Buffett Backs China Green-Auto Venture

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Trading to Resume Tuesday

Wang is one of China's premier entrepreneurs (BusinessWeek, 6/9/03), whom Dunne describes as a "visionary." The company was founded 12 years ago by Wang, now 42, who previously worked as an academic at the Beijing Non-Ferrous Research Institute where he received his master's in engineering. He built BYD into the world's largest rechargeable battery maker, with production of roughly 400 million units per year, mostly used to power cell phones. Using its own lithium-ion batteries, the company has developed technology that would allow cars to run for up to 300km (185 mi.) between charges. Recharging to 80% of battery power takes as little as 15 minutes at quick-charge centers, while full restoration of power using conventional electric outlets takes about nine hours.

Shares at Hong Kong-listed BYD were down 38% since the beginning of the year on Sept. 26, the last day of trading before the deal was announced. MidAmerican's stake, which would involve issuing new BYD shares, is to be priced at $1.03 a share, a 5% discount to Friday's close, and is subject to regulatory and shareholder approval. Trading BYD shares is expected to resume on Tuesday. After the deal, Wang will retain a 25% stake in BYD, which reported a 7% drop in first-half profits to $87 million despite a 44% increase in sales to $1.81 billion due to higher input costs.

PetroChina Falls After Sale

BYD's auto division, however, has performed well in an increasingly difficult market. In the first eight months of this year it sold 85,104 cars, a 35% year-on-year increase. By contrast, Chery Automobile, China's largest domestic automaker, has seen sales fall 4% over the same period. J.D. Power may revise downward its current 2008 forecast of 10% growth for passenger vehicles to below 5%. Auto sales this year will account for about 30% of BYD's revenues, says Wang, compared with 25% in 2007.

MidAmerican's move comes nearly 12 months after Buffett announced the sale of 28 million shares (BusinessWeek.com, 9/21/07) in mainland oil company PetroChina. By the end of October Berkshire Hathaway had unloaded its entire 9% stake in the company, which by November had overtaken ExxonMobile (XOM) to become the largest company in the world by market capitalization. PetroChina has lost more than 50% of its value since then, once again falling behind Exxon at the top of the industry.

Balfour is Asia Correspondent for BusinessWeek based in Hong Kong.