Enter the Dragon!

"Buffet visits mainland china" - The headline didn't matter as much as it should have. Buffett has been gung-ho on this part of the world for sometime. It's universal truth.. So what's the big deal?

"Buffett and his army marches ahead", was a better match in another edition. Now that's what caught my attention. As I scrolled down the colom, I figured that the name of the company in which Warren Buffett was evincing "more than life" interest was BYD.

BYD Auto better known as "Bǐyàdí Gǔfēn Yǒuxiàn Gōngsī" in cantonese is a clean energy (read battery operated) car that has got a fair share of attention from Uncle Sam now. US is struggling to understand the reasons for their failure to innovate as rapidly as this young company has in the past decade or so..

I was able to link this entire article with a discussion I had with a client, while working as a Financial advisor in Bangalore. My former client, a long-term Buffett style investor, someone who has substantial stake in eminent mid-cap companies in Bombay Stock Exchange and related to one of the top Indian stock brokers had spoken to me on this little-known company BYD Auto about a year back! He had wanted to invest about a million USD in this stock, which then was non-descript to me.

Today, I was amazed to note that this company had got massive support from the Chinese government that was showcasing this success story to the Westerners. Through this company, China had surely flexed its muscle big time proving yet again - what it takes to achieve scale. So cars manufactured by BYD Auto will get approximately 70000 Yuan rebate in five of the top chinese cities! Not just that, people who drive these cars will get addtional tax benefits from the government.

Thus, Warren Buffett had come down to China to meet the chinese authorities and whisper sweet nothings to them. Why not? Stock price of Mid-American holdings (Holding company of Berkshire Hathway)  has more than 14% stake in BYD Auto. The stock price of Mid-American holdings has rallied by more than 23% in the last five months. This is not just a speculation game. if all goes well, this company will expand into the US and European markets and guzzle the market share of the Toyotas, GMs and Honda.

China is talking of 4 million cars that will go on road by the end of next year in these five cities. We have an Indian version of the same story. "Reva" now bought by M&M (Mahindra) needs to crack the global market in the clean energy space.

Till then the dragon will roar! And roar loud..