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Buffett-Backed BYD Seeks China Funds for Hybrid Sales
2009-09-07         http://www.eobus.com    

 (Bloomberg) -- BYD Co., the Chinese automaker backed by billionaire Warren Buffett, is seeking government support for hybrid sales after selling 31 F3DM plug-ins nationwide in the first seven months of the year.

"We hope the local and central governments will work together to provide subsidies to consumers," BYD Chairman Wang Chuanfu said at an automotive conference in Tianjin yesterday. That would "definitely" help boost demand, he added.

Hybrid and electric vehicles have missed out on a boom in Chinese auto sales this year as higher prices damp demand, undermining government attempts to cut oil imports and pollution. Overall vehicle sales may rise 28 percent this year, based on a state forecast, likely enough to surpass the U.S. as the world's biggest auto market.

"People think they can buy two regular cars for the price of one electric car," said Chery Automobile Co. Vice President Fang Yunzhou. "There are very few people who think about the environment" when picking a new car.

Chery, China's largest maker of own-brand cars, will introduce its first plug-in electric car, the S18, next year. A plug-in car can be recharged from a regular household socket. Hybrids account for about 0.01 percent of China passenger- vehicle sales, according to JD Power & Associates China.

BYD U.S. Goal
Support for hybrids may be unpopular, said Chen Jianguo, deputy head of industry coordination at the National Development and Reform Commission, the government's top planning agency.

"Some may say it's unfair to offer subsidies using taxpayers' money for car buyers who are relatively rich even if that helps the industry grow," he said. It would be "very difficult to introduce" such a policy.

BYD's F3DM plug-in starts at 149,800 yuan ($22,000), compared with 59,800 yuan or more for a similar-sized gasoline- powered F3. The automaker, part-owned by Buffett's Berkshire Hathaway Inc., plans to start selling hybrids in the U.S. next year. It more than doubled first-half vehicle sales on rising demand for its gasoline models.

The company rose 4.1 percent to HK$56.40 in Hong Kong trading today. It has jumped more than fourfold this year.

China's overall vehicle sales surged 23 percent in the first seven months of this year to 7.2 million. Sales of Toyota Motor Corp.'s Prius, the world's bestselling hybrid, fell 32 percent to 271. By contrast, in the U.S., hybrids have outperformed the wider market this year, boosting their share to 2.8 percent. Sales fell 16 percent through August to 200,796, compared with a 28 percent drop in the overall market.

Long Way to Go
Full-year U.S. auto sales will likely total around 10.5 million, according to both General Motors Co. and Ford Motor Co. In China, the government says sales may reach 12 million.

China is backing hybrids and electric vehicles as it strives to develop a globally competitive auto industry. Widespread use of electric vehicles could also cut the nation's projected demand for imported oil in 2030 by as much as 40 percent, McKinsey & Co. said earlier this year.


"China and the automakers are certainly heading in the right direction, but there's a long way to go," said Vivien Chan, an analyst at SinoPac Securities Asia Ltd. in Hong Kong. "The government needs more concrete and clearer policies."

Research Funding
The government has given automakers funding for research and offered subsidies to bus companies, taxi operators and state agencies in 13 cities to boost sales. The government wants hybrids and battery-powered passenger vehicles to account for 5 percent of the market by 2011.

"If private individuals could get subsidies, that would be a great help," said Xu Liuping, chairman of Chongqing Changan Automobile Co., China's fourth-largest automaker. "Just helping public agencies is not enough."

Changan is building a plant with capacity to make as many as 600,000 low-emission and hybrid vehicles a year. Chongqing city, where the company is based, is giving 20 million yuan to help fund research.

Developing recharging infrastructure is also vital in ensuring that electric cars can be used for longer trips without the driver being forced to return home to power up the vehicle's batteries.

"Infrastructure for charging is a must," said Fu Zhenxing, chief engineer of Shanghai E-Propulsion Auto Technology Co., a unit of SAIC Motor Corp., China's biggest automaker "The whole industry is talking to the government about this."

SAIC has said it's investing 2 billion yuan in developing hybrids and electric vehicles. It plans to unveil the first hybrid Roewe 750 sedan by the end of next year, followed by a plug-in hybrid Roewe 550 and a pure electric car in 2012.

"China will definitely continue to promote this area," said Chen Liang, a Huatai Securities Co. analyst based in Nanjing. "Even so, it'll take as long as 10 years for the industry to take shape."



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