Gasoline-powered cars fuel BYD's comeback
BYD Co., the Warren Buffett-backed automaker best known for its electric cars, is in the midst of a revival thanks to its traditional gasoline-fueled vehicles.
The company's car sales jumped 25 percent to more than 250,000 units in the first six months of this year, outpacing China's overall auto market growth rate of 11 percent.
The vast majority of those sales were gasoline-powered vehicles, not electric.
The recovery in sales of gasoline-powered cars, which generated half of BYD's revenues, has raised investors' hopes that the company is starting to live up to the promise that attracted big-name investors such as Buffett.
Profits from sales of gasoline cars and mobile phone batteries can be funneled into expensive r&d for electric cars, solar panels and other futuristic green technologies.
In the first six months, BYD's net profits rose to 427 million yuan ($70 million), up sharply from the 16 million yuan it earned in the same period a year earlier, helped by strong auto sales and an improvement in its solar cell business.
It is too early to tell if the latest results mark the start of a sustained recovery.
But BYD shares have more than doubled in the past year on investor enthusiasm over rising profits and hopes that BYD could one day become China's answer to Tesla Motors Inc., the popular California electric vehicle maker whose shares have quadrupled this year.
Sales slump
BYD's fortunes took a turn for the worse in 2010, when its car sales began to tank amid a series of quality issues and a slowing economy.
Last year, the company suffered a much-publicized deadly fire involving one of its electric taxis, although an investigation found BYD's battery was not at fault.
BYD Chairman Wang Chuanfu responded to the sales slump by slowing expansion, restructuring the company and slashing the number of dealerships by a third to 800 stores.
"In the past, BYD made almost everything by itself, including windshield wipers and paint. That was the root cause of many quality issues," said Yang Zao, an analyst at KGI Securities. "Now, BYD has started to outsource and buy auto parts from suppliers, while focusing on making key components such as engines."
New green cars
As its traditional car business stabilizes, BYD continues to develop EVs and hybrid-powered vehicles.
In the fourth quarter, BYD plans to launch the Qin, a gasoline-electric hybrid, the company said in an e-mailed statement to Reuters. The company says it will export the model to France, Belgium and other European markets.
BYD also is preparing to produce and sell the Denza EV -- a model aimed at affluent consumers -- as part of its joint venture with Daimler AG. Most of BYD's electric vehicles are used as taxis and public transport.
Its B9 electric buses are still a tiny portion of the company's total sales, but BYD has signed contracts this year to supply vehicles to the California cities of Los Angeles and Long Beach, and also Amsterdam's Schiphol airport.
Some analysts, however, are skeptical of BYD's continued ability to post strong profits.
"While BYD has relatively mature technology to make both pure and hybrid EVs, we believe near-term the market will be small," Citi analyst Paul Gong said, adding that it takes time for consumers to embrace electric vehicles.
The vast majority of those sales were gasoline-powered vehicles, not electric.
The recovery in sales of gasoline-powered cars, which generated half of BYD's revenues, has raised investors' hopes that the company is starting to live up to the promise that attracted big-name investors such as Buffett.
Profits from sales of gasoline cars and mobile phone batteries can be funneled into expensive r&d for electric cars, solar panels and other futuristic green technologies.
In the first six months, BYD's net profits rose to 427 million yuan ($70 million), up sharply from the 16 million yuan it earned in the same period a year earlier, helped by strong auto sales and an improvement in its solar cell business.
It is too early to tell if the latest results mark the start of a sustained recovery.
But BYD shares have more than doubled in the past year on investor enthusiasm over rising profits and hopes that BYD could one day become China's answer to Tesla Motors Inc., the popular California electric vehicle maker whose shares have quadrupled this year.
Sales slump
BYD's fortunes took a turn for the worse in 2010, when its car sales began to tank amid a series of quality issues and a slowing economy.
Last year, the company suffered a much-publicized deadly fire involving one of its electric taxis, although an investigation found BYD's battery was not at fault.
BYD Chairman Wang Chuanfu responded to the sales slump by slowing expansion, restructuring the company and slashing the number of dealerships by a third to 800 stores.
"In the past, BYD made almost everything by itself, including windshield wipers and paint. That was the root cause of many quality issues," said Yang Zao, an analyst at KGI Securities. "Now, BYD has started to outsource and buy auto parts from suppliers, while focusing on making key components such as engines."
New green cars
As its traditional car business stabilizes, BYD continues to develop EVs and hybrid-powered vehicles.
In the fourth quarter, BYD plans to launch the Qin, a gasoline-electric hybrid, the company said in an e-mailed statement to Reuters. The company says it will export the model to France, Belgium and other European markets.
BYD also is preparing to produce and sell the Denza EV -- a model aimed at affluent consumers -- as part of its joint venture with Daimler AG. Most of BYD's electric vehicles are used as taxis and public transport.
Its B9 electric buses are still a tiny portion of the company's total sales, but BYD has signed contracts this year to supply vehicles to the California cities of Los Angeles and Long Beach, and also Amsterdam's Schiphol airport.
Some analysts, however, are skeptical of BYD's continued ability to post strong profits.
"While BYD has relatively mature technology to make both pure and hybrid EVs, we believe near-term the market will be small," Citi analyst Paul Gong said, adding that it takes time for consumers to embrace electric vehicles.
