While Chinese pure play solar panels companies have already captured a majority of the global solar module market,the entry of newer Chinese players into the solar energy market refused to stop.China’s 5 largest state owned utilities have already made their presence felt in the Chinese domestic solar installation market by bidding extremely low to win projects under the Chinese Solar Subsidy program.Automotive companies like BYD have also announced a big investment into solar panel manufacturing while Hanlong and Bluestar Groups have decided to invest in the CPV and Polysilicon sectors respectively.
BYD the Chinese battery and electric vehicle producer made famous after Warren Buffet made an investment has been facing rough times recently.Its falling auto growth,problems with land acquisitions in China and an incoherent strategy has hurt its profits and stock price in 2010.The Company has put on too many hats with investment in various green technologies besides its bread and butter car business.The most ambitious plans of BYD undoubtedly lies in the Solar Energy Business though little details have been revealed.The company is planning to spend 22.5 Billion Yuan on Solar Energy over the next 5 years for which it has already secured financing.The company has started a 100 MW cell plant in the Shaanxi province and plans to expand to 5000 MW by 2015.However its recent travails had made one think that they would have put their aside Solar ambitions .However that does not appear so.
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BYD has fallen almost 35% this year heavily underperforming the market as sales growth has slowed substantially.After a 140% growth in Auto Sales last year,this year the sales growth will go down to 30% as the company has reduced sales target to 600,000 from 800,000 earlier.Chinese auto sales have fallen and BYD has been specially affected with its workhorse F3 Model declining in popularity.The company delivered a good first half with $100 million in 2Q profits.However the company is still quite expensive at $15 Billion Market Cap which would give it a P/E of around 38x.Also the company’s strategy to enter solar energy does not make sense.However BYD is a good story for the future.China has made a new Green Policy to create National Champions in the EV and Battery Industry.BYD is a perfect candidate with its strengths in both areas.While its execution in the EV sector is yet to give results,it is already planning into the future getting into the Grid Storage Sectors.I would not put money presently but would wait for a better entry point in the future.
China’s Green Stimulus policies has been massively biased towards the growth of domestic industries.Electric Vehicles is no different with China recently introducing Fuel Efficiency Subsidies in Auto Industry exclusively for Domestic Firms.Now the new announcement by the Ministry of Industry and Information Technology to subsidize energy efficiency in Transportation with a 100 Billion Yuan Subsidy over the next 10 years further explicitly supports domestic firms