Warren Buffet Breaks 3 Rules, Invests in Chinese Electric Car Company – BYD

April 14, 2009 / No Comments

Warren Buffet is breaking his own rules.

The rules –

  1. When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is usually the reputation of the business that remains intact.
  2. You should invest in a business that even a fool can run, because someday a fool will.
  3. And perhaps most famously, Never invest in a business you cannot understand.

Munger, 85-year old, vice chairman of Berkshire Hathway, advised Buffet, 78-year old, to take up the new venture and Buffet agreed, despite the fact I don’t think he knows Chinese or electric car technology. I may be wrong.

byd car maker Warren Buffet Breaks 3 Rules, Invests in Chinese Electric Car Company   BYD

Buffet does, however, know the future. And, he may not have much left in his. Electric cars is what he is betting on for those who will take over his business. Hathway bought up 10% of BYD with an investment of $230 million.

BYD are the initials of the company’s Chinese name. It was started in 1995 in Shenzhen, China.

Wang, a chemist and government researcher raised $300,000 from relatives, rented about 2,000 square meters of space, and started making rechargeable batteries to compete with imports from Sony and Sanyo.

By the turn of the millennium, BYD had become one of the world’s largest cellphone battery makers. BYD makes mobile-phone handsets and parts for Motorola, Nokia, Sony Ericsson, and Samsung.

Wang went into the automobile business in 2003 by buying up an almost defunct Chinese state-owned car company. Though he knew almost nothing about making cars … well now, Warren Buffet is his friend. The BYD sedan called F3 is the bestselling sedan in China, beating out the Volkswagen Jetta and Toyota Corolla.

BYD has a plug-in electric car with a backup gasoline engine. The company is ahead of GM, Nissan, and Toyota.

And, did I say that Warren Buffet is interested?