Buffett-Backed BYD Issuing $1.9 Billion In New Shares

Electric cars are the future, and that is especially true in the more densely populated areas of the world such as China.

Buffett-Backed BYD Issuing $1.9 Billion In New Shares

That’s why it’s not too surprising that the Buffett-backed EV manufacturer BYD announced on Tuesday that it plans to raise up to $1.9 billion in new shares. Trading in BYD shares in Hong Kong was halted Tuesday (and in China on Monday) until the official announcement, which the company has called a private A-share placement.

To date, the firm has not specified what the funds from the placement will be used for, but issuing shares now allows the company to take advantage of the increase in its share price. Industry analysts note the new funds could be used for investment in R&D to try and gain an edge against Tesla.

The EV maker is working with several major banks for the almost $2 billion share placement, including China Merchants Securities, Guosen Securities, China International Capital and Swiss-based UBS.

BYD hoping to be the Tesla of China

BYD has its origins as a mobile phone battery maker, but over the last decade and change, it has morphed into specializing in producing electric and hybrid vehicles. The group has laid out its plans to compete with Tesla in the EV market, where its only real advantage right now batteries. However, auto industry analysts highlight that lightweight and efficient batteries are the most important part of a successful electric vehicle.

The company has evolved in to one of the biggest automakers in China since the firm threw its hat in the ring 12 years ago. Globally, however, BYD focuses on selling electric buses instead of cars.

That said, the firm is anticipating an increase in orders for its electric buses after signing its largest-ever U.S. contract with a major U.S. city. BYD has also unveiled plans for sales of electric trucks to foreign buyers in the second half of 2015. At the time, the EV manufacturer highlighted that the United States will be one of the first markets for its electric trucks.