Buffet and BYD
Buffet has already made a $1 billion on his investment in BYD, while holding a stake in the world's adoption of clean energy and China's economic growth. Besides leading in rechargeable batteries of all kinds, BYD has a shot at becoming the world's largest automaker, primarily by selling electric cars, as well as a leader in solar production.
The purchase was viewed as atypical for Buffet, who doesn't typically invest in new, disruptive technologies like electric vehicles. He also doesn't invest in technologies he doesn't know much about. But it takes a special person to capture a leading market share in batteries and vehicles in such a short time - Buffet invested in Wang Chuanfu as much as the company.
Chuanfu has been able to quickly turn BYD into a low-cost battery producer by turning the capital intensive battery manufacturing model on its head. Rather than investing in expensive robotic manufacturing, he created a simple production process that relies on China's cheap labor instead.
He's spent far more on R&D than other Chinese manufacturers, improving products and modifying the manufacturing process. He's also been able to attract leading scientists because of an emphasis on great benefits: free housing, food, health insurance and access to free education for their children.
Chuanfu has been called a combination of Thomas Edison and Jack Welch, and, like Henry Ford, is a skilled engineer and scientist as well as an outstanding entrepreneur. He started BYD after raising $300,000 from relatives and set out to compete with Sony and Sanyo making rechargeable batteries.
Buffet liked the fact that Chuanfu would only sell him 10% of the company - he wanted 25%. Buffet believes that all cars will be EVs in 20 years and BYD has a legitimate shot at becoming one of the largest suppliers of EV battery technology and EVs. But the biggest advantage may be access to BYD's energy storage technology. Buffet's utility, MidAmerican Energy Holdings acquired the shares in BYD and has already started using BYD's energy storage system in Oregon.
BYD was a top performer on the stock market in 2009 - its shares rose 439%, propelling Wang to the top of Forbes 2009 list of China's wealthiest. In addition to the Hong Kong exchange, BYD is planning a $100 million IPO on the Shenzhen exchange this year. The stock is down about 10% this year and is worth keeping on your radar screen.
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