Auto Industry

Dead battery

More bad news from BYD?

2011 isn’t shaping up to be a particularly good year for Shenzhen-based BYD, and we’re only a few months in.

The firm’s earnings have collapsed, its shares are down two thirds from their Warren Buffett-inspired high, and rumours of staff layoffs abound. Commentators are saying that the once-charmed carmaker may have overextended itself.

“In some regions, two-thirds of sales staff have been cut,” writes Southern Metropolis Weekly. But BYD is denying claims that it has reduced the size of its 200,000-strong workforce. “We’ve had no layoffs,” contends BYD spokesperson Wang Jianjun, “we still have a shortage of staff and all departments are recruiting.”

So what’s the truth? Industry analyst Jia Xinguang says BYD is dealing in semantics, as many of the sacked salespeople are hired by dealerships, not BYD itself. When the company announced sales targets of 800,000 last year (up from 400,000 in 2009) dealers went on a hiring frenzy. In the final tally, only 520,000 were sold.

Company employees who still have their jobs aren’t being spared the pain, with Southern Metropolis Weekly also reporting that wages are down by two thirds. Workloads are up, too. “Work that had been done by two people now is done by one,” Zhang Teng, a company employee told the magazine.

As a result, employee enthusiasm has dipped. “When the market was good, we were the pioneers,” says Zhang, “now that it’s bad, we are orphans.”

As we’ve noted before, the main reason BYD has stumbled is that it hasn’t been able to deliver new models to deadline. The 2009 launch of its all-electric E6 (which was supposed to take the US by storm) has been pushed back to 2012. And there is no follow up model yet for its F3 sedan. Pushing the F3 at ever-lower prices has also alienated dealers and destroyed margins (see WiC81).

The result: fourth quarter profits last year were down 94%, to just $13.7 million.

But chairman Wang Chuanfu wouldn’t be drawn on the chances of being abandoned by his famous backer. “Buffett visited us last year,” he told reporters, “and we don’t know how he thinks about us now.”

That doesn’t sound like the most stirring rallying call. But it’s by no means clear that BYD is a spent force.

The company is coming out with a new SUV later this year (the S6), and if it arrives on schedule it may yet turn fortunes around.


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