Wednesday, April 15, 2009

Move Over Car Dinosaurs

Warren Buffett has taken a 10% stake in a Chinese electric car company called BYD for $230 million. He tried to buy 25% of the company, but the founder, Wang Chuan-Fu, turned him down! BYD is a sign of the future for car companies.

A normal part of progress is for upstart companies to take over industries while old companies die off. In this case, it is GM, Ford, and Chrysler that are at risk of dying off. When companies have been around as long as these three, it’s hard to believe that they could fail, but they have demonstrated that the North American car industry would be better off without them.

A big change in the form of electric cars is coming, and new upstarts are more likely to satisfy customers than the old dinosaurs. I would prefer that the upstarts were home grown, but the change is coming whether we do it or the Chinese do it.

The race is on for what will be a huge market, and Canada and the US are piling resources into saving dinosaur car companies. Instead of saving the old companies so that they can hold back the upstarts, we should be nurturing the upstart car companies.

2 comments:

  1. There's a documentary out called "Who Killed the Electric Car". It was interesting, but a little slanted. Not quite Michael Moore slanted, but a little bit. GM had a good electric car, but they took it off the market, and destroyed them. If they had continued developing their plans on this vehicle, I think there would be less room for the upstarts.

    I think electric cars are promising, since there are a lot of ways to generate electricity. I imagine nuclear power will dominate in the long term.

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  2. Gene: You may be right about nuclear power dominating in the long term. There is a lot of room for wind and solar power to grow as highly distributed sources of power (meaning a great many small installations). But nuclear power may be the only answer for large cities.

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