SHANGHAI (Bloomberg) -- BYD Co., the Chinese automaker backed by Warren Buffett, reported second-quarter profit of 717 million yuan ($106 million) as vehicle demand rose in the world's biggest auto market.
It's the first time BYD reported second-quarter results, and no year-earlier comparison was available. Net income for the fiscal first half more than doubled to 2.42 billion yuan from 1.18 billion yuan a year earlier, the company said in a statement to the Hong Kong stock exchange Sunday. Sales rose 50 percent to 24.2 billion yuan for the six-month period.
BYD, 10 percent owned by Buffett's Omaha, Neb.-based Berkshire Hathaway Inc., cut its full-year vehicle sales target by 25 percent on Aug. 4 after China's auto demand began slowing amid faster inflation and easing economic growth. The Shenzhen-based company, which has announced plans to sell electric vehicles in the U.S. this year, met 36 percent of its original full-year sales target in the first six months of 2010.
“Profit will still see a significant increase in the first half year on year,” said Jack Yeung, an analyst at BNP Paribas Securities Asia Ltd. before the earnings announcement. “What I worry about is the second half.”
Domestic cars are losing in attractiveness to joint venture automakers as consumers become wealthier, said Yeung, who forecast first half profit of 2.715 billion yuan. BYD is also cutting car prices to dealers, which will affect its margins, he said.
“It's not the year for domestic carmakers such as BYD and Geely. People are switching from domestic cars to JV makers because of the wealth effect. It's a social status upgrade for them,” said Hong Kong-based Yeung.
The carmaker's shares have declined 32 percent this year, compared with a 4 percent drop in the in benchmark Hang Seng Index.
China's car sales, which have risen every month since February 2009, started to grow at a slower pace in April. Passenger-car sales to dealerships increased 13.6 percent from a year earlier in July, the slowest pace since March 2009.
BYD, whose F3 car was the best-selling model in China in the first quarter, now aims to sell 600,000 vehicles in 2010, compared with an earlier goal of 800,000.
The company boosted deliveries to dealers 3.3 percent from a year earlier to 35,400 vehicles in June, lagging behind a 23 percent industrywide increase.
Electric car push
BYD increased sales 162 percent to 448,397 vehicles last year as China's industrywide car demand surged. The company aims to increase output of alternative energy-powered vehicles to meet domestic demand.
China aims to raise annual production capacity of alternative-energy vehicles to 500,000 by next year as part of efforts to cut oil imports and curb pollution.
The government may invest more than 100 billion yuan in alternative-energy vehicles during the next 10 years, Shanghai Securities News reported on Aug 4. The country already subsidizes purchases of energy-efficient cars.
BYD signed an agreement in May with Daimler AG to develop electric vehicles in China and aims to be the first Chinese company to market alternative energy- powered vehicles in western Europe. The E6 electric car is among models BYD plans to introduce in western Europe next year, the company has said.