BYD, Famous for Warren Buffet Investment and Its EV Plans, Hits a Sticky Patch
By Scott Doggett August 3, 2010
On the face of it, BYD has been doing fine.
The Chinese automaker famous for its substantial investment from legendary American moneyman Warren Buffett and its plans to mass produce electric vehicles, has already placed at least 30 of its e6 battery-electric taxis into service on Shenzhen's roads and may have 560 operating by year's end.
In May, BYD and Daimler AG, maker of Mercedes-Benz and Smart cars, signed a contract creating a 50-50 research and technology joint venture that will develop an electric vehicle for China.
And in April, Los Angeles Mayor Antonio Villaraigosa, California Governor Arnold Schwarzenegger and BYD Chairman Chuanfu Wang stood on the steps of Los Angeles' City Hall and announced that BYD will establish its North American headquarters in downtown L.A.
But according to an article in today's Wall Street Journal (subscription required), the automaker has "hit a sticky patch." Sales are stalling, the newspaper said citing data from J.D. Power & Associates, up just 3 percent on-year in June.
In particular, sales of the F3 model, BYD's most popular car last year, slumped 30 percent. The compact car segment it is in has become the most competitive part of China's auto market. Accordingly, halfway through the year, BYD's made only 36 percent of its vehicle-sales target of 800,000 in 2010, the Journal said.
The company is an example of an automaker that "overpromised, and is now under-delivering," Bill Russo, an auto-industry expert at the consultancy Synergistics, told the paper.
That said, if sales per month carry on at June's slower rate, BYD's sales for 2010 will exceed those in 2009 comfortably. But its shares have undergone a justifiable re-rating, falling by 33 percent from a high reached in early April.
The company now trades at 18.9 times forecast earnings for the coming 12 months - way below a historic high of 56 times - but still ahead of its peer average of 15.9 times, the Journal reports, citing data provider Starmine.
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