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Electric car maker BYD share price has jumped 500% in 10 years

While Elon Musk and Tesla continue to make the news for all the wrong reasons, another electric car maker has capitalised on the growing interest in electric vehicles around the world.

BYD Co Ltd, a Chinese manufacturer of cars, battery-powered buses and rechargeable batteries, recently grabbed the headlines when it was reported that Warren Buffett’s $232 million initial investment in the Hong Kong-listed company is now worth about $1.6 billion.

Quite fitting for a company whose name is an acronym for Build Your Dreams.

While many private and retail investors may not have pockets as deep as Buffett’s, even a $1000 investment would have delivered hefty returns, as BYD’s share price has risen more than 500% since Buffett’s initial purchase in September 2008.

So what’s driving BYD’s stellar share price move?

BYD is now recognised as China’s biggest maker of alternative energy vehicles. Though it started as a maker of mobile phone batteries, it has expanded into the electric vehicle manufacturing sector, riding the wave of China’s demand for mass transportation.

While Buffet’s investment is not the only factor behind the share’s appreciation, it definitely helped to have a globally recognised investor backing the company.

Government subsidies to electric vehicle industry

With a population of more than 1.4 billion, which provides a massive consumer base, China is now the global leader in electric vehicles. The move toward a cleaner and more efficient transport system emerged as China realised it needed to cut air pollution in its densely populated regions.

The government started to subsidise the manufacture of electric vehicles, including buses and cars, in 2010. It also gave subsidies to consumers buying electric vehicles.

Although it will soon be replaced by a system of credits, this subsidy has benefited many electric vehicle manufacturers, including BYD.

According to the latest figures from the China Association of Automobile Manufacturers, China produced 770,000 electric vehicles in 2017. This is a 53% increase over the previous year. BYD is estimated to have a 31% share of China’s booming electric vehicle market.

Since its humble beginnings in 1995, when its founder raised $300,000 from family and friends, BYD shares have come a long way. They are now traded on the Hong Kong stock exchange and Shenzhen stock exchange.

International expansion

While it is recognised as one of the leading electric vehicle makers in China, BYD is also expanding its footprint in other markets.

According to recent electric vehicle industry reports, it is gradually establishing its presence in Europe. BYD is reported to have received orders for about 600 electric buses in Europe. More than 100 have been ordered by Norway and Sweden.

As BYD eyes Europe, it has set up manufacturing facilities in Hungary and France. The European production capability means BYD will continue to expand its global reach.

Investment in the US

BYD is also investing and expanding heavily in the US. The company, which has already delivered more than 200 electric buses in North America, has recently announced a $5 million upgrade of its warehouse facility in Los Angeles.

The expanded warehouse will also increase BYD’s manufacturing capability in the US. Since 2013, when BYD’s warehouse opened in the US, it has invested more than $53 million in the Los Angeles production facilities, according to industry reports.

Partnership with Baidu

Despite its strong leadership position in the electric vehicle industry, BYD is not resting on its laurels. It also wants to take a slice of the emerging intelligent vehicles market.

Earlier this year BYD joined Project Apollo, a platform launched by another Chinese giant, Baidu. This is one of the world’s largest and most diversified open self-driving alliances.

Baidu is a multinational technology company that specialises in delivering internet-related products and services. It also has an online advertising platform that can be compared with Facebook. Baidu is also involved with app development, downloadable content and artificial intelligence. It claims to have about 2 billion users worldwide.

Along with other Chinese internet and technology companies such as Alibaba and Tencet, Baidu is revving up its investment in smart/intelligent vehicles.

Wang Chuanfu , BYD’s chairman and president, was quoted as saying: “We have secured our position in the electric vehicle industry and now we want to focus on building intelligent vehicles, which will be super mobile phones on wheels.”

Even if you think you have missed out on the initial run of BYD’s shares, the company’s global expansion plans and ventures into the intelligent vehicle market position it well to achieve further growth in the years to come.

With Warren Buffett still solidly behind the company, the stock may continue to rev up in the coming years.

Written by Alex Douglas

Alex Douglas

Alex Douglas is managing director of Monex Securities Australia (AFSL: 363 972), part of the Monex Group Inc. Since first plotting currency price charts by hand in 1983, Alex has worked in a range of markets including foreign exchange, futures and equities. Alex is a Certified Financial Technician under the International Federation of Technical Analysts. He also has a Diploma of Technical Analysis from the Australian Technical Analysts Association.

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