Tag Archives: BYD

Buffett’s Ups and Downs With BYD

As a snapshot of global financial markets’ ups and downs, look no further than U.S. billionaire investor, Warren Buffett. In 2008, he paid $231 million for a 10% stake in BYD Co., China’s largest maker of rechargeable batteries and whose chairman, Wang Chuanfu, nurtured a dream of making electric cars. BYD’s F3 sedan was China’s best-selling marque in 2009 and 2010, but its hybrid F3DM and e6 electric model have not met with similar success and the company has had to delay the U.S. launch of the e6 until 2012. The company’s share price fell by 14% on Tuesday in the wake of a third-quarter profits warning. The value of Buffett’s stake is now down by $2 billion from its peak in October 2009, though still double what he paid for it.

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BYD Fined, Loses Factories For Illegal Land Use

We now have a decision in the widely watched case of illegal land use involving BYD, the fast-growing compact automaker in which American investor Warren Buffett has a 10% stake. The Ministry of Land and Resources has announced that BYD is being fined 2.95 million yuan ($443,000) and that the seven factories the company built in Xian on 49 hectares of land bought from an economic development agency in Shaanxi, 45 hectares of which was zoned for agriculture, will be confiscated.

Construction had started last December and the plants weren’t due to start production until 2011, so the practical effect on BYD will be to constrict future, not present capacity, and the ruling lifts some uncertainty over the company for investors. In one sense BYD has got off lightly. The ministry had previously hit five companies this year for illegal land use, following a tougher inspection regime launched in February that found examples of illegal land use in more than half the 13 cities examined in an initial spot check and officials cooking the books in four. In those cases buildings were ordered to be demolished, land taken back, executives imprisoned and officials reprimanded. BYD’s high-profile and famous foreign investor may have helped it escape the most severe of those punishments, as least as far as we can tell at this point.

The question now is what sort of signal BYD’s punishment will send, and who will see it. One audience is foreign companies. As the China Law Blog pointed out in response to our preview post on the ruling, “if China is going after Chinese companies for putting manufacturing facilities on agricultural land, what in the world makes you as a foreign company think you will be able to get away with doing the same thing?”

The bigger audience is local officials, at least a dozen of whom in this case have been censured for not exercising effective supervision, including one, the director of the planning department in Shaanxi’s local Land and Resources office, who has been removed from office. It is not unknown for local officials to turn a blind eye to such land-use violations in the drive for economic growth. Companies want to bring new production capacity on stream without waiting for all the red tape to be dealt with, while officials themselves are  judged on their promotion of local economic growth and local governments have become hooked on land sales for their revenue.

The ministry has said that 7,800 hectares of land had been used illegally in the first half of this year, a 14% increase over the same period last year. That reversed the trend of the figures of the past three years. They had shown the issue was shrinking, but that may just have reflected lax enforcement and reporting. The country’s farmland has continued to be eaten up by industrialization and urbanization. It has shrunk by 6% over the past decade to 122 million hectares, barely above the minimum arable land the ministry reckons China needs to be self-sufficient in food. The summer’s floods and the drought earlier in the year in some parts of the country have reduced that margin further. Food self-sufficiency is considered a national security issue. Getting permission to change agricultural land to other uses, particularly commercial uses, is now tougher than ever.

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Filed under Environment, Industry, Politics & Society

Cracking Down On Illegal Land Use: The BYD Case

A deadline is drawing near in a case of illegal land use involving BYD, the fast-growing compact automaker in which American investor Warren Buffett has a 10% stake, and which is being widely watched for a potential shift in policy.

In July, the Ministry of Land and Resources said it would rule by Sept. 30 on what to do about the company building seven factories on 49 hectares of land bought from an economic development agency in Shaanxi, 45 hectares of which was zoned for agriculture.

It is not unknown for local officials to turn a blind eye to such zoning violations in the drive for economic growth. Companies want to bring new production capacity on stream without waiting for all the red tape to be dealt with, while officials themselves are  judged on their promotion of local economic growth and local governments have become hooked on land sales for their revenue.

The ministry has said that 7,800 hectares of land had been used illegally in the first half of this year, a 14% increase over the same period last year. That reversed the trend of the figures of the past three years. They had shown the issue was shrinking, but that may just have reflected lax enforcement and reporting. The country’s farmland has continued to be eaten up by industrialization and urbanization. It has shrunk by 6% over the past decade to 122 million hectares, barely above the minimum arable land the ministry reckons China needs to be self-sufficient in food. The summer’s floods and the drought earlier in the year in some parts of the country have reduced that margin further.

The ministry has hit five companies so far this year for illegal land use, following a tougher inspection regime launched in February that found examples of illegal land use in more than half the 13 cities examined in an initial spot check and officials cooking the books in four. In those cases buildings were ordered to be demolished, land taken back, executives imprisoned and officials reprimanded.

None of the companies sanctioned were as high profile as BYD. How tough will the ministry be this time? And what sort of signal will it want its ruling to send?

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BYD Unveils China’s First Electric Hybrid

BYD, the battery maker turned electric car maker and in which U.S. investor Warren Buffett took a 10% sake earlier this year, has unveiled China’s first homegrown plug-in hybrid vehicle.

That is few weeks later than BYD chairman Wang Chuanfu had said in October but a year earlier than originally expected and more importantly ahead of the next-gen Toyota hybrid and two years ahead of GM’s Chevy Volt.

Plans for sales to foreign markets, including the U.S. remain set for 2011, which will let it ride on the marketing coat tails of foreign competitors and probably position itself as the cheaper alternative.

The vehicle, which has a small gasoline engine as a back up to its electric engine, is selling for 149,800 yuan ($21,890). That cheaper than Toyota’s top selling hybrid, the Prius, at 259,000 yuan, but twice the cost of BYD’s comparable gas-engine only car, the F3.

The company is focusing first on domestic taxi and fleet sales rather than individuals, with a target of 10,000 sales in 2009. The first announced sales of the F3DM are a total of 50 cars to the Shenzhen municipal government and China Construction Bank.

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BYD’s All-Electric Car To Go On Sale Next Month

BYD chairman Wang Chuanfu tells the WSJ that his company will have an all-electric car on sale in China by the end of November. That is the reason that Warren Buffett splashed out $230 million for a 10% stake in BYD last month (see “Buffet Buys Batteries“). BYD’s vehicle will look a lot like General Motors’ forthcoming Chevy Volt, but will hit the market two years earlier, the WSJ says. It will also beat out Toyota’s next-gen hybrid.

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