Submitted by: Matthew Eves

For the past two quarters the auto industry has been making the front page of the Wall Street Journal with bad news.  The big three have been sinking and it still is unclear who will make it through without having to file bankruptcy.  I am not a huge fan of American made automobiles and now doubt I’ll ever be, unless they REALLY restructure and start putting out some better products.

I have wondered for some time why China doesn’t have a significant presence in the automotive industry in the US.  I didn’t even know if they made cars until I did more research. Here is a list of over 20 auto manufacturers that clearly points out my ignorance: Click here

I have discovered one reason is that they have been hesitant to compete with big name auto companies who have been producing gasoline engines for many decades.  It would have been difficult for them to enter this market with their existing technologies and be competitive.

However…

An article in the Wall Street Journal on (01/12/09) (view here) sparked a lot of interest with news of BYD’s electric powered vehicles.  The hype of electric vehicles has brought a level playing field, since even the big auto manufacturers have minimal experience building them.  BYD’s vehicles are priced very competitively in relation to hybrid vehicles from Toyota and Honda and coming in about half the expected amount of the Chevy Volt.  Who is BYD?  BYD was established in 1999 as a rechargeable battery manufacturer.  Since their inception they have grown to the third largest producer of portable rechargeable batteries in the world.  They now make… cars.

I have found some negative buzz with regard to Chinese auto parts, but it is important to note that this is more focused on aftermarket replacement parts, not OEM parts outsourced in China.

With Ford, Chrysler, and GM mired in their respective troubles and European cars at a price point out of the league in discussion, China’s automobile companies may have an open door into the market and be able to compete in the US.  BYD has accomplished product differentiation and offers it at an extremely low price.  The average MPG on their vehicles is over 50, and they aren’t hideous!  It will be interesting to see the reception of these vehicles in the US.

I think at this point many are willing to try something new, and if they market the product well it could be a very successful business in the US.  Would you buy a Chinese automobile?

I’m not sold yet…  Warren Buffett is (one of the noted investors in BYD).  But hey what does he know?

Some of the safety issues have been reported at: http://www.autosafety.org/china