UPDATE 1-BYD Q2 net up 2.6 pct, lags forecasts

* H1 net 2.42 bln yuan vs 1.18 bln yuan a year ago

* Q2 net 716 mln yuan, lags f’cast of 1.1 bln yuan

* Stock down 13 pct this month on sales, earnings concerns

* Faces slow sales growth in H2

HONG KONG, Aug 22 (BestGrowthStock) – BYD Co Ltd (1211.HK: ), a
Chinese carmaker backed by U.S. billionaire Warren Buffett,
posted lower-than-expected second quarter earnings, which fell
substantially from the previous quarter as China’s booming car
sales lost steam in a slowing economy.

The company, 10 percent owned by Buffett’s Berkshire
Hathaway (BRKa.N: ), said the sales growth in China’s automobile
market slowed down in the second quarter.

“The domestic automobile industry is expected to keep modest
growth in the future,” it said in a statement.

The homegrown auto maker has cut its car sales target by 25
percent to 600,000 for 2010 and lowered prices by more than 5
percent in June following weak sales as dealers cleared
inventory and it experienced constraints in capacity.

China’s booming economy, boosted in part by government
stimulus measures, last year pushed China ahead of the United
States to become the world’s top auto market as sales rose 46
percent. But growth is likely to slow to 15-20 percent this
year.

Analysts say momentum could improve into September, the
traditional peak sales season, but high inventory at BYD’s
dealers and an oversupply in the world’s largest auto market
could remain a near-term drag on the company’s stock.

BYD also makes and sells batteries and handset components
and has recently diversified into the grid storage and solar
battery businesses. But car manufacturing and sales account for
more than two-thirds of its profit.

BYD Electronic (0285.HK: ), the handset components and
assembly unit of BYD, said it was facing price reduction
pressure continuously from customers, lowering profitability
despite achieving increase in overall sales.

BYD posted a net profit of 716 million yuan ($105.4 million)
for the April to June quarter, up 2.6 percent from 698 million a
year earlier.

That was below an average forecast of 1.1 billion yuan from
four analysts polled by Reuters and substantially lower than
profit of 1.7 billion in the first quarter.

It sold 123,000 cars in the second quarter, down 24.5
percent from the previous quarter. But for the first six months,
it sold a total of 286,000 vehicles, up 57.5 percent from the
same period last year.

Headed by Chinese entrepreneur Wang Chuanfu, BYD has seen
its share price fall 32 percent this year, after rising more
than five-fold in 2009 as investors banked on its development of
green cars and new energy products.

BYD planned to start shipping its E6 electric car to the
United States by the end of the year to compete with the likes
of Nissan’s (7201.T: ) Leaf and GM’s [GM.UL] Volt.

The company said it intended to establish regional sales
offices in North America and western Europe to seize greater
market share and generate more revenue.

But analysts said it would take a few more years for the
company to see a meaningful profit from its green cars and solar
battery business.

Its dual-mode car FD3M sells for nearly 167,000 yuan in
China, although government subsidies would cut the price tag to
about 100,000 yuan. But that level is still about 40 percent
higher than a comparable gasoline car.
($1=6.790 Yuan)
(Reporting by Alison Leung; Editing by Jon Loades-Carter)

UPDATE 1-BYD Q2 net up 2.6 pct, lags forecasts