29.09.08
HONG KONG: Warren Buffett, America's best-known investor, announced Monday that he had agreed to buy a 10 percent stake in a Chinese battery manufacturer that plans to sell electric cars in the United States by 2010.
MidAmerican Energy Holdings will pay $230 million for the stake in BYD. Buffett's Berkshire Hathaway in turn owns 87.4 percent of MidAmerican.
Based in Shenzhen, a mainland Chinese city adjacent to Hong Kong, BYD is one of the world's largest manufacturers of rechargeable batteries for cellphones and other uses. But it also has a fast-growing auto manufacturing subsidiary that accounts for nearly a third of the company's total revenues and makes fuel-efficient compact and subcompact cars for the Chinese market.
Wang Chuanfu, the president of BYD, said that the company's alliance with Buffett was not just about raising capital for the manufacturer, which relies heavily on short-term debt.
"If BYD were to enter the North American market, Mr. Buffett's investment would enhance the BYD brand name," Wang said at a press conference in Hong Kong on Monday afternoon.
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He added that BYD would sell cars in the United States and might even move up its plans for entering the market in 2010, by investing some of Berkshire's money in accelerated research.
David Sokol, the chairman of Mid-American, said at the press conference with Wang that Berkshire Hathaway wants to address climate change and sees electric cars as a way to do so. "This is a technology that can really be a game changer if we're serious about reducing" emissions of carbon dioxide, the main gas associated with manmade global warming, he said.
MidAmerican, a collection of electric utilities in the Midwest and the western United States, sees plug-in electric cars as the best approach because the United States already has the infrastructure to supply electricity for recharging almost anywhere, Sokol said. By contrast, plans for hydrogen-fueled vehicles would require the installation of many hydrogen-fueling centers.
MidAmerican also sees promise in BYD's battery technologies for storing wind energy and solar energy, Sokol said. Difficulties in storing energy for when the wind is not blowing or the sun is not shining have limited the deployment of these technologies.
More broadly, Berkshire Hathaway wants to tap into China's engineering talent and is doing so through BYD, which has 11,000 engineers and technicians among its 130,000 employees. "They're graduating about six times as many engineers in China as the United States," Sokol said.
Buffett did not attend the news conference, but said in a statement that he was impressed with Wang's record as a manager.
BYD cars on display at auto shows in China have tended to buttress the notion that the company's expertise lies more in batteries than automotive design.
Gasoline-powered BYD models already sold in China are unmemorable economy cars with little of the styling flair on which Western automakers pride themselves. The uneven purple paint on one BYD car displayed at a recent Chinese car show drew a gaggle of amused American auto executives who made derisive remarks.
But expertise in automotive design and manufacturing is easy to acquire these days. Other Chinese automakers have already hired some of the best Italian designers, while layoffs at big Western automakers mean that many talented engineers are available.
Battery expertise is much harder to find. Yet mastering battery technology is widely regarded in the auto industry as the linchpin to the production of electric cars with the range, horsepower and torque needed to compete with gasoline-powered cars.
Sokol said that MidAmerican was impressed by BYD's ability to produce electric cars that have a range of almost 306 kilometers, or 190 miles, on a single charge, and can be 80 percent recharged in 15 minutes. BYD plans to start selling electric cars in China at the end of this year.
BYD is working on all-electric cars, in which all of the power to move the vehicle comes from a series of batteries attached to an electric motor. That distinguishes them from hybrids like the Toyota Prius, which use an electric motor and battery to supplement the power from a gasoline engine.
BYD is using lithium-ion batteries. Japanese automakers have struggled to make sure that the batteries do not overheat and cause fires, an extremely rare occurrence but one with potentially deadly implications.
Sokol said that Berkshire Hathaway first became interested in BYD on a suggestion from Charles Munger, a longtime adviser to Buffett who is also the chairman of the Wesco Financial Corporation, another Berkshire Hathaway subsidiary.
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