As China’s auto world buzzes with excitement this week on news that Beijing will soon take steps to boost the struggling sector, my attention has turned to an element of the reports that could bode especially well for struggling BYD (HKEx: 1211; Shenzhen: 002594), which has placed a major bet on the difficult new energy vehicle space. At the same time, BYD, which is 10 percent owned by US billionaire investor Warren Buffett, has issued an unrelated announcement that could be cause for concern about an accident involving one of its electric vehicles, reflecting just one of the many uncertainties for this newly emerging technology. Let’s look at the bigger car story first, which has Beijing saying it will roll out new incentives later this year to boost car sales that have fallen from strong double-digit growth rates in 2009 and 2010 to very slow or no growth at present as China’s economy slows. The reports say that new incentives will target more energy efficient cars, as part of a broader national drive to cut back on China’s soaring energy consumption. (English article) But the detail in the reports that caught my attention was one buried in the middle of the China Daily’s story, saying one of the plan’s first steps will be to promote the purchase of new energy buses in large and medium-sized cities. The article says rental companies will also receive strong incentives to purchase big fleets of alternate energy cars. (English article) Both of those moves are smart because they target big vehicle owners that have the money to spend on necessary charging and maintenance infrastructure needed to make new energy vehicles attractive. That’s an important distinction with many of the previous incentives that have been targeted at ordinary consumers who are more reluctant to buy new energy cars due to worries about lack of such infrastructure. BYD’s home city of Shenzhen has already invested heavily in such programs, including rolling out experimental fleets of electric and hybrid buses and taxis. The mandate for more cities to buy new energy buses should mean lots of new business for BYD, as local governments are usually some of the biggest supporters of directives from Beijing, since local politicians want to please officials in Beijing. It’s less clear if rental car companies will embrace alternate energy vehicles under these new incentives, but many may at least buy small experimental fleets to see how they work. Meantime, BYD has also put out an interesting announcement detailing a high-speed accident in which one of its electric taxis in Shenzhen caught fire after being hit by another car and crashing. (company announcement) The fact that it issued the announcement means there’s clearly concern about this case, as obviously fire is one of the biggest dangers with this new technology that involves power generation through massive batteries. BYD does its best in the announcement to try to ease those concerns, and its points do look reasonable. Still, this kind of accident will do little to ease public concerns about new energy vehicles, making it that much more difficult for them to gain broader acceptance.
Bottom line: Beijing’s latest efforts to encourage new energy vehicle buying could benefit BYD by prompting more cities to buy the company’s new energy buses.
Related postings 相关文章:
◙ BYD Sputters Back to Life 比亚迪新车型助其重整旗鼓
The latest signs of trouble for China’s sputtering car industry are coming from some lower-end auto dealers, who are reporting a rapid build-up in their inventories even as manufacturers keep adding new capacity planned when the sector was booming 2 years ago. The current cycle looks like a classic case of looming oversupply, caused by a sharp jump in demand around 2009 that led manufacturers to invest billions of dollars in new production facilities that are only now coming on stream. Unfortunately for the automakers, the demand that helped to push China past the US to become the world’s biggest auto market has now started to stumble as Beijing takes steps to cool the nation’s overheated economy. The latest warning sign is coming from China’s largest car dealer group, the China Automobile Dealers Association, which is saying that dealers for 3 or China’s top domestic auto brands, Geely (HKEx: 175), Chery and BYD (HKEx: 1211), now have more than 45 days worth of inventory in their showrooms. (
Faced with a slowing home market and stiff competition from foreign-backed rivals, China’s big domestic auto brands are increasingly looking to developing markets to revive their flagging sales, with Geely (HKEx: 175) the latest to jump on the export bandwagon. A company executive says Geely, which made headlines a couple of years ago with its purchase of Volvo, aims to overtake domestic rival Chery in the next 2 years to become China’s leading car exporter. (
A growing number of big foreign car makers are developing new low-end brands and models just for the China market, with Nissan (Tokyo: 7201) and Volkswagen (Frankfurt: VOWG) the latest to make moves in that direction. These new initiatives come as the foreign giants look to keep their growth alive in China’s slowing auto market, posing a major new challenge to domestic nameplates like Geely (HKEx: 175) and Chery, which have been rapidly losing share to their better funded, more experienced foreign rivals. These moves also follow on the phenomenal success of General Motors’ (NYSE: GM) 2010 launch of the Chevy Sail, its first low-end model developed just for China which has posted growth rates in the 50 percent range for much of the last year and is now one of the nation’s best-selling models. Let’s look at the latest news first, starting with Nissan, which last week formally began production of its Venucia line of cars developed just for the China market in its partnership with Dongfeng Motors (HKEx: 489). (
After seeing its business tumble starting in the second half of 2010 and through much of last year, former high-flying car maker BYD (HKEx: 1211; Shenzhen: 002594) may finally be seeing its business stabilize and even bounce back a little as it returns to basics by developing popular new models even as it pushes ahead with its ambitious green car program. The Warren Buffett-backed company has just released preliminary full-year results that, while difficult to interpret too deeply, appear to show the company is back on a growth track after more than a year of falling revenue and plunging profits that nearly saw it fall into the loss column. (
China has just published its first monthly auto sales for 2012 and they aren’t pretty, boding poorly for the sputtering market in the Year of the Dragon. Of course, the figures for the month of January come with several major footnotes, most importantly the fact that sales were weak in 2012 as the Lunar New Year holiday fell during the month this year, whereas it fell in February for 2011. Still, the 16.5 percent decline in sales for the month marked the biggest decline in more than a decade, a sharp reversal for a market that was used to gains in the healthy double-digit percentage range for most of 2009 and 2010, and was still seeing healthy growth for most of 2011. (
After a year of hyping its electric vehicle (EV) initiatives even as sales of its traditional cars plunged, BYD (HKEx: 1211; Shenzhen: 002594) is finally waking up to the reality that it needs to focus on the present as much as the future by trumpeting early success of some of its newest gasoline-powered vehicles. The company’s shares soared eightfold in 2009 after billionaire investor Warren Buffett bought a 10 percent stake, presumably betting on BYD’s big gamble on electric powered cars. But since then its fortunes have faded considerably, with the company’s sales of traditional cars tumbling about 15 percent last year due to lack of exciting new models even as the rest of the market eked out modest growth. In the process, BYD’s shares also took a beating, losing as much as three-quarters of their value last year before bouncing back a bit over the last 2 months. Some of that bounce-back is no doubt due to a broader year-end market rally, but perhaps some is also due to guarded optimism over early success that the company is trumpeting for recently launched SUV and high-end sedan models, where BYD is competing mostly with major foreign automakers. BYD says that its G6 high-end sedan launched 4 months ago zoomed to a strong but still relatively modest 5,100 units in December, and predicted 10,000 in monthly sales for the near future. (
2011 sales data for 2011 has been trickling out for the past week from the various car makers in China, showing US and German names made big gains last year at the expense of Japanese and domestic rivals, who could face a continued uphill battle in the coming year. General Motors‘ (NYSE: GM) China sales rose 8.3 percent last year to a record 2.55 million vehicles, while Ford (NYSE: F), a later arrival to the market, said its sales grew 7 percent to 519,390 units, according to company statements. (
A barely noticeable news brief on Nissan’s (Tokyo: 7201) electric vehicle, the Leaf, in today’s China Daily provides some insight on how the big foreign automakers see China as an EV market, spotlighting the uphill battle the country faces in developing this technology. Nearly every foreign automaker has announced one plan or another to import or even build its EVs or hybrid vehicles in China, with GM (NYSE: GM) giving plans for its Chevy Volt and Toyota (Tokyo: 7203) and Volkswagen (Frankfurt: VOWG) all announcing their own initiatives. But most of those plans have been vague at best, reflecting both the fact that technology still needs time to mature and also a high degree of skepticism that Chinese consumers are ready to spend big dollars on alternate energy vehicles, which are typically much more expensive than gas-powered cars and require charging infrastructure that most of China still lacks. The news brief hidden on the inside pages of today’s China Daily says that Nissan recently put 15 of its Leaf EVs on the road in the central Chinese city of Wuhan for test driving. A company spokesman further said that Nissan will continue the tests for a full 3 years, which sounds to me like an incredibly long period for this kind of technology if it was really interested in trying to sell these vehicles in China. In fact, there’s a very real possibility that the technology will be obsolete in 3 years or sooner, meaning the Leaf will probably never see any commercial sales in China at all. My guess is that other foreign automakers will proceed with similarly conservative plans for their EV and hybrid vehicles in China, as all wait to see if government incentives and needed infrastructure develop to make a serious effort worthwhile. If that is indeed what happens, look for EV and hybrid auto sales by foreign automakers in China to number in the thousands of units or less for each of the next 2-3 years, while domestic players like BYD (HKEx: 1211; Shenzhen: 002594) are left to make a more serious effort at developing what in all likelihood will be a very difficult market.
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. (
