Shares in Warren Buffett-backed electric car maker BYD are on fire

Investors are keen on China’s response to Tesla.

Shares in WORLD (I WILL), a Chinese manufacturer of batteries and electric cars in which Warren Buffett is a major investor, rose 55% last month.

Warehouse in Tesla (TSLA) The rival hit a 52-week high in Hong Kong this week but closed about 3% lower on Wednesday.

The steep spike began in early September when China announced plans to finally ban the production and sale of fossil-fuel-only vehicles.

Related: China wants to ban gasoline and diesel cars

The announcement also boosted the shares of China’s other leading electric car maker, Geely (BODY), which has increased by around 40% over the same period.

China is pushing to replace the gas-guzzling cars on its streets, and Beijing wants local businesses to capitalize on the windfall of alternative vehicle sales.

The country’s “Made in China 2025” plan envisages that by 2025 at least 70% of sales of hybrid vehicles and electric cars will be produced in-house.

Related: Tesla stock is up 75% this year. This is not a typo.

It makes sense to rely on BYD as the company is also a leading manufacturer and supplier of batteries, said Angus Chan, an analyst at market research firm Bocom International.

But investors in BYD – which stands for Build Your Dreams – may be a little overzealous.

Chan says the stock is “expensive” right now.

Related: Tesla announced another delay – this time it’s the tractor-trailer

Daiwa, a Hong Kong investment firm, recommends investors buy BYD stock, but has a relatively modest 12-month target price of 58 Hong Kong dollars – about 25% below the current price of the stock.

Other analysts are much more skeptical. JL Warren Capital, a New York-based investment firm, said in an August report that the Chinese automaker is by far too dependent on government subsidies. The company says investors should sell BYD shares.

A year rarely goes by in which BYD does not need funding “because of its constant consumption of money,” wrote JL Warren founder Junheng Li in the August report.

Related: These countries want to ban gasoline and diesel cars

Investors have driven the stock to dreamy heights in the past. In October 2009, BYD stock hit an all-time high of Hong Kong $ 88.40 ($ 11.30), only to plummet sharply in 2012 after an analyst in China cut the company’s price target for the stock to virtually zero.

Buffett’s Berkshire Hathaway (BRKA) has stuck with the stock through ups and downs.

It bought a 9.9% stake in September 2008 for $ 232 million. After the most recent run, that stake is now worth around $ 2.2 billion.

CNNMoney (Hong Kong) Initial published Oct. 11, 2017: 7:27 am ET

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