Is Warren Buffett's China Car Deal A Smart Move? (BRK-A, BRK-B)

A report in Reuters suggests that Warren Buffett's (NYSE: BRK-A) (NYSE: BRK-B) $232 million investment in China's electric car start-up BYD could backfire, in light of claims that BYD is openly suspected of copying competitors and putting other companies' logos on its own vehicles in its franchised dealerships.

That investment represents a 9.9 percent stake in the company, which has to be considered a significant risk for a man so proud of his level head. So what does Buffett see that so many others don't? Simply by involving himself, Buffett has put BYD ahead of the game in terms of Chinese contenders seeking to sell an all-electric car in the U.S., but Buffett's involvement would throw any company into the spotlight.

It could be that this is a rare black mark on Buffett's resume. BYD appears to be getting damned from all sides, with Paul Newton, an analyst at the London-based HIS Automotive, quoted as saying, “Until the law in China recognizes some kind of international intellectual property issues, companies will always be up against it. But for the most part, (Western company officials) shrug their shoulders and say it will cost us more not being involved than being involved, so let's get involved.”

Perhaps it is telling that Buffett has said little publicly about the BYD investment. He has made mistakes in the past, he himself admitting that the acquisition of shoe maker Dexter is the worst mistake he has ever made, so he is not entirely flawless. “I'll make more mistakes in the future,” he said. “You can bet on that.”

With questions arising over the reliability of the BYD vehicles, it seems increasingly likely that BYD is a mistake. If Buffett's resume proves anything though, it is that he always knows a little bit more than everyone else, so maybe a little bit of faith is in order.