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Author: captainccs Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 21174  
Subject: Re: Need help valuing car makers Date: 11/15/2012 3:58 PM
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Good luck with the Chinese and their appetite for electric cars! Perhaps it's worth considering how Berkshire Hathaway did, and Charlie Munger in particular, dipping a toe into these shark invested waters.

kelbon


I don't much follow Munger and Buffett's buys but they did invest in a Chinese battery company turned car maker, BYD. It is an interesting story:

Warren Buffett takes charge
Warren Buffett hasn't just seen the car of the future, he's sitting in the driver's seat. Why he's banking on an obscure Chinese electric car company and a CEO who - no joke - drinks his own battery fluid.

By Marc Gunther
Last Updated: April 13, 2009: 9:29 AM ET

(Fortune Magazine) -- Warren Buffett is famous for his rules of investing: 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. You should invest in a business that even a fool can run, because someday a fool will. And perhaps most famously, Never invest in a business you cannot understand.


http://money.cnn.com/2009/04/13/technology/gunther_electric....

Buffett was seduced by a siren song and he broke one of his own rules: "Don't buy anything you don't understand." Traditional electric cars are generally a bad idea, hybrids can be OK. If you want to know why, read John Petersen at Seeking Alpha.

According to the article, Buffett actually invested in the man behind BYD who is supposed to be brilliant but even so he has not been able to solve the issues of electric cars. Another EV maker that's bound to crash sooner or later is Tesla for all the reasons expressed by John Petersen.

To make matters worse, the green bubble burst because the cost of fossil fuels dropped just about the same time governments ran out of green subsidy money. Preaching peak oil is going to cost some people a lot.

Initially there were two key differences to Kandi's business model: batteries not included and the Kandi car is tiny. Batteries are about half the cost of the car and 100% of the problems. The small size reduces the cost and extends the range of the car making it a good fit for the Chinese middle class (but not for export to America). Even so the first sales to the public proved difficult. The third difference is that the Chinese government got interested for a variety of reasons (grid storage, fighting pollution, traffic jams, and parking). The outcome is that at least two rental/leasing projects are under way, one for 20,000 cars and the other for 100,000 cars in pilot provinces. Of the 20,000 car project, the order for the first 5,000 has been placed and should be delivered this year. This is the largest pure EV car purchase ever.

Yes, it is risky business. I have followed Kandi for two years and the story has been unfolding more or less according to plan. Shark infested as well and not all the sharks are Chinese. Just now there is a bear raid by an American who is short KNDI.

http://seekingalpha.com/article/1003881-kandi-twisting-the-t...

Their previous bear raid was on September 27:

http://seekingalpha.com/article/892201-connecting-the-dots-k...

Denny Schlesinger
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