China's Buffett-backed BYD says 1H profit plunges

AP News
Posted: Jul 12, 2011 11:48 PM
China's Buffett-backed BYD says 1H profit plunges

Chinese auto and battery maker BYD Co. 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 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 121 million to 363.2 million renminbi ($18.7 million to $56.2 million) in the January-June period. That's 85 to 95 percent lower than 2.4 billion renminbi 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 2010 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.

The company started out making batteries and later moved into automaking. Recently, it has branched into energy storage systems and bus production.