Car and battery maker BYD (1211) has had a tough year. Last week alone, its share price fell 20 per cent last week after the firm announced an 88.63 per cent drop in first-half profit, year on year. Warren Buffett's Berkshire Hathaway owns 9.56 per cent of the firm.
Robert Wang (Kim Eng) says BYD's vehicle sales have suffered owing to an aggressive strategy implemented in 2009. The firm used rebates and expanded its distribution network. As sales per dealership have declined, dealers have defected, Wang says.
Meanwhile, BYD is focusing its growth strategy on new energy, such as solar cells, and on making electric vehicles, particularly electric buses.
'The chairman of BYD [Wang Chuanfu] has a good relationship with the government and the top leaders in China, so he can always sense the best opportunities for industry,' Wang says. 'Autos are slowing down, but he sold a lot of cars in 2009. And he thinks, enough. The car sector is going down. Time to focus on something else.'
Olive Xia (Core Pacific-Yamaichi) says the poor performance of BYD's car division is fully to blame for the firm's recent share price drops.
'The car market is expected to moderate in the second half. Competition will remain intense,' Xia says. 'BYD's share price may experience short-term pressure because of weak results.'