China's BYD expects 2018 profit to fall by a third as competition rises

BEIJING/SHANGHAI (Reuters) - Chinese electric carmaker BYD Co Ltd 002594.SZ1211.HK, which is backed by U.S. investor Warren Buffett, said on Monday it expected full-year net profit to drop almost a third as competition heats up in the world's largest auto market.

FILE PHOTO: BYD hybrid electric SUV model Yuan is displayed during the Auto China 2016 auto show in Beijing, China April 26, 2016. REUTERS/Kim Kyung-Hoon/File Photo

China’s market for electric cars is booming, but profits in the sector have been squeezed by intense competition between established firms and start-up rivals, as well as moves by Beijing to slash subsidies for the market.

The Shenzhen-based firm posted a 1.9 percent fall in third quarter net profit to 1.05 billion yuan ($150.97 million), down from 1.07 billion yuan a year earlier.

That was the smallest quarterly drop since the end of 2016, but it said 2018 profit would be between 2.73 billion yuan and 3.13 billion yuan, down as much as 32.94 percent.

First half profits at BYD, which makes battery electric and plug-in hybrid cars - as well as public transport vehicles and batteries - had plunged over 70 percent, hit by the drop-off in policy support for new energy vehicles (NEVs). The carmaker said then it hoped profitability would improve in the second half of the year.

Although sales of traditional petrol-engine cars have stalled, sales of NEVs have been buoyant in China, rising 81 percent in the first nine months of the year to 721,000 units, China’s top auto industry body said this month.

BYD, whose models include the Tang series and plug-in hybrid EV model Qin, has been trying to shift to fully-electric vehicles but has faced battery shortages. It is now building several new battery production bases to boost capacity.

Analysts also expect BYD's main local rivals Geely Automobile Holdings Ltd 0175.HK and Great Wall Motor Co Ltd 601633.SS2333.HK to miss their full-year sales targets.

Great Wall reported a record quarterly sales drop on Friday, blaming the sharp slowdown in China’s auto market that has spooked automakers and dealers alike.

Geely had reached just 72 percent of its annual sales target at the end of the third quarter, according to its sales report.

China’s overall car sales fell 11.6 percent in September, the steepest monthly decline in nearly seven years, stoking concerns of a first annual market contraction in decades.

Reporting by Yilei Sun in Beijing and Adam Jourdan in Shanghai; Editing by Kirsten Donovan