Friday, July 31, 2009

BYD Doesn't Really Need Buffet's Money

Buffet's Midas Touch is Enough

A story appearing on Bloomberg's website yesterday reported that Warren Buffet's Berkshire Hathaway had already earned a US$1 billion paper profit on shares in Hong Kong listed, Chinese automaker BYD.

What makes this interesting is that, as of yesterday, Berkshire Hathaway (or more precisely, Berkshire's subsidiary Mid-American Energy) had yet to actually purchase any of BYD's shares. Only on July 30 did BYD receive approval from the China Securities Regulatory Commission (CSRC) to sell the shares to Buffet's company.

Since the joint announcement by Buffet and BYD last September 27, the value of BYD's shares have increased nearly fivefold -- before Buffet had invested a single dime in BYD stock. Apparently BYD only needed for the world to see that Warren Buffet approved in the direction the company is going to benefit from his Midas touch.

Of course, there is more credit to be handed out. BYD's sales of 176,814 vehicles in the first half of 2009 more than doubled their sales in the same period last year. Credit can also be given to China's State Council whose 50% tax break on small engine passenger cars have boosted sales of China's domestic automakers. BYD's F3 (the gasoline model) is China's fourth most popular passenger car.

A New Shanghai Bubble?

Unfortunately, there may have also been some irrational exuberance at work. China's stock market has been one of the best performing in the world so far this year, and this has also provided some lift to the Hong Kong market. Analysts are concerned that the sudden resumption of IPOs may have unleashed pent-up demand and begun to inflate a stock market bubble.

And speaking of IPOs, BYD is also considering one of its own on the Shanghai market. This will be a key for the growth of the company as Chinese auto companies may only draw 50 percent of their capital from overseas sources. And despite the fact that Hong Kong now belongs to China, capital raised on its stock market is still considered to be "overseas".

While the run up in BYD's Hong Kong stock price is certainly welcomed by the company, this will increase pressure on them to raise more funds on the mainland. Now that the CSRC has turned on the tap again, there is apparently a lot of money waiting on the sidelines, eager for more IPOs. Two other Chinese auto companies, Chery and Lifan, are also considering IPOs.

But what will happen when the CSRC turns off the tap again? I'm afraid the CSRC will soon discover they are riding a tiger.

Tuesday, July 28, 2009

June car exports drop 45.53%

Vehicle exports for June were down on the same month last year by 45.53 per cent to 35,403 units, Surapong Phaisiahatthnapong, spokesman of the Automobile Group at the Federation of Thai Industries (FTI) reported on Wednesday.

Malcolm Bricklin and Chery, The Movie

I stumbled upon this fascinating documentary today, and dropped what I was doing to watch the entire film in the middle of the day. The Entrepreneur documents the efforts of Malcolm Bricklin to introduce cars made by Chery of China into the United States. Bricklin previously had success with introducing Subaru to the US, and later, initial success by introducing the Yugo (which later turned out to be a fiasco).

The film was made by Bricklin's son, Johnathan, who was apparently given uncensored access, not only to Bricklin's board meetings, but also to negotiations with senior Chery management in China.

What I found most fascinating is the way Bricklin basically browbeats his Chinese hosts into signing an agreement with him. This goes against everything that China "experts" tell us about negotiating with the Chinese -- that typical Western emotional reactions have no effect on Chinese negotiators.

I don't think I am giving anything away by revealing the fact that Bricklin's venture was ultimately unsuccessful. If it had been, we would see Cherys on US roads today. However, I must admit surprise at how it all ended. My original assumption had been that the failure lay completely at Bricklin's feet. Indeed, the entire documentary, except for the last five or so minutes, gives one the impression that this excitable, hot-tempered entrepreneur could not possibly succeed in holding up his end of the contract.

So why did it all fall apart? Well, I'll leave that for you to judge -- that is, if you have about an hour and a half to watch a fascinating story.

You can find the entire documentary online at Once you've watched it, feel free to return here and post your thoughts.

How does Bricklin get away with breaking all the "rules" of negotiating in China?

Did he ever really have an agreement with Chery?

Whose fault was it that this venture never got off the ground?

Friday, July 24, 2009

In Lieu of an Actual Blog Post...

A decision to spend the rest of the summer in LA, followed by a decision to move to a different apartment, have interrupted my original research plans. Once my move is out of the way, I expect to spend the rest of the summer absorbing the content of the 30+ interviews I have conducted in China thus far and planning my return to China later in the year, as well as hopefully resuming a more regular blog posting schedule.

Meanwhile, I was recently interviewed about my research by the intrepid Aimee Barnes, a New Yorker and China specialist who interviews other China specialists with diverse backgrounds. I am honored to have been added to the mix.

You can find a transcript of the interview on Aimee's blog, here.

Thursday, July 23, 2009

Better statistics: China leads the way

I think we all wish we had this kind of statistical information available in Thailand. Compare this with the data available on the "Thai Automotive Institute" web site.

Wednesday, July 22, 2009

BANGKOK POST: Eco-car may get a rethink

The government may improve tax incentives for eco-cars to stimulate the economy, says Suwit Khunkitti, minister of Natural Resources and Environment.

He said a government panel seeking solutions to delays in the programme to build small, fuel-efficient cars could favour a "green tax" incentive"The more reductions in carbon emissions and the greener technology for engines [that carmakers can provide], the more green tax incentives they would receive," he said.

Monday, July 20, 2009

CHINA CAR TIMES: Electric Geely Panda to be built this year

Electric vehicles from China.... makes sense to me. China's domestic car industry still has to catch up many years to be able to compete with the west. In the electric car sector, they could become a serious player much more quickly. At a price of 200,000 to 300,000 Baht, I think they might sell.....

(Comment above by Uli Kaiser)

BANGKOK POST: Magna, RHJ, BAIC in the race to take over Opel

Canadian auto parts maker Magna, Belgium-based investment fund RHJ and China's BAIC have all filed formal bids to take over General Motors' struggling subsidiary Opel, GM Europe said on Monday.

Sunday, July 19, 2009

BANGKOK POST: Pickup trucks fare worst in auto slump

One-tonne pickup trucks performed worst, lagging far behind other segments in the first half of this year, according to Tri Petch Isuzu Sales Co.

Pickup sales for the period fell by 35.95% year-on-year to 112,869 units.

USA Today: World's cheapest car: First Tata Nano is delivered in India; due in U.S. in two years

India's Ashok Vichare, 55, a resident of Mumbai, today became the proud owner of a silver Tata Nano, the first delivery of the world's cheapest car.

Friday, July 17, 2009

BANGKOK POST: Auto market drop of 22% foreseen

The domestic automobile market this year is likely to be far worse than in 2008 because of the global recession and local political instability, says Ninnart Chaithirapinyo, the vice-chairman of Toyota Motor Thailand.

Total sales for 2009 are expected to drop 22% year-on-year to 480,000 units, while 2008 sales slipped only 3% year-on-year to 615,000 units, he said.

Wednesday, July 15, 2009

THE NATION: Auto market remains subdued in first half

The automobile market witnessed a 28.01 per cent drop in sales in the first six months of this year, when a total of 231,428 units were sold, according to data compiled by Tri Petch Isuzu Sales.

BANGKOK POST: Bold tax cuts may fire up eco-cars

Manufacturers of eco-cars may be awarded a two-year tariff reduction of as much as 90% on imported parts, as Thailand is striving to revive the sluggish automotive industry. The goal is to attract carmakers to turn the country into a major production base for fuel-efficient and environmentally friendly compact vehicles.

Monday, July 13, 2009

THE NATION: Bridgestone's new plant to make retread material

Bridgestone's Thai subsidiary, Bridgestone Bandag Manufacturing (Thailand), is to invest Bt5.2 billion in a manufacturing plant in Chon Buri to produce retread materials for tyres.

THE NATION: Tax break on eco-car parts

The Board of Investment plans to reduce import duties on materials and parts for eco-cars, to reduce prices and encourage buyers.

Bangkok Post: AAT opens $500m compact car plant

Auto Alliance Thailand (AAT), the 50-50 joint venture of Ford Motor and Mazda Corp, opened its new $500-million compact car plant yesterday aimed at positioning Thailand as a global manufacturing hub for the two international automakers.

Thursday, July 2, 2009

BANGKOK POST: Auto revival unlikely before next year

Thailand's struggling automotive industry is expected to see a revival by the first or second quarter next year, says Vivek Vaidya, director of the Asia-Pacific automotive and transport practice with the industry consultancy Frost & Sullivan.

Based on the current scenario, total vehicle sales are projected to drop by 29% year-on-year to 434,000 units this year from 615,000 units sold in 2008. Sales of pickup trucks could decline 32% to 226,000 units and those of passenger cars by 14% to 195,000 units.

Wednesday, July 1, 2009

THE NATION: Thai Competitiveness conference under way

The Thailand Competitiveness Conference 2009 will kick off today in the Grand Ballroom of the Four Seasons Hotel in Bangkok.

Speakers will discuss how to boost the Kingdom's competitiveness.

The two-day conference will be hosted by the Thai Institute of Directors Association in cooperation with the Thailand Management Association, the Board of Trade, the National Economic and Social Development Board and the Stock Exchange of Thailand.

BANGKOK POST: Petrol, gasohol prices up

Motorists are paying more at the pump today after oil companies increased the price of petrol by 0.50 baht per litre and gasohol by 0.70 baht a litre.