BYD Boosts EV Network With California Bus Plant
BYD e6 - Electric Taxi in Shenzhen, China.
Photo by Brücke-Osteuropa
After punishing BYD's stock for much of the last 2 years as sales for its traditional gas-powered vehicles tumbled and its profits evaporated, investors also seem to be cautiously returning to this beaten-down company, which first powered onto the global stage after billionaire investor Warren Buffett purchased a 10 percent stake in 2008. BYD shares have jumped about 50 percent over the last 2 months, as the company's traditional car business starts to stabilize and perhaps as investors start to believe in BYD's vision of becoming a global leader in electric vehicles (EVs).
After building its dreams at least partly on hopes of tapping the mass consumer market, BYD has largely abandoned that part of its vision for now in favor of focusing on big buyers such as bus and taxi operators. Such a move looks smart, as those kinds of buyers tend to have more stable driving patterns that make recharging EVs more practical. They also have the resources to build necessary infrastructure for maintaining their fleets.
Such buyers can also work closely with BYD to improve and maintain their vehicles, and can start off with pilot programs that they slowly build up over time as they become more confident in the technology. This slower, more targeted approach has seen BYD sign a series of global deals to sell electric buses and taxis to operators in markets ranging from Britain and Germany in Europe, to Singapore in Asia, and the US and Canada in North America.
To be closer to those customers, the company has recently begun an ambitious program of building a series of manufacturing facilities around the world. Just last week the company formally signed a deal to form a joint venture EV plant in Bulgaria (English article), and earlier this year it announced plans to serve the Latin American market with a new plant in Argentina. (previous post)
Now a company official has disclosed that BYD also plans to set up a wholly owned electric bus-making plant in California, with a formal announcement to come in 3 or 4 months. That plant should come into operation later next year, and should slowly ramp up production to an annual capacity of more than 500 buses by 2015.
BYD isn't saying how it will finance all these new investments, but I suspect the company is getting strong support from China's state-run banks, which are under orders from Beijing to support the new energy sector. BYD already gets very strong support from the government in its hometown of Shenzhen, which has recently discussed plans to have 50 percent of the city's buses and all of its taxis powered by electricity by 2015. Beijing has also rolled out other recent incentives to encourage other cities to try out EVs and hybrid vehicles (previous post).
After being bearish on BYD for much of the last 2 years, I'm starting to become interested in the growing momentum of the company's EV campaign, though I still think there are many obstacles ahead. Still, a continuation of this kind of new investment and more orders from both home and abroad are positive signals that could hint that BYD has finally turned the corner after a prolonged difficult period.
Bottom line: Plans for a new US manufacturing plant are the latest sign that BYD may finally be turning a corner and its EV program gaining momentum following a 2-year downturn.
Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.
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