Today, I would like to discuss stocks that may benefit from the upcoming electric vehicle revolution in China. As we have seen, high-power batteries are the key component of electric cars. In short, my exclusive list consists of a few companies who hold a strong focus on battery initiatives. The first company I will touch on got its start with cell phone batteries, which lead the CEO to the electric automotive industry. Then I will move onto a battery provider that has established strategic alliance with major automotive manufacturers, and I will conclude with a up and coming automotive company that is actively engaging battery suppliers.
The list is by no means complete. The EV revolution in China will probably offer a huge cake for almost everyone. Volkswagen and GM, for example, can take a big share of the cake, thanks to their successful operation in China over the past 30 years.
1. BYD (1211.HK)
BYD (BYDDF) means “Build Your Dream”. It was a company that specialized in rechargeable batteries for cell phones. It only took the company 10 years to grab more than half the world’s mobile-phone battery market. In 2003, in a surprising move back then, BYD ventured into auto making. The founder and CEO of the company, Chuanfu Wang, said that he would devote the second half of his life to automotive manufacturing. His idea was to take advantage of BYD’s strength in battery technology and utilize it towards hybrid and all-electric vehicles. He was, indeed, a dream builder.
He was pragmatic enough to build traditional gasoline cars first. Today, BYD is already one of the major auto companies in China. The successful BYD F3 model, a compact car that costs around $9,000, is everywhere on Chinese highways. It is a national bestseller.
On the electric front, BYD was the first in the world to sell mass-produced, plug-in hybrid vehicle, the BYD F3DM. BYD’s brand new e6 model, an all-electric car, will be available in US market in 2012. It offers two modes of recharging. Under the quick mode, it can be fully recharged within 40 minutes for a continuous journey of 321 kilometers. For an 80% recharge, it takes only 15 minutes. Finally, but perhaps the most important to profitablity, BYD has rolled out an all-electric bus, K9, for both Chinese and American markets.
Attracted by the potential of BYD in hybrid and electric cars, Warren Buffet spent $230 million buying up a 10% stake in BYD in 2008.
2. China BAK (CBAK)
Before introducing China BAK, we start with Chery. Chery Automobile is the 7th most-productive Chinese automaker in 2010 with nearly 700,000 units, and one of the most popular models among mid-income families. Even one of analyst in Mainland China drives a Chery A3 himself.
Like BYD, Chery is very aggressive in the R&D of all-electric cars. Qilin M1 is already on the market, which will be followed by Qilin X1 all-electric, G5 all-electric, and so on.
However, Chery is not yet listed at this time. It is still owned by a local government in Anhui Province. But don’t despair; you can take a look at China BAK, a leading lithium-ion battery manufacturer that has formed strategic alliance with Chery.
As recently announced, China BAK is scheduled to supply batteries for Chery’s Qilin M1 model. China BAK has also signed contract with Xidesheng Bicycle, a leading e-bike manufacturer, for the supply of lithium-ion batteries for electric bicycles.
3. Geely (0175.HK)
The third company on my list is Geely (GELYF). Originally a refrigerator-maker, Geely is now among the top-10 Chinese automakers. Like BYD, it is not state-owned and has a legendary founder and CEO, Shufu Li.
Geely was synonymous with low-end cheap cars for third-tier cities or countryside. But in a bold move, the company successfully acquired Volvo from Ford in 2010. As we can see, Mr. Li has a hunger to make a name in the automotive industry.
Geely lags behind BYD and Chery in the R&D of electric cars. But given its past record in catching up, this company cannot be ignored. Indeed, Geely has been actively shopping for strategic alliance with battery makers, which it’s clear intention to enter the electric race. It is widely known that one of Geely’s potential partners is Foxconn (2038.HK), a feudal foe of BYD in electronics products business.
An interesting multi-player battle seems to be in play, BYD vs. Chery+CBAK vs. Geely+Foxcon….so keep your investment eyes on the prize.
For further information on the Chinese markets, you may visit www.chinastockdigest.com or join us at www.globalprofitsalert.com for our daily market commentary. I will look forward to bring my exclusive insight to you next week.
Committed to your Global Profits,
Chief Investment Analyst