Why BYD marches into crisis-ridden US market?

Shanghai, October 8 (Gasgoo.com) When the auto industry and auto sales in the United States are shrinking amid the economical crisis, China's home-brand carmaker BYD Auto makes its foray into the U.S. auto market. This ambition is boosted by the investment of 1.8 billion Hong Kong dollars by Buffett's MidAmerican Energy Holdings. BYD's entry into the North American market has been accelerated by more than one year.

The American Plan of BYD is focused on the eco-friendly cars. As a Chinese electronics-turned-vehicle manufacturer, BYD launched its first dual mode (DM) electric car, the F6DM last year, and another F3 DM electric car will go on sale by the end of this year. BYD, which is developing into a sizable domestic auto maker, plans to unveil its first fully electric-powered car to Chinese customers in June 2009.

In the current conditions, eco-friendly vehicles have the biggest markets in the U.S. and Israel, because these countries have issued policies to support energy-efficiency vehicles, and eco-friendly cars are in great demand in these markets. Amid the global economic depression, eco-friendly vehicles will follow the energy-saving trend. Currently, the DM electric car of BYD consumes only 40%-50% of the fuel used by an ordinary car.

BYD said it hopes to launch its electric car in the U.S. by 2011, after General Motors Corp. begins the sale of its first electric car, the Chevrolet Volt, by November 2010. While the Volt has a battery range of just 40 miles on a full charge, BYD says its model will be able to offer as many as 185 miles on a single charge, given advances in its battery technology.

Investment company MidAmerican Energy Holdings, which is 87 percent owned by Buffett's Berkshire Hathaway group, said it will pay $230 million (HK$1.8 billion) for 225 million shares in BYD, sending shares of Hong Kong-listed BYD soaring. MidAmerican said the deal would extend to a collaborative partnership designed to help bring BYD's technology to a wider global market.

MidAmerican Chairman David Sokol says the move reflects the emergence of Chinese companies as important research-and-development centers for technology products. "We've looked at a number of companies throughout the sector, and we actually think BYD is at the cutting edge of battery technology," he said.

BYD's battery technology can be applied to wind energy and solar energy appliances as well as electric cars, which promises huge market potentials in many environmentally-friendly industries. The energy-storing technology of BYD cars, the company's high-quality management and its mighty R&D team are regarded as the major factors that have attracted Buffett's investment.

MidAmerican Energy Holdings's energy operations cover electricity, nuclear power, electric products, all of which can have cooperation with BYD's cutting-edge battery technologies and electric car manufacturing.