China automaker BYD’s 2017 profit declines 20 percent

Chinese automaker BYD Co, backed by Warren Buffett’s Berkshire Hathaway Inc, stated on Sunday that its yearly earnings would likely drop by as much as a fifth amid increasing competition in the hybrid and electric car markets.

China has set strict targets for automakers to shift to so-called new-energy vehicles (NEVs), triggering a rush of companies aiming to take advantage of possible demand for less-polluting cars worldwide’s most significant car market.

BYD, which has invested greatly in hybrid and electric vehicles, forecast full-year net profit would drop by between 15.1 percent to 20 percent to a range of 4.04 billion yuan ($607.54 million) to 4.29 billion yuan, it stated in filings on the Hong Kong and Shenzhen stock exchanges.

Net profit in last year increased 80 percent to 5 billion yuan.

BYD’s performance will be carefully watched by other regional and foreign automakers which are now rushing to bring out new hybrid and electric models for China and developing joint ventures concentrated on electric vehicles for the market.

China has signified a long-term goal to move to new-energy vehicles, however has also been phasing out subsidies, raising concerns from some automakers that consumer demand alone will not suffice to drive sales.

China’s general automobile market has likewise slowed this year after a tax break for smaller automobiles was cut down.

BYD’s shares dropped dramatically on Monday, with its Shenzhen-listed and Hong Kong stock both down over 5 percent in early morning trading.

The automaker stated in its filing that sales of new-energy vehicles would “continue” proliferate in the fourth quarter, while investments in other transport technologies such as its skyrail business would “bring sound” earnings and profits.

BYD stated January-September net earnings fell 23.8 percent to 2.79 billion yuan. In August it had actually forecast a drop of approximately 20 percent to 25 percent. Third-quarter net earnings dropped 23.9 percent from a year earlier to 1.07 billion yuan.

Sales of new-energy vehicles in the broader China market in January-September amounted to 398,000, boost of 37.7 percent from 2016, industry data revealed. The nation is on track to achieve a sales target of 700,000 NEVs in 2017.