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Future For Electric Cars In China

BYD: 1H Profit Collapsed, Future For Electric Cars In China

By Shuli Ren

Warren Buffett backed electric car maker BYD (1211.HK) reported dismal second-quarter earnings over the weekend. BYD fell 3.2% at the open, trading at 47.65 Hong Kong dollars this morning.

In the first half, revenue at BYD rose 4% from a year ago to 23.3 billion yuan, but net profit fall 15.5% to 361 million yuan. Traditional auto sales declined 27% from a year ago. For comparison purposes, sales at Great Wall Motor (2333.HK), which also announced its first-half earnings, rose 8%.

BYD now forecasts a 12-22% year-on-year net profit decline in the first 9 months this year.

The only bright spot perhaps was the electric car sales. Electric vehicle sales were up 11% from a year ago, which is good but not great. But is there a future for electric cars in China? JL Warren Capital does not think so:

We do not expect BYD’s EV to ramp beyond Shanghai, Shenzhen, and Guangzhou due to local protectionism, as we elaborated in our BYD Q1 Results Review. Without local government support in the form of subsidies, the demand simply isn’t there for EVs. That is true for all EV makers selling in China, including Tesla (TSLA), Kandi (KNDI), and BYD Auto.

Even as analysts question if there is a future for electric cars at all in China, Warren Buffett still has made a good killing. He invested in BYD at HK$8 per share in September 2008, for about 10% of the company.