BYD's Q3 profit falls 99% as vehicle sales falter

BYD Co., the Chinese carmaker backed by Warren Buffett, posted a 99 percent decline in third-quarter profit as the company’s sales declined in the world’s largest auto market.

Net income for the three months ended Sept. 30 fell to 11.34 million yuan ($1.7 million) from 1.16 billion yuan a year earlier. The third-quarter figure was calculated by subtracting six-month earnings from nine-month results announced by the company in a statement to the Hong Kong stock exchange today. The profit fell short of the 575 million yuan average estimate of two analysts surveyed by Bloomberg News.

The plunge in profit adds to setbacks for Shenzhen-based BYD, which has delayed plans to export electric vehicles to the U.S. and was ordered to surrender seven factories earlier this month after China’s government said it built them illegally. The company, the fastest growing automaker in China last year, cut its 2010 vehicle sales target 25 percent to 600,000 vehicles in August as it struggled to maintain momentum amid higher taxes on cars with smaller engine sizes.

“Most local brands suffered from the government policy tax revision,” Ricon Xia, a Hong Kong-based senior analyst at Mitsubishi UFJ Asset Management, said before the earnings were announced. BYD’s fourth quarter also “won’t be very strong,” he said.

Third-Quarter Sales

Third-quarter sales rose 0.3 percent from a year earlier to 10.3 billion yuan, based on today’s statement.

BYD, 10 percent owned by Buffett’s Omaha, Nebraska-based Berkshire Hathaway Inc., rose 0.4 percent to close at HK$56.90 in Hong Kong trading on Oct. 25. The shares have declined 17 percent this year, compared with an 8 percent rise in the in benchmark Hang Seng Index.

BYD’s sales dropped 25 percent in September to 33,085 vehicles even as rivals SAIC Motor Corp. and Dongfeng Motor Group Co. increased deliveries and China’s industrywide passenger-car sales to dealerships rose 19 percent. BYD’s deliveries dropped 19 percent in August.

The carmaker, founded by Chairman Wang Chuanfu, has said it may fail to meet a schedule for shipping electric cars to California. BYD may introduce its E6 electric cars in the U.S. next year, Henry Li, general manager of the company’s export division, said last month, delaying an earlier plan to begin deliveries this year.

Buffett’s Support

Berkshire Hathaway’s chairman Buffett affirmed his support for BYD last month when he visited the automaker in Shenzhen, saying it will be a leader in electric cars. Berkshire owns its stake in automaker through Des Moines, Iowa-based MidAmerican Energy Holdings Co.

China’s vehicle sales may rise 25 percent to 17 million this year, Xinhua News Agency reported on Oct. 11, citing the China Association of Automobile Manufacturers.

The carmaker, which also makes batteries and assembles mobile phones, plans to list on the Shenzhen stock exchange. BYD, whose F3 car is still the best-selling passenger car in China this year, is also expanding its alternative-energy business to jumpstart earnings.

For the nine months through Sept. 30, BYD said profit rose 4 percent to 2.43 billion yuan from 2.34 billion yuan a year earlier. Sales increased 31 percent to 34.5 billion yuan, the company said.