis. But further reading makes the numbers a little less noteworthy, as it becomes clear that a portion of these vehicles may only stay in use during the upcoming Universiade Games, and also that many pieces of this tie-up were previously announced. I’ve said before that BYD needs to get back to basics and design some good traditional gas-consuming cars that people want to buy if it wants to get back on the right track and return to profitability anytime soon. Its electric vehicle vision may indeed work out in the end, especially with the strong support it’s getting from Shenzhen, though even in this area I would only give it a 50 percent chance of success. But if it doesn’t return to the right track soon, it could soon lose support from Buffett, and could potentially even end up out of the car business completely before its electric dreams ever have time to become reality.
Bottom line: BYD is again showing off its strong support from Shenzhen in achieving its electric car dreams, but it may run out of gas before those dreams have a chance to succeed.
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