BYD and Pang Da profits plunge

BYD's Q1 profits could plunge as much as 95%, leaving many calling for management change, while Pang Da suffers from the Saab aftermath.

Fears that profits at Warren Buffett-backed carmaker BYD could continue to plummet were confirmed last month as the company issued a first-quarter statement forecasting net income may drop between 65-95%. Profits have continued to decline sharply since the company peaked in 2009, largely due to falling sales and disproportionate investment in the development of electronic vehicle technology.

BYD Co was founded as a battery company by Wang Chuanfu in 1995, and began developing EVs in 2003. By June 2009 its second generation F3 model was China's best-selling sedan. However, increased competition in the low-end market, primarily driven by new additions from General Motors and Honda Motor Co, left BYD uncompetitive and lead to a large drop in sales throughout 2010 and 2011.

Industry analysts have placed the responsibility for the decline squarely on Wang, citing a lack of “strategic direction” and claim the company needs to realign its focus on the auto sector, from which it derives over half of its profits. Yang Jian, editor at Autonews China, believes the only way for BYD to save itself is to seek a new manager and not an innovator.

Meanwhile competitor, Pang Da, is facing the consequences of its attempts to buy the ailing Saab brand with the news that 2011 profits tumbled 47% to CYN 650m ($103m) after it was forced to write off delivery of a fleet Saab cars.   Although revenues rose a little more than three percent last year, profits were badly hit by a combination of the Saab debacle - which included a CYN 371m ($58m) bailout investement in the company - and expansion of Pang Da's own dealer network.