China carmaker BYD expects profit growth to slow as government ‘green’ subsidies phased out

Billionaire Wang Chang-fu, chairman of mainland China car and battery producer BYD Company, said on Monday its sales of new energy vehicles will double to 120,000 units this year.

With an increasing contribution from environmentally friendly vehicles, the Warren Buffett-backed BYD announced a 384 per cent net profit surge to 2.26 billion yuan for the six months ended June.

Sales of new energy vehicles rose 161 per cent to 15.32 billion yuan, boosted by government incentives for the purchase of “green” vehicles. That helped lift the company’s overall turnover to 43.7 billion yuan in the first half, up 43.74 per cent from a year earlier.

However, the scaling down of Chinese government grants and subsidies for new energy vehicles is expected to restrain the strong growth momentum, said market watchers.

China plans to gradually reduce subsidies for new energy vehicles and will stop providing financial assistance altogether after 2020, according to Finance Minister Lou Jiwei.

The government will cut 2017-2018 subsidies by 20 per cent from those granted in 2016, and 2019-2020 subsidies will be 40 per cent less than this year, Lou said earlier this year.