BYD’s New-Energy Division Sees Explosive Growth Due To Electric Vehicle Success
SEP 7 2014 BY MARK KANE
BYD land was hit hard as second quarter results appeared to indicate a drop in net profits and a huge decline in vehicle sales volume.
The Chinese company, often emphasized as backed by Warren Buffett, saw net profit decline by 15.5% from from 426.9 million yuan in Q2 2014 to 360.7 million yuan ($59 million).
However, the slump of vehicle sales volume amounted to 27%!
Bad news is that the situation is getting worse and in nine months of this year, BYD is expected to show 12-22 percent drop in net profits.
According to Reuters, some other Chinese brands are losing market share too as foreign brands like Volkswagen, General Motors and Ford raise the bar in the low-end segment.
“JL Warren Capital LLC, a New York-based, China-focused equity research firm said in a research report published on Monday that BYD’s earnings forecast translates into a 27-31 percent fall in 2014 net profit. “Q3 guidance is disastrous,” the research firm said.”
The only part of BYD that doesn’t disappoint is the new energy vehicles division. Revenues from selling all-electric and plug-in hybrids went through the roof growing more than 10-times year-over-year to 2.7 billion yuan (roughly $442 million) in the first half of 2014.
And BYD has 37% percent of market share of NEVs in China.
Anyways, JL Warren Capita, cited by Reuters, advises selling of BYD shares:
“But some analysts said such growth is unsustainable. “Without local government support in the form of subsidies, the demand simply isn’t there for electric vehicles,” said JL Warren Capital, which has a “strong sell” rating on the stock.”
“BYD raised HK$4.2 billion ($542 million) in May through a share placement in Hong Kong to fund mainly its electric vehicle business, which some analysts described as a risky bet.”