Friday, July 31, 2009
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
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 Hulu.com. 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
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
Wednesday, July 22, 2009
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.
Tuesday, July 21, 2009
Monday, July 20, 2009
(Comment above by Uli Kaiser)
Sunday, July 19, 2009
Pickup sales for the period fell by 35.95% year-on-year to 112,869 units.
Friday, July 17, 2009
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
Tuesday, July 14, 2009
Monday, July 13, 2009
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
Wednesday, July 1, 2009
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.