Despite all its recent woes, I have to applaud electric vehicle aspirant BYD (HKEx: 1211; Shenzhen: 002594) for its determination to make its EV dream a reality. This time the company, backed by billionaire investor Warren Buffett, is using an old trick to try sell its electric cars and buses outside China, namely by building manufacturing plants overseas, in this case in Argentina. (English article) Of course, this kind of investment will be strongly welcomed in the Argentina and is generally welcome in any country, which means BYD shouldn’t have any difficulty selling similar plans in other overseas markets. Now the only issue is whether BYD can actually find a market for its cars in Argentina and other Latin American markets. The answer is almost certainly no. BYD hopes to leverage the Argentina plant as a springboard to sell its EVs in other Latin American markets. But in any of these markets, the company is likely to face a difficult road as most are unlikely to offer the same strong support as China, which gives big subsidies for EV buyers and helps to build out the charging stations necessary to make electric vehicles an appealing proposition for consumers. Even if these markets offer monetary incentives, an EV is still likely to cost far more than a traditional gas-powered vehicle, which will make them a tough sell in price sensitive Latin American countries where BYD will also face competition from other Chinese automakers selling low-priced made-in-China cars. I don’t know where BYD is getting the money to build all these plants, since its profits have fallen to nearly zero as its China sales plummet. Given its own tenuous finances, I would be wary of BYD’s ability to build and operate these new overseas plants over the longer term, not to mention helping to build new infrastructure to make its EVs attractive to overseas buyers.
Bottom line: BYD’s new plans to build its EVs in Argentina will face numerous obstacles, with the result that the project may not survive very long.
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