Chinese cars have developed a reputation for many things, but excitement – of the intentional kind – rarely tops the list. Wang Chuanfu, founder and chairman of BYD (1211.HK), is trying to change that.
Wang made headlines at last year’s Detroit Auto Show when he drove BYD’s hybrid F3DM sedan around the show floor. It was a good publicity stunt, but the company must do much more if it is to reach its ambitious goals.
“We hope we can become the largest car maker in China by 2015, and the largest car manufacturer in the world by 2025,” said Paul Lin, marketing manager at BYD’s export trade division.
The firm’s strongest hope for growth is its battery technology. According to Mark Wilkinson, an independent automotive analyst based in Beijing, automakers like General Motors are finding their electric and hybrid projects stymied by batteries that are insufficiently reliable, light or affordable. BYD – which began in 1995 as a battery maker, and still derives most of its revenue from battery and phone handset manufacturing – hopes its background will help it to overcome those technological obstacles.
“The auto business has lots of kinds of different technology, but each one is not very high tech … so we find it’s not so hard for us to be in the auto business,” said Lin.
Despite being a relative newcomer to the industry, BYD’s traditional, gas-powered vehicles have found favor. It sold 23,000 vehicles in March, making it China’s eighth-largest auto brand. Success in this area is vital for the firm as its traditional battery and handset business slow due to weaker global demand.
“In the future, the automobile business will drive the company, but in the short term the handset [business] will present some risks,” said Alex Lee, an analyst at Tai Fook Securities in Hong Kong. Lee says BYD’s stock is overvalued, but expects the firm to post slight growth this year.
BYD’s shares have enjoyed high valuations since Warren Buffett’s Berkshire Hathaway bought 10% of the company for US$230 million in September 2008.
Frank He, an analyst at Bank of China International Securities in Hong Kong, is another who believes the stock is overvalued (giving it a “sell” rating) despite BYD’s strong fundamentals. He is also wary of the firm’s rapid expansion into new business lines: While manufacturing low-cost notebook computers could prove lucrative, a move into solar technology could be undermined by a lack of relevant experience.
Regardless, BYD is not standing still, and plans to introduce its most ambitious product yet in the second half of 2009. The launch of the E6, a fully electric passenger vehicle, “will be a challenge,” said BYD’s Lin – but a challenge that the company is eager to take on.