China's privately owned battery and automobile maker BYD Co is expanding its product line-up and capacity through a series of moves it made over weekend.
BYD, part owned by Warren Buffett's Berkshire Hathaway, agreed with Foshan Weishang Technology Industry Development Group last Friday to purchase the latter's total stake in Hunan Midea Coach, an ailing bus maker from Changsha (Hunan province), for 60 million yuan, BYD said in a statement to the Hong Kong stock exchange on Sunday.
It also signed an agreement with the Changsha government on Saturday to invest in a bus-and-minivan manufacturing facility with an annual capacity of 400,000 units and focusing on new energy models.
The same day, the Shenzhen-based company planned to expand its existing production facility in Xi'an (Shaanxi province) by setting up a new plant with an annual output of 400,000 units to produce its F3 cars, other new models and auto parts, BYD stated.
F3 is the most popular BYD model and has been China's fourth-best selling car in the first half of the year.
The automaker's shares rose 6.83 percent to HK$43.8 yesterday in Hong Kong. It has more than tripled since the beginning of this year.
"It's a positive move for BYD to acquire the 54-year-old Midea Coach as it plans to tap into the commercial vehicles segment," said Jia Xinguang, chief analyst with the Chinese National Automotive Industry Consulting and Development Corp. "The inexpensive acquisition would provide BYD with the necessary government licenses to build buses and coaches."
"With its advanced technology in batteries and alternative energy, BYD can grab market share in the government's big purchase plan for new energy buses, which has huge profit potential," Jia pointed out.
Earlier this year, the government started test promotion of new energy vehicles for public usage in 13 cities. The government subsidy can touch 600,000 yuan per unit for fuel cell-based public buses.
"The move toward new energy buses may be a shortcut for BYD (which is facing a bottleneck in promoting its battery cars for mass usage) to commercialize its battery technology in the commercial vehicles segment first," said Chen Quanshi, an analyst with the Society of Automotive Engineers of China.
The company has ambitiously set its 2010 car sales target at 700,000 units, up 75 percent from its target for 2009, Reuters reported yesterday citing Henry Li, general manager of BYD's auto export trade arm.
It sold 170,000 vehicles in 2008 and aims to sell 400,000 units this year. In the first half, BYD became the fastest-growing automaker in China, the world's biggest auto market currently, with a sales growth rate of 176 percent over last year.
Early this month, BYD said it was planning to raise capital for new projects through the issuance of as many as 100 million A shares on the Shenzhen Stock Exchange.
(China Daily July 28, 2009)