Tough Times For BYD: Sales Down By 25 Percent, 7 Factories Confiscated By Government

Bertel Schmitt
by Bertel Schmitt

BYD, that Chinese company that could do no wrong, and that has been anointed by Warren Buffet’s golden hand (and money), is in a bit of a rough patch lately. As if there was no shortage of Bad Yucky Dreams lately, here is more. You want the bad news or the really bad news first?

Ok, let’s ease into the story with the bad news: While the Chinese market was up 19.3 percent in September, BYD was down 25 percent year-on-year last month, and sold only 33,085 vehicles (pretty much all of them gasoline-powered.) That according to ( via Gasgoo.) BYD sold 11,890 F3 and 12,615 F0 cars.

Now for the really bad news: China’s Ministry of Land and Resources announced today (in Chinese) that BYD received a 2.95 million yuan ($442,000) fine from the central government after BYD had unlawfully built seven factories on 112 acres of farmland in Xi’an. When the factories went up, 92 percent of the land was still zoned for agriculture. Taking land from farmers is a hot button in China. But then why the $442,000 slap on the wrist? Wait what else happened: The seven factories were confiscated by the government. Ooops. THAT hurts.

Reuters reports that “the government also gave administrative punishment to related government officials for not exercising effective supervision.” That will make sure that there won’t be any repeats.

According to Bloomberg, “the decision adds to setbacks for the Shenzhen-based automaker that include declining domestic sales and scaled-back plans to sell electric cars in California.”

All of this doesn’t help with the planned A-share listing in Shenzhen. BYD is currently a Hong Kong company. If you want to be a blue chip, you need an A-share listing with a mainland bourse.

In July, BYD had said it may delay the share sale to wait for “better timing.” A day later, the government announced its investigation into the land deals.

As the list of nine month sales published yesterday shows, BYD is in an unenviable situation. The Chinese market is dominated by five state-owned enterprises, SAIC, Dongfeng, FAW, Changan and BAIC. They all produced more than a million cars this year already. Then comes a long stretch of nothing, until we hit a group of private (as much as this is possible in China) carmakers: Geely, Chery, BYD, Brilliance.) They all produced only a few hundred thousand so far. When the big consolidation comes (and it will, the big ones got the memo that you are only viable with 5m cars annually), the privately owned ones will be gobbled up. Especially if they aren’t doing so well. As we all know by now: A state owned car company can afford mistakes. A privately owned one cannot.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href=""> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href=""> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • PlentyofCars PlentyofCars on Oct 13, 2010

    Don't blame the Chinese government for this. They looked at the western democracies and thought large fines to punish private companies for simply obeying failed government regulators; and the confiscation of private property to bail out favored political allies, were normal capitalist activities.

    • See 2 previous
    • PeriSoft PeriSoft on Oct 13, 2010

      OK, you win - the failures of Goldman, Lehman Brothers, and Bear Stearns were caused by a... uhh... meddling government that didn't ban exotic instruments that the banks used incompetently to their own detriment? Blaming the government for failing to regulate a practice which had not heretofore existed is absurd - it's like slitting your wrists to sell the blood, complaining that your doctor didn't tell you it was a bad idea, and then whining when he saves your life and sends you the bill. BACK TO CARS... I like Saabs.

  • Porschespeed Porschespeed on Oct 13, 2010

    Thanks Bertel, You have proved once again with that wacky fact-based info, that the Chi-Comm rulers of China are anything but open or competitive on a level playing field. Or are anything but Chi-Comms. Carry on...

  • FreedMike Needs MOOAAARRR POWER.
  • Mgh57 I should just buy an old car where everything is analog.
  • FreedMike You mean, the "Hellcat all the things" plan failed?
  • Fred I've only had it for about 7 months and I like it. Mostly because I have a hard time seeing my phone screen. So even tho my Honda's screen is 6" it's a lot easier to see than my phone.
  • Cha65697928 I'm 48. Both our cars have it, I'm never going back. Being able to activate calls, messages, music, nav, opening/closing garage doors all via voice command is awesome. Now if Audi would just allow Google maps to mirror in the middle of the driver's display instead of only allowing the native nav...