BYD projects sharp profit rise; Chinese car and battery maker expects government to extend subsidies for green vehicles

Chinese battery and carmaker BYD Company forecast a sharp increase in first-quarter earnings and a rebound in its auto operations, thanks to the introduction of new models and potential government subsidies on environmentally friendly cars.
The company said prospects for 2013 were improving as models including the Siuri compact car and S6 SUV, which hit the showroom in the second half of 2012, won back some of its lost customers.
China’s auto market posted a 15% sales increase for the January-February period, fueling optimism over the world’s largest auto market after two consecutive years of modest growth. Sales of passenger cars rose 20%.
BYD Chairman Wang Chuanfu said car sales and profit this year will “definitely be much better” than last year.
“We expect details about a new round of government subsidies for green vehicles to be announced in April or May,” Wang said. The Chinese government would likely extend its subsidy until 2015, he said, without elaborating on the details. The MidAmerican Energy Holdings Co. unit of Warren Buffett’s Berkshire Hathaway Inc. owns 10% of BYD.
BYD said that its net profit fell 94% last year to US$13.05 million from US$221.2 million a year earlier, citing weakness in the company’s automobile and handset divisions and a loss of more than US$160.3 million from its solar operations.
The company sold 456,056 cars in 2012, up just 1.7% from a year earlier, lagging rivals Great Wall Motor Co. and Geely Automobile Holdings Ltd., which posted increases of 28% and 15% respectively.
But the Shenzhen-based company forecast a net profit this quarter of US$16 million to US$22.4 million, thanks to rising car sales and narrower losses from its solar operations. BYD reported a profit of US$4.3 million in last year’s first quarter.
China’s subsidy policy is part of the government’s effort to reduce emissions by putting 500,000 electric and plug-in hybrids on the road by 2015 and five million by 2020. The subsidy to buyers of alternative-energy vehicles expired in December 2012, prompting Chinese car makers such as BYD to delay the introduction of new green vehicles and focus instead on promoting the vehicles for public transportation.
Wang said the company planned to introduce several new cars this year to boost sales, including the Sirui mid-market gasoline car, an upgraded version of the S6 sport-utility vehicle and a plug-in hybrid car called the Qin.
BYD said it hoped to more than triple electric vehicle sales this year to 8,000 units, including 2,000 buses, with the bulk of the vehicles targeted at the taxi industry.
The company’s electric car E6 joined Shenzhen’s taxi fleet in 2010 as part of a pilot project initiated by China to put 5 million plug-in hybrids and electric cars on the road by 2020. Forty-five of its E6 cars will join the Hong Kong cab fleet around May 2013.
A BYD E6 taxi caught fire in a fatal accident in Shenzhen in May last year. A probe showed the lithium-ion phosphate battery that powers the car was not the cause of the fire and it was due to a high-speed collision, BYD said.
The company’s joint venture with Germany’s Daimler AG will roll out a full-electric car, the Denza, in China in the first half of 2014, he added.
(March 26, 2013)