(Corrects name of BYD's electric buses in 4th from last paragraph)
By Samuel Shen and Kazunori Takada
SHANGHAI Aug 25 (Reuters) - BYD Co Ltd , the Warren Buffett-backed company best known for electric cars, is in the midst of a revival thanks to traditional gasoline-fueled vehicles.
Its car sales jumped 25 percent to more than 250,000 units in the first six months of this year, outpacing China's overall auto market growth rate of 11 percent. The vast majority of those were gasoline-powered, not electric.
The recovery in gasoline car sales, which account for half of BYD's revenues, has raised investors' hopes that the company is once again starting to live up to the promise that attracted big-name backers such as Buffett.
Profits from those gasoline cars, as well as from selling batteries for mobile phones and other handheld devices, can be funneled into expensive research and development of electric cars, solar panels and other futuristic green technologies.
Shenzhen-based BYD said on Sunday its first-half net profit rose to 426.9 million yuan ($69.74 million), well ahead of the 16.3 million yuan it earned in the same period a year earlier, helped by strong auto sales and an improvement in its solar cell business.
To be sure, it is too early to tell if the latest results mark the start of a sustained recovery.
But BYD shares have more than doubled in the past year on investor enthusiasm over the company's improving profitability and hopes that BYD could one day become China's answer to Tesla Motors Inc, the popular California electric vehicle maker whose shares have quadrupled this year.
BYD's fortunes took a turn for the worse in 2010, when its car sales began tanking amid a series of quality issues and a slowing economy. Last year, a much-publicised deadly fire involving one of its electric taxis hurt its share price, although an investigation found BYD's battery was not at fault.
Wang responded to the sales slump by slowing expansion and restructuring the company, including streamlining its distribution system and slashing the number of dealers by a third to 800.
"In the past, BYD made almost everything by itself, including windshield wipers and paint. That was the root of many quality issues," said Yang Zao, analyst at KGI Securities.
"Now, BYD has started to outsource and buy auto parts from suppliers, while focusing instead on making key components such as engines."
NEW GREEN CARS
As the traditional car business stabilises, BYD is ramping up development of new energy vehicles.
One green-car area BYD is focusing on is gasoline-electric cars. People close to BYD, who are privy to BYD management's thinking, told Reuters earlier this year that the company might phase out the gasoline car business over the next several years to embrace hybrid and other electrified cars.
As part of this refocus, BYD plans to launch "Qin," a gas-electric hybrid, in the fourth quarter, the company said in an emailed statement to Reuters. It plans to export the model to European markets including France and Belgium, BYD said.
BYD is also gearing up to produce and sell Denza electric vehicles as part of a joint-venture with Daimler AG aimed at appealing to wealthy Chinese. Most of BYD's electric vehicles are currently used as taxis and public transport.
Its K9 electric buses are still a tiny portion of the company's total sales, but BYD has signed several contracts this year, including one to supply the U.S. cities of Los Angeles and Long Beach, and to Amsterdam's Schiphol airport.
Some analysts, however, are skeptical of BYD's continued ability to post positive results.
"While BYD has relatively mature technology to make both pure and hybrid EVs, we believe near-term the market will be small," Citi analyst Paul Gong said, adding that it takes time for the consumer market to embrace electric vehicles.
Gong expects BYD to deliver 2,100 pure electric vehicles in 2013, one-tenth of Tesla's guidance of 21,000 units. ($1 = 6.1210 Chinese yuan) (Editing by Norihiko Shirouzu and Emily Kaiser)