Buffett-backed BYD says profit will fall on drop in car sales

AP, HONG KONG

Thu, Jul 14, 2011 - Page 10

Chinese auto and battery maker BYD Co (比亞迪) warned that first-half profit will plunge as much as 95 percent because of a drop in auto sales after some tax incentives for small cars ended.

The company, which also makes mobile phone batteries, said late on Tuesday that earnings were also hit after its biggest customer in its telephone handset components and assembly business deferred part of an order.

Billionaire investor Warren Buffett’s Berkshire Hathaway owns a 9.9 percent stake in BYD through its MidAmerican Energy subsidiary.

The company said that profit would be between 121 million yuan to 363.2 million yuan (US$18.7 million to US$56.2 million) in the January-June period. That’s between 85 percent and 95 percent lower than 2.4 billion yuan in the same period last year.

The warning follows a company announcement last month that first quarter profit fell 84 percent.

BYD blamed the expiration of Chinese tax breaks for small passenger cars at the end of last year for the drop in auto sales volume and revenue in the first half, along with “intensifying market competition.”

The tax breaks and subsidies to buyers of smaller, fuel-efficient vehicles helped auto sales surge last year in China, the world’s biggest car market.

BYD said a drop in revenue across its businesses is squeezing gross profit margins. More details will be available when the full earnings report is announced.