BYD Co. planning IPO for battery unit by 2022
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BYD Co. planning IPO for battery unit by 2022

China is fast becoming the world’s major market for electric cars, and BYD is reaping the rewards. The electric car maker, which is backed by Warren Buffett amongst others, has an inside track in the country, and it’s looking at another way to expand as the auto industry moves away from combustion engines and towards electrification: batteries.

BYD’s share price has appreciated by 23% so far this year

graph 13 byd

Source: Yahoo Finance

BYD, which makes batteries for electric cars as well as mobile phones, has said that it’s planning to spin off its vehicle battery business into a separate company and then pursue an initial public offering (IPO). The date hasn’t been specified, but chairman Wang Chuanfu said it would be done by the end of 2022. The location is still undecided. As of yet, it is not known whether the IPO will include just the car battery business or other segments too.

Passenger vehicles are about to become the world’s biggest users of Li-ion batteries

graph 13 byd2

Source: Bloomberg NEF

As the trend towards electrification continues apace, demand for lithium-ion batteries is shooting through the roof. BYD is one company that has capitalised on this increase in demand, and its battery business is increasingly being seen as a major growth driver. According to Sanford C. Bernstein & Co., as demand continues to rise, the market value of batteries “used in electric cars, electric buses and related energy storage” will hit around half a trillion dollars in 2050.

Chairman Wang, who is also the company’s founder, thinks that China’s land transport can become fully electrified by 2030. Having recently proposed a timeline to the authorities in Beijing, he thinks that – assuming it is stuck to – the country will need to increase its battery-manufacturing capacity by “about ten-fold”.

Batteries are a relatively new area for BYD, despite its success therein. Having previously made batteries for its own models, it started soliciting orders from other carmakers last year. The company is still in the car business though, and is apparently close to securing an order for a 2,000-strong fleet for Montreal. If it gets the gig, it’ll be the company’s biggest overseas contract for electric vehicles to date. Either way, BYD’s immediate future looks bright.

Disclosure

Dominion holds BYD Co. in its Global Trends Managed Fund.


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