Cars

BYD Q3 net down 99% on weak sales

(Agencies)
Updated: 2010-10-26 10:50

People walk by the BYD (Build Your Dreams) E6 Electric Car as it is plugged in to charge during the North American International Auto Show in Detroit, Michigan January 12, 2009. [Photo / Agencies]?

BYD Co, a Chinese carmaker backed by US billionaire Warren Buffett, posted a 99 percent drop in third quarter earnings as its sales strategy backfired and it slipped behind competitors, Reuters reported on Monday.

The quarterly result came as auto sales tapered off in China, the world's biggest auto market, in response to Beijing's efforts to keep its economy from overheating.

The pullback marked a sharp contrast with breakneck expansion in 2009 and the first quarter of this year.

"BYD had been expanding its sales network aggressively and pressing its dealers to hike their sales targets. That strategy worked well when the market was good," said Marvin Zhu, an analyst with J.D. Power and Associates.

"But it backfired when the market slowed in the summer months."

BYD said its July-September net profit stood at 11.82 million yuan ($1.78 million) compared with 1.16 billion yuan a year earlier.

J.P. Morgan had forecast BYD's net profit to fall by 55 percent to 522 million yuan.

BYD Revenue rose 0.27 percent to 10.26 billion yuan in the third quarter.

Sales taper off

BYD's auto sales started to taper off in August, down 19 percent from the year-ago period, with September sales down about 25 percent, company data showed.

That compared with an 18.7 percent and 19.3 percent rise in China's passenger car market during the two months, respectively.

While BYD's market share was slipping, others, especially some long-established foreign brands, including General Motors and Volkswagen, were gaining ground.

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Sales at GM's car venture with SAIC Motor rose 41 percent in September from a year earlier, with sales at Volkswagen's tie-up with SAIC up 36 percent.

BYD, 10 percent owned by Buffett's Berkshire Hathaway, in August warned of a slowdown in car sales in the second half and said it would launch new models to lessen the impact.

It had also cut its car sales target by 25 percent to 600,000 for the year and lowered prices by more than 5 percent.

BYD shares closed on Monday up 0.35 percent at HK$56.90 ($7.33), lagging a 0.47 percent rise in the Hang Seng Index.

They have fallen about 17 percent so far this year, compared with an 8 percent rise in the broader market.

BYD also makes and sells batteries, energy storage stations, handset components.

Still, automobiles account for about 70 percent of the company's profit, J.P. Morgan estimates.