Buffett group wins big in stock buy of Chinese car firm
Christine Tierney / The Detroit News

Legendary investor Warren Buffett hasn't been fortunate with all his holdings over the past year, but one of his picks turned out to be a big winner. 

Buffett's Berkshire Hathaway Inc. agreed last September to pay $230 million for a 10 percent stake in Chinese automaker BYD Co. that had soared in value by the time the deal was finalized in August. BYD shares, listed on the Hong Kong Stock Exchange, have risen from $1.21 last November to $10.55 on Wednesday. 

The runup in BYD's stock, due partly to Buffett's interest, has made its founder Wang Chuanfu the richest man in China, according to the Hurun Report, a list of the wealthiest Chinese. 

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Based in the southern Chinese city of Shenzhen, BYD is a young company that started out making batteries and only entered the car business in 2003. 

But its expertise in lithium-ion batteries, coupled with the rapid growth in the Chinese vehicle market, have attracted a great deal of investor interest. 

China is on track to become the world's No. 1 vehicle market this year, and the government in Beijing is intent on developing a strong domestic auto sector with expertise in clean technologies. 

BYD developed its first electric car, the F3e, in 2006, and is rolling out the e6, a crossover which it displayed early this year at the North American International Auto Show in Detroit. 

BYD expects to sell 400,000 vehicles this year, and its exports are limited to small markets such as Ukraine. But it has ambitious goals and hopes to sell electric cars in the United States, possibly as early as next year. 

"They're a very good company. They have a lot of knowledge on batteries," said Nick Reilly, General Motor Co.'s Shanghai-based executive vice president of international operations. 

Volkswagen AG is considering a battery deal with BYD. 

While its prospects look bright, some analysts caution that the stock has risen too quickly. "Payback might be distant," Deutsche Bank analysts Vincent Ha and Alan Hellawell said in a report assigning a sell rating to BYD shares.