Chinese automaker BYD Co (比亞迪), backed by US billionaire Warren Buffett, said yesterday that first-quarter net profits shrank 84 percent because of increased costs and falling auto sales.
The firm earned 266.7 million yuan (US$41.2 million) in the three months ended March 31, well below its 1.7 billion yuan net profit in the same quarter last year. The Hong Kong-listed company also said operating revenues fell almost 12 percent to 11.7 billion yuan in the quarter, down from 13.25 billion yuan a year ago.
“This was mainly due to a decline in automobile sales performance coupled with an increase in management and finance expenses,” BYD said in a statement.
The firm’s A-shares will make their trading debut in the southern Chinese boomtown of Shenzhen today after BYD raised a lower-than-expected 1.4 billion yuan in a share sale earlier this month.
BYD’s results come as China’s auto sector — which overtook the US in 2009 to become the world’s largest car market — has lost steam after the government phased out most sales incentives implemented to ward off the global downturn.
Vehicle sales declined for 10 straight months through last month as demand slowed and rival automakers, including General Motors Co and Nissan Motor Co, introduced new models. The company’s F3 sedan, introduced in 2005, fell to fourth from first in the rankings of China’s best-selling cars this year, prompting BYD to cut prices for its line-up in February.
“What BYD needs is a new product or a revamp of the F3,” said Johnny Wong, a Hong Kong-based auto analyst at Yuanta Securities (元大證券) HK Co. “They didn’t have many new models coming out in the first half of the year and people are more attracted to newer models.”
BYD sold 97,300 F3 sedans in the first five months, 30 percent fewer than a year earlier. That makes it the fourth-best selling model after Volkswagen AG’s Lavida and Jetta, and GM’s Excelle, according to the China Association of Automobile Manufacturers.
Finance expenses more than doubled in the first quarter to 118 million yuan because of increased borrowing and rising interest costs, BYD said. The company’s earnings are based on Chinese accounting standards.
China’s central bank has raised interest rates four times starting in October last year and it has boosted banks’ reserve requirements nine times since November to stem rising consumer prices.
BYD’s Hong Kong-traded stock has plunged 42 percent this year.
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