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* Jan-Sept net down 86 pct largely on weak auto sales
* Q4 outlook dim as policy change further dents demand
* K-listed shares down 57 pct so far this year
By Fang Yan and Ken Wills
BEIJING, Oct 28 (Reuters) - BYD Co Ltd , a Chinese carmaker backed by U.S. billionaire Warren Buffett, reported an 85.5 percent plunge in earnings for the first nine months as it struggles to revamp its over-stretched dealer network amid a slowing market.
The outlook for the remainder of the year remains dim as Beijing’s policy changes may further damp auto demand in a market that has already eased to a 3.6 percent gain in the first three quarters, after years of breakneck expansion.
“The fourth quarter will be tough for all automakers. Many people made their purchases in September to take advantage of the 3,000 yuan subsidy for fuel-saving cars before it was too late,” said Yuantai Research analyst Charlene Gu. “It’s quite likely China’s overall car sales will declined during the period.”
Beijing started giving 3,000 yuan to buyers of fuel-saving cars in June 2010, with the number of models qualified for the subsidies topping 300 units as of the end of that year. But regulators raised the bar significantly from October, cutting the number of models qualifying for the handout to just 49.
In a stock exchange filing, BYD projected its full-year earnings to drop 35-65 percent, largely on weak auto sales and falling profit margins.
BYD had been a rising star after an investment of $230 million from Buffet in 2009. Its F3 sedan was China’s best-selling car in 2009 and 2010, but it has been unable to build on its initial success.
A lack of competitive new models, coupled with its fast-growing dealerships, has taken a toll on the carmaker, which ended the first half with an 89 percent plunge in earnings.
The steeper-than-expected slow down of the world’s largest market this year after Beijing ended tax incentives for small cars also hurt BYD and most other Chinese carmakers, which dominate the lower-end of the market.
Xia Zhibin, head of the company’s sales unit, resigned in August citing personal reasons. Analysts said slumping sales were likely to have played a part in the move.
In the first three months, BYD delivered 326,379 vehicles, down 15.5 percent from a year earlier, lagging a 6.4 percent gain of China’s car market.
For January to September, it posted a net profit of 352.7 million yuan ($55 million), in line with its own forecast of a 85-95 percent decline.
To draw customers back to its showroom, BYD, 10 percent owned by Buffett’s Berkshire Hathaway Inc (BRKa.N), has rolled out three cars this year -- the G3R, S6 sport utility vehicle, and G6, its most pricey sedan.
Earlier in the week, it also start selling its e6 electric car to retail customers in Shenzhen.
Chairman Wang Chuanfu said BYD should return to its growth track, with auto sales rising 20-30 percent per year between 2013 and 2015.
BYD’s Hong Kong-listed shares, which have lost 57 percent since the start of the year, dropped 1.4 percent on Friday, lagging a 1.68 percent gain by the Hang Seng Index .
Its Shenzhen-listed shares ended the day up 0.4 percent, underperforming a 1.55 percent gain by the benchmark Shanghai Composite index . ($1 = 6.359 yuan) (Editing by Chris Lewis)