Summary
- BYD share price falls on Berkshire sale, which seems of little consequence to BYD's business.
- New US funding for battery recycling.
- BYD appears to be moving into repurposing its LFP BEV batteries for home storage.
- There's a lot to like about BYD’s commanding position in battery manufacture and electrification of transport.
Nick Cox has recently provided a detailed update of BYD’s (BYDDF) global business which provides a really helpful overview for prospective investors. The company has a big presence as a battery maker and maker of BEV cars, buses and commercial vehicles. It set me thinking about the bigger picture of BYD’s business and how it's moving toward integration of a number of its business areas. This is a big deal for me personally as I’m seeking to get my energy and transport integrated as I live in a rural community with indifferent grid supply. Here I explore BYD’s cryptic plans to give its blade car batteries a second life in energy storage. This not only addresses complaints by critics of BEVs about what to do with old batteries, but it also reveals a new product that has a lot of potential in the home battery area. It may give Tesla’s ( TSLA ) Powerwall batteries competition. In breaking news Berkshire Hathaway (BRK.A) ( BRK.B ) has sold down a small part of its BYD stake and this has caused the share price to fall. This represents opportunity for new investors who want to participate in the BEV revolution and see BYD as a major player.
Berkshire selling BYD shares presents opportunity
There have been rumors about the possibility that Berkshire Hathaway might be considering selling down its entire stake in BYD over recent months. This week it became clear that there has been a small sell down of the Berkshire Hathaway stake, reducing its BYD H share stake from 20.49% to 19.92%. This has unsettled the BYD share price and in the past five days BYD’s BYDDF shares have fallen by 13.57% to $29.36 as the market opens today. The uncertainty about the possibility of further sale of BYDDF shares by Berkshire Hathaway creates a potential buy opportunity for investors interested in the company. Warren Buffett’s investment in BYD is up 30 fold since 2008, and maybe he has better things to do with the profits, but surely this does not reflect a loss of confidence in BYD’s business, which is booming. It's true that the share price has oscillated around $30 since the start of 2021 after a dramatic rise from below $5 at the start of 2020. While it has breached $40 a couple of times recently, overall the overall share price is down 12.47% year on year.
BYD’s plans for their batteries after their use for powering BEVs is exhausted
Battery recycling is in the news in the US with a new $335 million battery recycling program that's in addition to recent massive $369 billion funding for energy security and climate change in the Inflation Reduction Act of 2022 funding.
At the end of 2020 BYD announced a partnership with Itochu ( OTCPK:ITOCF ) involving recycling its BEV batteries. BYD’s LFP (Lithium iron phosphate) batteries are well suited to being repurposed as storage batteries as they have a more robust for cycle life than NMC (Nickel, Manganese, Cobalt) lithium batteries. The Itochu partnership seemed focused on industrial scale storage (container-sized power units) and BYD’s role was to sell its used batteries from BEV cars and buses. A Chinese startup was to be involved. I’ve been unable to update the Itochu story.
More interesting to me is a personal issue that involves resolving living in a rural area with an unreliable grid that's prone to multiple outages. My plan is to purchase a BEV equipped with V2G/V2H capacity as a core power backup. I’ve ordered a BYD Atto 3 as a step in this direction, although the Atto 3 just has the capacity to plug in a power lead. More interesting was discussion with an Australian BYD representative who indicated that repurposed BYD batteries are coming for home use. It was suggested that a system with similar capacity to a Tesla Powerwall might become available soon at a price point substantially less than a Powerwall. This involves a partnership between BYD and Australian startup 2NETZER and the product will be called Rethium. A 10 kWh product has a 29 page Installation Guide , and 21 page User Manual so it looks real. Watch this space.
Of course the BYD involvement is just part of the beginning of lithium battery recycling. After a second life as storage batteries, the lithium batteries will be recycled. Companies are appearing to do this, including Redwood Materials , a JB Straubel startup with big ambitions to produce 100 GWh of anode copper foil and cathode active material annually from recycled lithium batteries by 2025 (enough for 1 million BEVs annually). These materials account for 65% of lithium battery cost and they have not been manufactured in the US previously. Note that lithium battery demand is expected to increase five-fold by 2030, largely as a result of massive adoption of BEV for personal transport.
Conclusion
I’ve been following BYD for some time as it became my choice for BEV investment when I missed Tesla’s meteoric rise. In some respects BYD is a more conservative version of Tesla that has done the hard work of battery manufacture and auto manufacture, with increasing focus on BEV production. It has been a successful investment for me and I’m holding as I think the company is just getting into its stride. BYD is a really significant company that demands investor attention if you have an interest in the electrification of transport, which is now well underway. I think it's extraordinary that BYD is so neglected by SA coverage. Only five SA authors have covered the company over the past 30 days, with two strong buy, one buy, one hold and one sell recommendation. There is no Wall Street Analyst ranking over the past 90 days. This company shares the BEV front position with Tesla. Of course Tesla is controversial, but 18 SA authors have covered it in the past 30 days (one strong buy, three buy, six hold, five sell and three strong sell) and 37 Wall Street Analysts have covered Tesla in the past 90 days (14 strong buy, seven buy, 11 hold, four sell and one strong sell). I’m biased because I’ve been successful with my BYD investment, but BYD has to be a hidden gem that deserves more investor attention.
I'm not a financial advisor but I pay attention to energy storage and the electrification of transport. I hope that my observations concerning BYD are of interest to you and your financial advisor as you consider investment in energy storage and electrified transport.
For further details see:
BYD Powering On While Buffett Cuts Stake