Road Runner

Berkshire Well Positioned for Buffett's Prediction on Electric Cars

Davewmart, You may be right which would cause a faster adoption of electric vehicles.


On Nov 22 06:07 PM Davewmart wrote:
> Road Runner:
> Your prediction for the likely part of the US vehicle fleet which
> will be electric in 20 years is based on affordable oil and the fleet
> size staying around the same as it is at present, with presetn usage
> patterns.
> The figures I gave from the Uppsala report of an absolute reduction
> in oil supply would indicate much reduced use in the US, as China
> and so on will want their share.
> This means massively increased US prices.
> What would the size of teh US fleet be with oil at $5gallon? At $10gallon.
> At $20gallon?
>
> It seems likely that there will be a lot fewer cars in the US in
> 2030 than now, and that most of those will be electric.
> *Please note that these figures are based on the IEA rexerve estimates,
> the figures which are used by Governments throughout the world, and
> only differ in their output rates by assuming that exploitation rates
> remain constant, whereas the IEA assumes greatly increased rates
> for unexplained reasons - 'cough' - political influence- 'cough'

Berkshire Well Positioned for Buffett's Prediction on Electric Cars

I am very optimistic about electric cars, much more so than most people. But there is no way that all cars on the road will be electric in 20 years. I think Warren was exaggerating to make a point here.

I think that in 20 years, China will have somewhere between 60% and 80% electric cars because most of their people are starting from no cars, and the government is pushing hard for electric cars. Also, companies like China-based BYD will be able to push its electric cars in China more than outside the US.

It the US, if 40% of cars are electric in 20 years, it will be a phenomenal success. I don't see electric cars becoming price and performance competitive with engine/transmission cars for 8 to 10 years. But, when they do, there will be strong consumer demand because of high gas prices and performance. I'm looking forward to driving a car that doesn't take 1 second to decide what gear to be in when I press the gas pedal at a light.

Even, when electric cars become popular, it will take 15 to 20 years to rotate into electric cars. People won't just dump their old cars for a new one immediately. So I'm looking for 30 years to get to 70% plus in the US.

Berkshire Well Positioned for Buffett's Prediction on Electric Cars

DLB40, You are making a logic mistake. You are comparing a fuel to a technology. If the fuel supply is cut off, then the US comes instantly to a halt. But, if the batteries and electric car components, like rare metals in motors, is cut off, will can still use the ones we previously purchased. The US economy doesn’t come to an instant stop. We have time to adjust.

You are comparing apples and oranges.


On Nov 22 12:53 PM DLB40 wrote:
> Batteries will only change our dependence on Overseas oil from the
> Oil cartel ,to dependence to China and their Battery cartel. BTW
> please check on the pollution from battery component mining and the
> battery production pollution. Net gain for the USA is Zero. Natural
> gas is ours. Net gain to the USA 100%

Berkshire Well Positioned for Buffett's Prediction on Electric Cars

Gandalph, Your link is to a John Peterson article. John Peterson is not some authoritative person on electric cars. He is just a lawyer that is arguing his pocketbook. He cherry-picks and misinterprets information. He gets huge amounts of criticism that he and his groupies just blow off.

Who are you going to believe - Warren Buffett who has a long, proven track record of great insight into the future, or John Peterson? Please everyone, take John Peterson with a grain of salt.


On Nov 22 12:13 PM Gandalph wrote:
> Please refer to:
> seekingalpha.com/artic...?
>
> It is a very clear explanation of why the electric vehicle is a terrible
> idea. Recently books have been written on scientific illiteracy in
> our society. If people writing these articles had the most rudimentary
> knowledge of physics and thermodynamics, this folly would just go
> away!

Readers Pick the Top 20 5-Year Horizon Stocks

TheHague, Don't lose faith in Wal-Mart. Wal-Mart hasn't performed this year simply because it is considered a "defensive stock”, a safe place to put money during tough economic times. Well, during 2009, money shifted out of defensive stocks into potential high growth stocks as the threat of economic catastrophe abated. It has little to do with how Wal-Mart, as a company, is performing. It’s just natural stock rotation.


On Oct 18 09:18 PM TheHague wrote:
> WMT? Nice try! I just sold my shares that I bought in March! I can
> now buy into them cheaper than they were when I bought them! I gave
> up! Their last Div. was not that great! I tried to believe, but some
> thing is not right there! I don't know what it is but it ain't cool!

Readers Pick the Top 20 5-Year Horizon Stocks

I'm impressed by the quality of this list, and how it reached down into some stocks that I didn't think were in the minds of the general investor community, like AONE and BYDDY.PK. Plus, it listed stocks that are truly (not stuck-in-the-mud like Microsoft and Yahoo) innovative companies that are “pushing the envelope” on the technology front like GE with green technology, like Google with search, operating system, and “cloud computing” technology, and like Apple with mobile Internet technology.

A123 Systems (AONE) and BYD of China (BYDDY.PK) are head-to-head competitors in the plug-in vehicle battery market. They both make the Lithium Iron Phosphate (LFP or LiFePO4) battery which, when the manufacturing is perfected, will be the ideal battery for vehicles, in my opinion. These are the clearly, in my opinion, the leaders in the quickly emerging LFP battery market. A123 seems to be the high quality player, and BYD seems to be the high quantity player. BYD is an established player with non-LFP batteries so it is well established and profitable. A123 is a startup with only one product – its LFP battery. I see investing in A123 as very speculative but potentially very profitable.

As a side note, if Japan wants to pull itself out of its 2 decade economic stagnation, one of the best things it could do is let Wal-Mart “run wild” in its country. Japan’s retail system is very inefficient. There is a lot of job protection going on. Wal-Mart would cause many jobs to be lost, but it would spur economic growth via a much more efficient retail system that would deliver goods to its citizens at a much lower price. This would leave money left over in people’s pockets that would lead to a higher consumption of other products increasing the economy.

MidAmerican Energy, BYD Partner on Battery Storage Initiative

HaavBline, there is no need to have a quick battery replacement station with the Lithium Iron Phosphate battery. Another one of its revolutionary characteristics is that it can be recharged very quickly. BYD says its battery can be recharged to 50% in 10 minutes. Wow!

If you want to read some fun blogs about how fast this battery can be recharged, read some of the RC (radio controlled) airplane blogs. Some of these guys are pushing the limit on these batteries just to see what they can do. So far, I've read nothing but amazement and praise.

The only real issue with the Lithium Iron Phosphate battery for vehicles is price and availability. Both are a function of manufacturing scale and innovation.

MidAmerican Energy, BYD Partner on Battery Storage Initiative

Alan Young, BYD is a Li-ion battery specialist in the established Lithium Cobalt technology which is what is used in laptops and cell phone. But, they are also heavy into the new Lithium Iron Phosphate battery technology that will go into vehicles. This new technology is much safer and lasts much longer than Lithium Cobalt batteries. These 2 technologies should not be grouped together under the "Li-ion" title, like so many articles do, because they are so different.

In response to your last remark. I believe the Lithium Iron Phosphate battery technology is “spectacularly disruptive” in the long term, but not now. It has the potential to be low cost (no expensive Cobalt) along with being high energy, high power, long life, extremely safe, easy to charge, very fast charge rate, no venting so can be put under the back seat of a car, etc. But, this revolution will take many years, maybe like 10 years or more. It will take huge amounts of capital and time to build up the manufacturing capacity, and make the incremental technology and manufacturing improvements to bring down the cost.

That is why I am amazed, like yourself, of why BYD is pursuing the power infrastructure market at this time. This new battery is perfect for vehicles, but is probably not the cost effective battery for the alternative energy infrastructure at this time because it is going to be many years for the cost to decrease sufficiently.

MidAmerican Energy, BYD Partner on Battery Storage Initiative

I agree with MidAmerican Energy’s Chairman David Sokol. I don't think he is being contradictive in opposing cap-and-trade while pushing forward with alternative energy. There are other ways to promote wind and solar without cap-and-trade, like the current system of tax incentives and mandates on power companies. Cap-and-trade would be an unnecessary added tax on the consumer.

MidAmerican Energy, BYD Partner on Battery Storage Initiative

BYD is amazingly aggressive. Not only are they going after the vehicle market with their revolutionary new battery, but also the alternate energy market. Both are giant markets. I would think that the vehicle market would be enough to keep them overwhelmed with orders and keep them expanding factory capacity at a breakneck pace. Maybe their manufacturing style of low automation and high people count allows them to expand quickly. Maybe BYD can prove wrong the battery world conventional wisdom that battery production must be highly automated to ensure quality. We'll see.

BYD: Positioning Berkshire for the 'Chinese Century'

Misha, There is a huge difference between the new Chinese government and the old Soviet Union government. Communism is now recognized world-wide as a bad idea. There is no doubt now. The Chinese government, which is basically the old communist party, knows this well. And they know the only way it can stay in power is to create a continuously rising economy leading to a rising standard of living. Else, the masses (like over a billion people - gulp) will rise up against the government. This has created the best form of government, a benevolent dictatorship.

If you not convinced by my theory, you can see it in actions of the government. They funnel huge amounts of resources into infrastructure projects that will improve the economy and create a better life for their people in general. Look at the massive 3-gorges damn which will generate a massive amount of electricity and make much more of the river navigable. Look at how they managed the take-over of Hong Kong by building a major industrial city just outside Hong Kong to leverage the economic power of Hong Kong.

This new Chinese communist government is nothing like the deeply corrupt self-destructive communist government of the old Soviet Union. Don’t even try to compare the two.

BYD: Positioning Berkshire for the 'Chinese Century'

Excellent article. Thank you. You got at the essential nature of why Warren Buffet and gang bought into BYD, and why it is my most exciting investment.

Warren and gang saw the founder and CEO Wang Chuan-Fu as the complete entrepreneur package. He completely understands all aspects of this business from the technology, to the manufacturing, to the market.

Not only that, but the products he is creating have the potential to explode in sales.

One of BYD’s products is the revolutionary new battery technology of Lithium Iron Phosphate (I believe BYD calls it Lithium Ferrous Phosphate). This battery technology is far better an any other battery technology for electric vehicles (see my previous posts for an explanation why).

BYD is putting these new batteries in all-electric and hybrid-electric vehicles, and driving down the price of these vehicles for the car thirsty Chinese market. The government of China is promoting electric vehicles to help curb its air pollution problem. BYD can perfect its vehicles in China, then launch them in the first world countries undercutting prices because of BYD’s manufacturing cost advantage.

Note that China is the only proven reserve (though other unproven ones exist) of Lithium other than South America. Another competitive advantage for BYD?

Electric Car Initiatives Heat Up: Implications for Investors

Dead on Ravi! You hit the nail on the head. I believe the auto industry will go through major upheaval in the next 10 years because of plug-in electric hybrids (sorry I don't see pure electric vehicles as the future because people want the most flexibility out of their vehicles - an argument for another time).

The very new Lithium Iron Phosphate (LiFePO4) battery technology (only been in limited production since 2006) is ideally suited for cars (don't even think about comparing this battery to other non-phosphate Lithium batteries - see my previous posts for why not). It is extremely safe and sealed and runs cool (can put under the back seat), lasts very long (maybe the life of the car), has high power density (it’s Lithium), charges and discharges very fast, low material cost, no pollution risk, wide operating temperature range, holds charge for long periods, etc. No other battery comes close to matching vehicle requirements like this battery.

When these batteries are finally perfected and the manufacturing is perfected and built to scale (I estimate between 5 and 10 years for this), a plug-in hybrid electric will cost the same or less than an equivalent sized engine/transmission type car. Yes, I said “less” because an engine/transmission pair is an extremely complex precision-tooled expensive machine. The engine/transmission pair will be replaced by a much simpler and cheaper engine/generator pair. The engine can be much simpler because it will be smaller (no “take off from the stop sign” extra power needed) and will operate at a constant speed (optimized for simpler operation).

One thing that I find aggravating now is the marketing of hybrids as sensible environmentally-friendly but boring vehicles. That’s not the future of hybrids. Electric motors (what will drive the wheels on hybrids) have very high torque (“push” for you civilians) at zero speed. In other words, press the “gas” pedal at the stop sign, and away you go without any hesitation. Note that the Tesla Roadster, which is all electric, can go from 0 to about 60 in about 4 seconds. Ouch! That’s almost as fast as a turbocharged Porsche. Conclusion, in the near future hybrid electric cars will be seen as performance cars and not just “eco” vehicles. They may even be preferred for their performance.

Hybrid electric cars remove a large barrier to entry in the automotive world – engine and transmission technology. Developing a new engine and transmission is prohibitively expensive and time consuming. This is one of the “strategic products” of auto companies. In other words, a well developed engine/transmission pair gives a car company a strong competitive advantage over “want to be” startups. If a startup no longer has to develop an engine/transmission pair, then they are much more able to compete. Most of the rest of the systems in a car, are “commodities” meaning they are easily obtainable. Also, the established car companies also have to develop there own hybrid platforms so, in some ways, they have to start over just like the startups.

One example of the possible upheaval. Mazda car company has survived because of its good engine technology (I’m not an expert on this subject so I may get some debate on this point). It recently announced that it will not pursue a hybrid electric vehicle, choosing instead to keep perfecting its engines. They basically admitted they couldn’t afford to pursue hybrids. I believe this will be big trouble for them down the road.

There is no Lithium shortage and there never will be. This topic has been beat to death on Seeking Alpha already. If you want to know more, look at some of my previous posts.

The 3 companies that I follow that make LiFePO4 batteries are A123 (private held US company), Valence Technology (VLNC, US company), and BYD (Chinese company, 1211.HK and BYDDF.PK).

Note that China (home of BYD) is the other place besides South America that has proven reserves of Lithium (though over sources of Lithium are going to be developed). Couple that will China’s desire to become a major auto manufacturer, and watch out car companies of the world. China’s failure to make inroads into the standard engine/transmission auto markets of the world, may now prove to be an asset because it doesn’t have to worry about hurting a domestic engine/transmission auto industry while it attempts to “leapfrog” the rest of the world’s auto makers with hybrid electric vehicles. So do you think BYD will be given special treatment by the Chinese government in its bid to compete with the established car companies of the world? Easy answer - yes.

Buffett on Alt Energy

Buffett has taken a lot of criticism lately because he lost money in 2008 and he bought into some companies recently before the stock of those companies plummeted. I even see some of that criticism on this blog.

Please everyone, stop with the extreme near sighted view of the stock market. We must wait at least 3 years before we can conclude whether he’s lost his touch or not. My guess is that in 3 years he’ll look like a genius – again.

“Be fearful when others are greedy and greedy when others are fearful” – Buffett.

Buffett Likes to Be Early; Don't Rush to Follow

bobbobwhite, You base your idea that Buffett's purchase of GE may have been a mistake because the stock has sagged since he bought it about ONE MONTH ago!? A month is nothing on the Buffett timeline. He once said that people should be limited to trading stocks once a year.