General Motors Calls China's Bluff

Just returned from the dead, and reintroduced to the public markets, General Motors (NYSE: GM  ) is the stock everyone's cheering for these days. But is China about to rekill GM, and this time, nail the coffin shut? Maybe not ...

Just a couple years ago, that's how things were looking. Mere months from declaring bankruptcy, GM was making a last ditch effort to reinvent itself, to go green, develop a wunder-produkt, and recapture the imagination of car-buyers -- and automotive investors. The company's groundbreaking Chevy Volt electric car offered the potential to finally make the internal combustion engine obsolete, or nearly so. But no sooner had GM set a date for introducing the car to potential buyers, than out came China's BYD, recently armed with an investment from Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) , and announced an electric car of its own -- and a threat to begin selling it in the U.S.

The little car company that could
It looked like a deathblow for GM, a Cadillac-sized coup de grace. Leapfrogging Toyota's (NYSE: TM  ) electric car offering, and coming to market even before Tesla (Nasdaq: TSLA  ) could get its Model S finished, BYD promised to begin landing its F3DM plug in hybrid and E6 electric buggy on U.S. shores about the same time GM and Ford (NYSE: F  ) begin bringing their own electro-buggies to market, at prices rumored to undercut competitors.

But if China can invade GM's turf, then turnabout must be fair play, right? On Tuesday, the Detroit Lion announced an electric shocker of its own -- it knows how to export cars too, and intends to make an international play with the Volt. Before 2011 is out, GM promises to begin exporting electric Volts.

It's not saying where to -- not yet -- but considering the size of GM's operations in China these days, I'd be shocked if that isn't one of GM's target markets. And while it's true the Volt will probably cost more than the F3DM, the more Volts get built, the more the efficiencies of scale will begin to shift in GM's favor. Already, General Electric (NYSE: GE  ) has cast its lot with GM, confirming that nearly half the 25,000 electric cars it plans to buy will be Chevy Volts. With the big fish already snagged, it seems BYD's going to have to fish elsewhere for customers if it wants to monopolize this market.

Will BYD, which has been struggling lately, even be able to pass "Go?" Sound off below.

Fool contributor Rich Smith does not own shares of any company named above. Berkshire Hathaway is a Motley Fool Inside Value choice. Berkshire Hathaway and Ford Motor are Motley Fool Stock Advisor recommendations. BYD is a Motley Fool Rule Breakers recommendation. The Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On December 02, 2010, at 2:28 AM, tomwittmann wrote:

    This BYD is one of the many pretendent for "instant-EV"

    It seems that many of these, with no experience in car manufacturing, think that cramming a Battery in an existing chassis and presenting a few frills,

    voila, the EV is ready,

    And Mr. Buffet should be ashamed by chosing a Chinese instead to invest its money in the country which supplied his billions.

    Of course, all these "projects" are NISSAN type of vehicle, only usable in a city, without a back up with for any reason the battery runs dry. And other when a gasoline car runs out of fuel, you cannot bring a can of electricity to restart it!!!

    If people really will fall for such cars, this will be great opportunity for towing services

  • Report this Comment On December 02, 2010, at 11:47 AM, TMFDitty wrote:

    >>If people really will fall for such cars, this will be great opportunity for towing services<<

    Ha! Know of any that are public? ;)

    TMFDitty

  • Report this Comment On December 05, 2010, at 9:36 AM, swrussel wrote:

    The firstest and bestest to the market with quick-change battery tech and a business plan that involves leasing rather than buying batteries has my investment dollar.

    Part of "bestest" is "can be shoehorned into existing service stations up and down the interstates and can be done by semi-skilled labor.

    Steve Russell

  • Report this Comment On December 27, 2010, at 7:08 PM, mythshakr wrote:

    So, How far in the future do you think it is before the government of China just declares no more new petrofuel only cars in China, which will the prelude for no more new petrofuel at all cars in China. 2 years? 5? 10?

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