Berkshire Hathaway to profit off Chinese auto sales?

July 10, 11:52 AMWarren Buffett ExaminerWilliam Freehling

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Warren Buffett's Berkshire Hathaway could benefit from the growth in Chinese auto sales.

Chinese auto sales had their best month of the year in June, The Wall Street Journal reports today. China is poised to pass the U.S. this year as the world's biggest auto market. The Journal reports that China is likely to sell more than 11 million autos this year, a 17.3 percent increase from last year. As more of the country's 1.3 billion people enter the middle class, that growth rate is likely to continue. Meanwhile U.S. auto sales continue to lag, though many U.S. automakers including GM are finding success in China.

Berkshire last year bought a 10 percent stake in Chinese battery and electric car maker BYD Co. for $230 million. A BYD hybrid automobile was on display at Berkshire's annual meeting in Omaha this spring. I snapped the photo that is running with this post. Buffett said at the meeting that investing in BYD was mainly the idea of his partner, Charlie Munger. Buffett usually avoids high-tech investments but made an exception in the case of BYD.

Reuters reports today that BYD is trying to buy a bus-making company in central China to increase production of alternative fuel vehicles. BYD didn't comment, according to Reuters. Volkswagen earlier this year said it will work with BYD to develop hybrids and electric vehicles.

Hybrids and electric vehicles seem poised to thrive in China, whose population will otherwise demand massive quantities of gasoline as the number of people who can afford a car grows. The company that can dominate the market for fuel efficient or electric cars seems poised to be a big winner, and that will please environmentalists concerned about China's growing carbon footprint.

Buffett and Berkshire shareholders certainly hope BYD becomes that dominant company.