By on October 13, 2010

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.

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14 Comments on “Tough Times For BYD: Sales Down By 25 Percent, 7 Factories Confiscated By Government...”

  • avatar

    “Administrative punishment”?

    Max Mosley, please explain.

  • avatar

    What the hell kind of country nationalizes their failing auto industry? That’s private enterprise. Silly commies.

  • avatar

    The Chinese government is seizing private assets?  INCONCEIVABLE!!!1one

  • avatar

    Buffet’s Yuan Disappointment.

  • avatar

    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.

    • 0 avatar

      …large fines to punish private companies for simply obeying failed government regulators…
      Yeah, because using your influence as a finance company to convince your customers to place extremely risky bets, and then setting yourself up to earn money when your customers lose is the essence of capitalism.
      Seriously, I’m all for capitalism, but do you really think that trading in exotic instruments that ended up nearly taking down the entire world economy should be encouraged just because it wasn’t specifically forbidden? Your position is that when banks painted themselves into a corner, lost billions due to myopic greed and monumental incompetence, and had to be bailed out by the taxpayers, that it was somehow unfair to them? Wow…

    • 0 avatar

      What are you talking about?  Those exotic securities were unregulated. Even so, that did the stop Fannie and Freddie from facilitating them with the strong approval and support from the government.
      Loaning money to people who cannot afford the house was official government policy in the USA and Great Britain.  To resist was racist and redlining and subjected lenders to huge fines.  Interesting that the two major housing meltdowns in the world were in the USA and Britain.
      Canada has no government housing policy or housing agencies.  Even so, home ownership is higher in Canada than in the USA.  Canada did not have a housing meltdown at all. There are no bank failures in Canada beyond what is normal. Canada’s debt to GDP ratio is one the lowest in the developed world. No need for any stimulus.

      BACK TO CARS….

      I am waiting for all those people who traded in a totally paid-off car for a new car under “cash for clunkers” defaulting on that car loan they received to buy the new car. How does that help them.?

    • 0 avatar

      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.
      I like Saabs.

  • avatar

    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…

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