Buffett's China visit could auger shift of gears on BYD

* Buffett could be tempted to sell down BYD stake - analysts

* Buffett likely to express concern over BYD missteps

* Stake now worth $1.6 bln versus purchase price of $230 mln

HONG KONG, Sept 24 (Reuters) - U.S. billionaire Warren Buffett could deliver some tough talk to BYD Co Ltd 1211.HK when he visits the Chinese automaker next week, including potential plans to sell down his stake in the former high flyer that has hit a speed bump.

BYD was China’s fastest-growing car maker last year but has encountered a host of problems in 2010, including sliding sales, a delay in plans to export its electric cars, and a legal dispute with the government over land it wants to develop.

Buffett's Berkshire Hathaway Inc BRKa.N bought 10 percent of the company in 2008 -- an investment that has yielded handsome rewards with the stake now worth $1.6 billion, nearly seven times the original $230 million purchase price.

Still, the current value is well off a peak of $2.5 billion reached last October, leading some to speculate that Buffett may be tempted to cash out part or all of his investment for a return that is still impressive by any measure.

“Buffett’s visit to BYD may not be good news for the company,” said Andrew To, sales director at Tai Fook Securities. “The old man may actually be tempted to sell down as the value has been inflated by several times.”


Buffett and Bill Gates, the 55-year-old co-founder and chairman of Microsoft Corp MSFT.O, will arrive in China next Monday for a four-day visit, including three stops related to BYD in the cities of Beijing, Changsha and Shenzhen.

Buffett and Gates, America’s two richest men and the world’s top two donors to charity, will also host a private meeting in Beijing to discuss philanthropy development in China.

But Buffett, who made his billions as a shrewd investor, could be more focused on BYD, whose shares soared after Berkshire Hathaway’s initial investment on hopes the battery-maker-turned- auto-manufacturer could become a future electric vehicle leader.

Buffett admitted previously that his bet on BYD was less focused on the company’s products and more on its founder and chairman, the entrepreneurial Wang Chuanfu, known for devoting his time to the company and passionately pursuing new products.

BYD's shares now trade at more than 20 times projected earnings, nearly double the multiple of rivals Dongfeng Motor Group Co Ltd 0489.HK and domestic leader SAIC Motor Corp Ltd 600104.SS.

Some analysts are questioning the company’s ability to deliver its new energy vision, and others say it may be straying too far from its roots as a battery specialist.

Chinese media recently reported that BYD had acquired 18 percent of Zhabuye Lithium, which has mining rights in the country’s biggest lithium mine, for about $30 million. Other reports said the company planned to make electrical appliances such as air conditioners and TVs.

“The company should do whatever it is good at,” said Johnny Wong, an analyst at Yuanta Research. “The share price will fall further if they really enter the home appliance sector, in which competition is keen.” (Reporting by Doug Young; Editing by Chris Lewis)