Best stock to invest in – Some BYD Buyers Wanted Subsides, Not Electric Vehicles

Best stock to invest in

Doug Young

Bottom line: A new report spotlighting
suspicious sales by BYD shows that last year’s EV explosion in
China was fueled by people seeking to pocket government

A story from China’s new energy (electric) vehicle space is
shining a spotlight on the challenges companies are facing after
becoming too reliant on government support. It is a twisted tale
involving electric car maker BYD (HKEx: 1211,
and shows how its boom in sales last year may have been largely
due to big government rebates for buyers.

BYD experienced a rocky road over the last few years as its dream of
a future filled with new energy vehicles failed to take off. That
seemed to change last year, as new energy vehicle sales suddenly
exploded at the company backed by billionaire investor Warren
Buffett. BYD and industry boosters said the sales explosion showed
that Beijing’s years of support for the sector was finally bearing

But lately a much darker story has emerged, showing that much of
the explosion was fueled by opportunists simply looking to pocket
some of the big government rebates being offered to new energy car
buyers. Now a new report from the respected Caixin is spotlighting
one such case involving 3,000 electric cars that were purchased
between 2013 and 2014 to become taxis in the city of Nanjing. (Chinese article)

I’ll admit I’ve read the story several times and am still not
sure what exactly happened in this convoluted tale. But the bottom
line seems to be that many of these cars never got put into use,
and some 240 remain in BYD’s Shenzhen warehouses to this day even
tough they were ready for delivery back in 2014.

The case seems to center on a BYD dealer who later killed himself
and left behind a note that detailed a large amount of unpaid
bills related to the Nanjing order. BYD last month said that it
was owed 30 million yuan ($50 million) related to the case, which
obviously isn’t huge and won’t have a huge impact on the company.
But the case hints at the kinds of fake buying that were taking
place more broadly to get the government subsidies. That kind of
fraud has prompted Beijing and local governments to sharply reduce
or even eliminate many of those incentives this year.

Doug Young has lived and worked in China for 20 years, much of
that as a journalist, writing about publicly listed Chinese
companies. He currently lives in Shanghai where, in addition to
his role as editor of Young’s China Business Blog, he teaches
financial journalism at Fudan University, one of China’s top
journalism programs.. He writes daily on his blog,
China Business Blog
, commenting on the latest
developments at Chinese companies listed in the US, China and Hong
Kong. He is also author of a new book about the media in China,

Line: How The Media Dictates Public Opinion in Modern China.

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