BYD wins contract to build Brazil monorail, landing Buffett-backed firm its biggest overseas deal

BYD won its biggest overseas order for monorail systems in an affirmation of efforts by the Chinese electric-vehicle maker to revive profit growth.

The company signed a 2.5 billion Brazilian real (US$689 million) order this week to build a light transit system in Salvador, Brazil, Stella Li, a senior vice-president at BYD, said in a telephone interview Thursday. The Shenzhen-based firm is also in discussions for as many as eight monorail deals in the Americas, including the US, and expects to nail at least two this year, Li said.

“This is a milestone deal for us,” Li said from Los Angeles. “We have been investing outside China for a few years and are about to enter the harvesting stage, with the overseas business starting to make profit and even leading the company’s growth.”

The company posted profit declines in five of the past 10 years as rising competition in China’s electric-vehicle market eroded BYD’s market lead. BYD -- about a quarter owned by Warren Buffett’s Berkshire Hathaway Inc. -- made its foray into the monorail business two years ago as it sought new earnings generators and has also tried to cut its reliance on the domestic market.

BYD’s overseas business is expected to break even this year and may start contributing to profit in 2019, said Li, who is in charge of the company’s long-term strategic planning.

Construction on the monorail in Salvador is expected to begin in the fourth quarter and be completed in 2020. Li said the transit system will be operational in 2021.

Increasing revenue from outside China will help revive BYD’s profitability, which has also been undermined by declining government subsidies on new-energy vehicles.

First-quarter net income plunged 83 per cent, and the company forecast last month that profit would also decline in the second quarter. Aided by contributions from new businesses, the company could return to year-on-year profit growth as early as the fourth quarter, Li said.

BYD, which began life as a battery maker, is spinning off its power-battery business and has said it plans to hold an initial public offering for the division. Other components units will follow the same pattern and become independent firms, Li said, without giving a timeline.

“BYD is a company that has businesses ranging from battery-making to vehicle assembly to monorail and energy storage,” Li said. “If investors factor in our diversified business scope and our global reach, they would see our advantages.”