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Buffett-backed Chinese carmaker hit by slowdown and solar woes
HONG KONG, April 25 |
HONG KONG, April 25 (Reuters) - BYD Co Ltd , a Chinese carmaker backed by U.S. billionaire Warren Buffett, posted a 90 percent slide in quarterly profit as it was hit by a slowdown in the world's largest car market and losses in its solar business.
China's once-sizzling auto industry has succumbed to softening economic growth, further exasperated by new vehicle offerings in the fiercely competitive market.
Shenzhen-based BYD reported a net profit of 27 million yuan for the first three months of 2012, down from 266.74 million yuan t h e previous year, in line with a forecast drop of 65-95 percent the company made last month.
"As the domestic macro economy grew mildly and the growth in GDP declined in the consecutive 5 quarters, confidence of domestic consumers and consumption willingness were affected," the company said in a filing to the Hong Kong bourse.
BYD's auto sales fell 4 percent in the first quarter to 114,000 vehicles, but March sales outperformed the industry, up 8 percent on the year, helped by new model ramp-ups, such as the S6 and G6.
Analysts believe BYD faces a tough 2012 as its core auto business lags many domestic rivals. The company also makes batteries, handsets and other components.
Shares of BYD lost about 60 percent of their market value last year but have rebounded 25 percent so far this year.
BYD's earnings will have limited upside in the short term as it switches to new models and due to continued losses in its solar business, analysts said. A recent stock rally, which boosted its shares, likely only reflected market enthusiasm over potential policy support for electric vehicles, they said.
"BYD's execution in auto line-up upgrade and renewable business holds the key to success," Morgan Stanley analysts Tim Hsiao and Jasmine Lu wrote in a report before the earnings.
BYD, which attracted investment from Buffett's Berkshire Hathaway because of its battery technology, has started selling pure electric cars and buses in China.
It has also starting exporting a small number of electric vehicles on a trial basis.
BYD, which debuted its new generation of plug-in sedans at the Beijing auto show on Monday, is betting on new car models to boost sales after it was badly hit by competition and the end of tax incentives for small cars in China. (Reporting by Alison Leung and Kelvin Soh; Editing by Jacqueline Wong and Elaine Hardcastle)
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